No Proof to Claim LTA

No Proof to Claim LTA
Employers, while assessing the conveyance and leave & travel allowance (LTA) claims of their staff, are under no statutory obligation to collect supporting evidence and furnish them to tax authorities, the Supreme Court has said.
A bench comprising Justice SH Kapadia and Justice Aftab Alam said that assessee employers are under no statutory obligation to collect bills and details to prove that the employees had utilized the amounts obtained against these claims on travel and related expenses.
According to prevailing rules, if claims on LTA and conveyance are not supported by journey bills, they would be taxed. For instance, on an LTA allowance of Rs 1 lakh, if documentary proof such as air tickets, taxi vouchers and other public transport bills are submitted only for Rs 50,000, then tax is applicable on the rest of the amount.
Regardless of the amount an executive is entitled to as LTA, tax laws allow air tickets
only in the domestic sector for the claim.
The apex court order came in a plea by companies including Larsen & Toubro and ITI. In its defence, the revenue department had argued that assessee companies were under statutory obligation under Income Tax Act, 1961, and relevant rules, to collect documentary proof to show that their employee(s) had actually utilised the amount paid towards the leave travel concession and conveyance allowance.
Source: Times of India

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.993 OF 2005
COMMISSIONER OF INCOME TAX & ANR. ...APPELLANT (S)
VERSUS
M/S LARSEN & TOUBRO LTD. ...RESPONDENT(S)
WITH
CIVIL APPEAL NO. 992 OF 2005
O R D E R

A short question which arises for determination in these Civil Appeal(s) is –whether the assessee(s) was under statutory obligation under Income Tax Act, 1961, and/or the Rules to collect evidence to show that its employee(s) had actually utilized the amount(s) paid towards Leave Travel Concession(s)/Conveyance Allowance? It may be noted that the beneficiary of exemption under Section 10(5) is an individual employee. 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). For the above reasons there is no merit in the Civil Appeals and the same are dismissed with no order as to costs.

Important Links

• Sixth Central Pay Commission
• LTA Supreme Court Order

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LAUGHTER IS THE BEST MEDICINE

Three engineers and three accountants are traveling by train to a conference. At the station, the three accountants each buy tickets and watch as the three engineers buy only a single ticket.

"How are three people going to travel on only one ticket?" asks an accountant.

"Watch and you'll see," answers an engineer.

They all board the train. The accountants take their respective seats but all three engineers cram into a restroom and close the door behind them. Shortly after the train has departed, the conductor comes around collecting tickets. He knocks on the restroom door and says, "Ticket, please."

The door opens just a crack and a single arm emerges with a ticket in hand. The conductor takes it and moves on.

The accountants saw this and agreed it was quite a clever idea. So after the conference, the accountants decide to copy the engineers on the return trip and save some money (being clever with money, and all that). When they get to the station, they buy a single ticket for the return trip. To their astonishment, the engineers don't buy a ticket at all.

"How are you going to travel without a ticket?" says one perplexed accountant.

"Watch and you'll see," answers an engineer.

When they board the train the three accountants cram into a restroom and the three engineers cram into another one nearby. The train departs. Shortly afterward, one of the engineers leaves his restroom and walks over to the restroom where the accountants are hiding. He knocks on the door and says, Ticket, please."