AO rightly treated bank as an assessee -in-default for allowing LTA claim to its employee travelling abroad

Facts:

a) A survey was conducted on nationalized bank under section 133A to verify the TDS compliance in the case of salary and perquisite payments made to its employees. 

b) Assessing Officer (AO) noticed that bank had allowed LTC exemption to its employeesfor the foreign travel. AO treated bank as an 'assessee-in-default' under section 201(1) for making short-deduction of tax.

c) CIT(A) confirmed the order of AO, aggrieved-assessee filed instant appeal before the Tribunal.

Tribunal held in favour of revenue as under:

1) As per the provisions of section 10(5), only the reimbursement of expenses which are incurred on travel of employees and their families to any place in India are exempt. Since the employees of the Bank had travelled to foreign countries, the benefit of exemption available under section 10(5) should not have been granted.

2) Though bank may not have been aware of the details of the employees' places visited or destination at the time of advancement of LTC amounts. Yet, at the final settlement of the claims of the employees under LTC, bank should have obtained all the relevant details, such as the places of visits (destinations), etc.

3) Thus, the bank was aware of the fact that its employees had visited foreign countries by availing of LTC concession. So they were not entitled for to reimbursement of LTC.Thus, bank was under an obligation to deduct tax at source treating such an amount as not exempt.

4) Since the bank had failed to enforce its duty to deduct tax at source under section 192, AO correctly treated Bank as an 'assessee-in-default'. - [2017] 80 taxmann.com 179 (Bangalore - Trib.)