What the courts have decided on section 10(5), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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State Bank of India v Assistant Commissioner of Income Tax
Supreme CourtHelps department
My client is an employer facing a s.201 order for not deducting on LTC where the employees' itineraries included a foreign leg but the reimbursement was limited to the domestic shortest-route fare. Is the bona fide estimate defence available?
No. The Supreme Court held that the moment an employee undertakes travel with a foreign leg it is not travel within India and the payment is outside s.10(5), so the employer was bound to deduct under s.192(1) and was rightly held an assessee in default. It rejected the argument that the reimbursement having been confined to the shortest domestic route saved the exemption, and it rejected the bona fide mistake defence because the employer had the complete travel details before it when settling the bills.
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CIT v Larsen & Toubro Ltd
Supreme CourtHelps taxpayer
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.
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State Bank of India v ACIT (TDS)
High CourtHelps departmentNo later treatment found
Staff booked a consolidated package tour with a foreign leg. Can we exempt the Indian part as LTC?
No. Where the tour operator charges a consolidated amount for the whole journey including the domestic portion, there is no severable Indian leg on which s.10(5) can operate, and the employer was rightly treated as an assessee in default under s.201(1) and s.201(1A).
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Abhishek Rajeshbhai Karia v ITO, Ahmedabad
ITATCuts both waysNo later treatment found
My s.148 reassessment started over a political donation but the Assessing Officer has disallowed my 80D and 80DDB for my parents' medical expenses as well. Are those safe?
On this order the s.80D claim of Rs 75,000 for health insurance premium and medical expenditure incurred for the assessee's parents was allowed outright, the Tribunal holding the disallowance unjustified because the expenditure was incurred for his parents and is deductible under s.80D. The s.80DDB claim of Rs 87,000 for a father diagnosed with cancer was NOT allowed: it went back to the Assessing Officer because eleven documents called for had never been produced either before him or before the CIT(A).
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
