As an employer, must I collect bills and tickets from employees before treating leave travel concession or conveyance allowance as exempt while deducting tax under section 192?
No. The Supreme Court dismissed the department's appeals on 21 January 2009, holding that an employer is under no statutory obligation, under the Act or the Rules, to collect evidence that its employees actually spent the amounts paid as leave travel concession or conveyance allowance. Two reasons are given. The beneficiary of the exemption under section 10(5) is the individual employee, not the employer. And there is no circular of the Central Board of Direct Taxes requiring an employer, when deducting under section 192, to collect and examine material supporting the declaration the employee submits. The appeals were dismissed with no order as to costs.
Decided by the Supreme Court (Supreme Court of India; S.H. Kapadia and Aftab Alam JJ) on 2009-01-21, reported as Civil Appeals Nos. 992 and 993 of 2005, Supreme Court of India, decided 21 January 2009. It bears on section 192, section 10(5), section 201(1), section 201(1A) of the Income Tax Act 1961, in TDS Defaults and Salary & Perquisites matters.
This is the short Supreme Court order employers rely on when a survey or a section 201 proceeding says they should have demanded proof of travel. It places the burden where the exemption sits: section 10(5) exempts income in the employee's hands, so it is his assessment in which the claim can be tested, and the employer estimating salary under section 192 acts on the declaration he receives. The absence of any Board circular requiring verification is treated as decisive, which also means the position can change if the Board prescribes otherwise — and the rules on the evidence an employer must obtain have since been added to. Its practical value is in resisting the demand and the interest that follow when the department reconstructs an employer's withholding years later on the footing that employees' claims were unsupported.
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The order sets out almost nothing by way of facts. It records that a short question arose in the two appeals: whether the assessee was under a statutory obligation, under the Income Tax Act 1961 or the Rules, to collect evidence showing that its employees had actually utilised the amounts paid to them towards leave travel concession or conveyance allowance. The context is that the employer had estimated its employees' salary income under section 192 and deducted tax accordingly, treating those amounts as exempt on the strength of declarations submitted by the employees, and the department had taken the view that the employer should have obtained supporting evidence. The order does not identify the assessment years, the amounts, the demand raised, or the reasoning of the High Court whose judgment was under appeal.
The appeals were dismissed with no order as to costs. The employer was under no statutory obligation under the Act or the Rules to collect evidence that its employees had actually utilised the amounts paid to them as leave travel concession or conveyance allowance. Two reasons are given for that conclusion. First, the beneficiary of the exemption under section 10(5) is the individual employee, so the exemption operates in the employee's assessment rather than in the employer's withholding. Second, there is no circular of the Central Board of Direct Taxes requiring an employer, when deducting tax under section 192, to collect and examine the material supporting the declaration submitted by an employee. On those reasons the Court found no merit in the department's appeals.
The order carries only the two reasons set out above, and they are the whole of the Court's reasoning. The first locates the exemption: section 10(5) exempts the value of the travel concession in the hands of the individual employee, who is the beneficiary, so it is in his hands that the entitlement falls to be established. The employer deducting under section 192 is estimating the employee's salary income and is entitled to act on the declaration the employee gives him. The second is an argument from the absence of any prescription: the department could point to no circular of the Board obliging the employer to collect and examine the supporting evidence for that declaration, and without such a requirement the employer cannot be faulted for not doing so. The Court did not discuss the scope of an employer's duty of honest estimation under section 192 more generally, nor did it consider section 201 or the interest under section 201(1A) in terms; the conclusion that the employer was not in default follows from the answer to the question framed.
There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the Declaration to be submitted by an employee(s).
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Handle my notice → Ask a CA on WhatsAppNo. The Supreme Court dismissed the department's appeals on 21 January 2009, holding that an employer is under no statutory obligation, under the Act or the Rules, to collect evidence that its employees actually spent the amounts paid as leave travel concession or conveyance allowance. Two reasons are given. The beneficiary of the exemption under section 10(5) is the individual employee, not the employer. And there is no circular of the Central Board of Direct Taxes requiring an employer, when deducting under section 192, to collect and examine material supporting the declaration the employee submits. The appeals were dismissed with no order as to costs. This was decided by the Supreme Court (Supreme Court of India; S.H. Kapadia and Aftab Alam JJ) and bears on section 192, section 10(5), section 201(1), section 201(1A) of the Income Tax Act 1961. It is reported as Civil Appeals Nos. 992 and 993 of 2005, Supreme Court of India, decided 21 January 2009. This is the short Supreme Court order employers rely on when a survey or a section 201 proceeding says they should have demanded proof of travel. It places the burden where the exemption sits: section 10(5) exempts income in the employee's hands, so it is his assessment in which the claim can be tested, and the employer estimating salary under section 192 acts on the declaration he receives. The absence of any Board circular requiring verification is treated as decisive, which also means the position can change if the Board prescribes otherwise — and the rules on the evidence an employer must obtain have since been added to. Its practical value is in resisting the demand and the interest that follow when the department reconstructs an employer's withholding years later on the footing that employees' claims were unsupported. If it applies to you, the first step is this: Obtain and keep the employee's declaration in the prescribed form for each claim; that is what the employer acts on, and the order assumes it was furnished.
