Sarthak Umang
Published on: November 8, 2022 at 18:13 IST
In the case of State Bank of India vs. Assistant Commissioner of Income Tax, the Supreme Court ruled on November 4, 2022, that government employees are not eligible to receive the leave travel concession (LTC) for international travel or for lengthy detours.
“The LTC has to be availed by an employee within certain limitations, prescribed by the law. Firstly, the travel must be done from one designated place in India to another designated place within India.
In other words, LTC is not for a foreign travel. Secondly, it is given for the shortest route between these two places,” the judges observed in the order.
“LTC is for travel within India, from one place in India to another place in India. There should be no ambiguity on this,” the bench led by CJI UU Lalit underscored.
The question that has fallen for our consideration is whether the appellant (State Bank of India) was in default for not deducting tax at source while releasing payments to its employees as Leave Travel Concession (LTC).
As a result, the bench rejected the State Bank of India‘s (SBI) appeal against a judgment that the bank had failed to withhold the source-deducted portion of its workers’ salaries.
On January 13, 2020, a Delhi High Court order supporting the findings of the Income Tax Appellate Tribunal was appealed (ITAT).
To give some context, a number of SBI employees had visited overseas nations and submitted LTC claims. However, the employees only claimed LTC for travel within India, according to SBI, and not for any visits outside of India.
For instance, some of the employees took a detour and travelled from Delhi to Madurai, Columbia, Kuala Lampur, Singapore, Columbia, and back to Delhi. And their claims were fully reimbursed by SBI and no tax was deducted under Section 192(1) for the same.
The LTC scheme, as well as the Income Tax Act and Income Tax Rules, were all violated, according to the Income Tax department.
Although the journey by SBI workers under LTC did include a foreign leg and it is true that a circuitous route rather than the shortest path was used, senior advocate Shri K.V. Vishwanathan contended that two elements go in the employees’ favour.
Firstly, although a foreign nation was also included in their travel schedule, the appellant’s employees did travel within India from one designated location to another; and
Secondly, the payments which were made to these employees were for the shortest route of their travel between two designated places within India.
In other words, no payment was made for foreign travel through a foreign leg was a part of the itinerary undertaken by these employees, and further said that there is no specific bar under Section 10(5) for a foreign travel and therefore a foreign journey can be availed as long as the starting and destination points remain within India is also without merits.
LTC is for travel within India, from one Indian location to another. On this, there should be no room for doubt.
Employee travel that includes an overseas leg ceases to be travel within India and is therefore not covered by Section 10(5) of the Act.
Additionally, a foreign trip defeats the fundamental purpose of LTC.
The main goal of the LTC programme was to introduce a government worker or civil servant to Indian culture by travel around this vast nation.
Because of this, the 6th Pay Commission denied the requests for foreign travel as well as the payment of monetary compensation in place of LTC.
With these observations, the bench dismissed the appeal.