No Proof Needed to Claim LTA, Conveyance

Posted In India - By NitiN Kumar Jain On Thursday, January 29th, 2009 With 0 Comments

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Its a latest update from the leading newspaper in India that the Income Tax authorities cannot ask the government organisations and private companies to furnish proof in support of tax exemption availed by their staff on leave and travel allowance (LTA) and monthly conveyance allowance.

“There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 of the Income Tax Act to collect and examine the supporting evidence to the declaration to be submitted by an employee(s),’’ said a bench of Justices Altamas Kabir and S H Kapadia.

While clarifying the ruling, the bench said the beneficiary in the case is an individual employee under the section 10 (5) and the employer is not bound to submit it to the IT department.

The apex court dismissed an appeal filed by the Commissioner of Income Tax that had asked Larsen and Toubro Ltd and ITI to furnish the details of the travel expenses incurred by the employees to avail LTA.

According to the IT Act, if claims on LTA and conveyance are not supported by journey bills, they will be taxed. But if bills such as air tickets, rail tickets, taxi vouchers, hotel bills and other expenses on food and entertainment are submitted, there will be no tax cut.

On an LTA allowance of Rs 1 lakh, if documentary proof of bills are submitted only for Rs 50,000, then tax is applicable on the rest of the amount.

The IT Department had argued that the companies and organisations are bound to collect the documentary proof to show that the employees had actually utilised the amount meant for LTA and conveyance allowance.

The companies had defended their act by saying that tax exemption is given on the basis of the documents submitted on their travel by the employees and tax is deducted if travel proof is not submitted.