The order sets out almost nothing by way of facts. It records that a short question arose in the two appeals: whether the assessee was under a statutory obligation, under the Income Tax Act 1961 or the Rules, to collect evidence showing that its employees had actually utilised the amounts paid to them towards leave travel concession or conveyance allowance. The context is that the employer had estimated its employees' salary income under section 192 and deducted tax accordingly, treating those amounts as exempt on the strength of declarations submitted by the employees, and the department had taken the view that the employer should have obtained supporting evidence. The order does not identify the assessment years, the amounts, the demand raised, or the reasoning of the High Court whose judgment was under appeal. The matter was decided on 2009-01-21 by the Supreme Court (Supreme Court of India; S.H. Kapadia and Aftab Alam JJ). On those facts the Supreme Court held as follows. The appeals were dismissed with no order as to costs. The employer was under no statutory obligation under the Act or the Rules to collect evidence that its employees had actually utilised the amounts paid to them as leave travel concession or conveyance allowance. Two reasons are given for that conclusion. First, the beneficiary of the exemption under section 10(5) is the individual employee, so the exemption operates in the employee's assessment rather than in the employer's withholding. Second, there is no circular of the Central Board of Direct Taxes requiring an employer, when deducting tax under section 192, to collect and examine the material supporting the declaration submitted by an employee. On those reasons the Court found no merit in the department's appeals.
The order carries only the two reasons set out above, and they are the whole of the Court's reasoning. The first locates the exemption: section 10(5) exempts the value of the travel concession in the hands of the individual employee, who is the beneficiary, so it is in his hands that the entitlement falls to be established. The employer deducting under section 192 is estimating the employee's salary income and is entitled to act on the declaration the employee gives him. The second is an argument from the absence of any prescription: the department could point to no circular of the Board obliging the employer to collect and examine the supporting evidence for that declaration, and without such a requirement the employer cannot be faulted for not doing so. The Court did not discuss the scope of an employer's duty of honest estimation under section 192 more generally, nor did it consider section 201 or the interest under section 201(1A) in terms; the conclusion that the employer was not in default follows from the answer to the question framed. In the words reproduced by the source cited on this page: "There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the Declaration to be submitted by an employee(s)."
It was decided by the Supreme Court on 2009-01-21 and is reported as Civil Appeals Nos. 992 and 993 of 2005, Supreme Court of India, decided 21 January 2009. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 192, section 10(5), section 201(1), section 201(1A), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeals were dismissed with no order as to costs. The employer was under no statutory obligation under the Act or the Rules to collect evidence that its employees had actually utilised the amounts paid to them as leave travel concession or conveyance allowance. Two reasons are given for that conclusion. First, the beneficiary of the exemption under section 10(5) is the individual employee, so the exemption operates in the employee's assessment rather than in the employer's withholding. Second, there is no circular of the Central Board of Direct Taxes requiring an employer, when deducting tax under section 192, to collect and examine the material supporting the declaration submitted by an employee. On those reasons the Court found no merit in the department's appeals. It arises in TDS Defaults and Salary & Perquisites matters, on section 192, section 10(5), section 201(1), section 201(1A) of the Income Tax Act 1961, and was decided by Supreme Court of India; S.H. Kapadia and Aftab Alam JJ. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If a section 201 proceeding says you should have called for bills and tickets, ask the department to identify the provision or Board circular that required it — the absence of one is the ground on which this appeal was dismissed. Check the rules in force for the year in question before relying on this order; the requirement to obtain evidence of an employee's claims has been prescribed since, and the reasoning turns on there being no such requirement. Where the exemption is disputed, point to the employee as the assessee in whose hands section 10(5) operates, rather than defending the merits of his claim yourself.
Still good law. A citator search on the order returns 45 later decisions citing it. Its holding that an employer is under no statutory obligation to collect evidence of how leave travel concession or conveyance allowance was spent has been applied repeatedly at Tribunal level: by the Bangalore Bench in Syndicate Bank v Assistant Commissioner of Income Tax (6 April 2017), by the Ahmedabad Bench in Oil and Natural Gas Corporation Ltd (6 February 2014), by the Kolkata Bench in Link Consultants Pvt Ltd (25 November 2011) and by the Delhi Bench in Hero Honda Motors Ltd (27 September 2010), which held an employee declaration unsupported by evidence sufficient. Nothing overruling or doubting it was found. No decision applying it at High Court or Supreme Court level appeared in the citator. Its second reason depends on there being no requirement prescribed for an employer to examine supporting evidence; the rules prescribing what an employer must obtain were not examined in this check and should be consulted before the order is applied to a later year. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The whole of the harvested text was read, but there is very little of it — this is a two-page order, printed with the record of proceedings, running to a statement of the question and two sentences of reasons. It gives no facts: no assessment years, no amounts, no account of the proceedings below, and no reference to the High Court judgment under appeal or to the reasoning the department was resisting. The order does not in terms address section 201(1) or section 201(1A), which the batch line lists; the conclusion that the employer was not in default follows from the answer to the question framed rather than from any discussion of those provisions. The source printed no reporter citations, so the case numbers from the order itself are used. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals were dismissed with no order as to costs. The employer was under no statutory obligation under the Act or the Rules to collect evidence that its employees had actually utilised the amounts paid to them as leave travel concession or conveyance allowance. Two reasons are given for that conclusion. First, the beneficiary of the exemption under section 10(5) is the individual employee, so the exemption operates in the employee's assessment rather than in the employer's withholding. Second, there is no circular of the Central Board of Direct Taxes requiring an employer, when deducting tax under section 192, to collect and examine the material supporting the declaration submitted by an employee. On those reasons the Court found no merit in the department's appeals.
TaxSphere, “CIT v Larsen & Toubro Ltd”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-larsen-toubro-ltd/ (validity last checked 2026-08-29)
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