Rule 2B — the law in short
What the courts have decided on section Rule 2B, 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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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).
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.
