Page 20 - Banking Finance December 2022

LEGAL UPDATE

Legal

News

'Profitable' charitable en- clarified if any profit or margin is Trip that includes a foreign
earned from such an activity, it shall
tities cannot claim tax re- trip is not eligible for LTC
cease to be a charitable activity.
lief: SC A recent judgement by the Supreme
SC gives 4 month time for Court (SC) has underlined the point
Any entity or institution involved in any
that Leave Travel Concession (LTC) can
trade or commerce under the guise of pension scheme
'general public utility' will cease to be be offered only on travel within India.
Eligible employees who had not opted
a 'charitable institution' and therefore, If the trip involves a foreign leg, the
for enhanced pension coverage prior
cannot claim tax exemption under the employer must deduct TDS (tax de-
to 2014 can jointly do so with their
Income-Tax (I-T) Act, the Supreme ducted at source) on this payment.
employers within the next four months
Court (SC) ruled.
after the Supreme Court upheld the In State Bank of India (SBI) versus Assis-
Two key issues were heard by the apex Employees' Pension (Amendment)
tant Commissioner of Income Tax, employ-
court. One, scope of the expression Scheme, 2014.
ees of SBI undertook trips that started
'general public utility' (deals with ben-
Employees who were existing EPS mem- and ended in India. En route, however,
efit to a section of the public) for claim-
bers as on September 1, 2014 can con- they also visited foreign countries.
ing tax exemption as 'charitable insti-
tribute up to 8.33 per cent of their 'ac-
tution'. One employee, for instance, undertook
tual' salaries -- as against 8.33 per cent
the following journey: Delhi-Madurai-
Two, scope of exemption to educa- of the pensionable salary capped at Rs
Colombo-Kuala Lumpur-Singapore-Co-
tional institutions claiming tax exemp- 15,000 a month -- towards pension.
lombo-Delhi. The SBI paid LTC to such
tion as 'charitable institution'.
The court struck down the require- employees without deducting TDS.
The expression 'charitable purpose' has ment in the 2014 amendments man-
The SC dismissed SBI's appeal on two
been defined under certain clauses which dating employee contribution of 1.16
grounds. One, it said, according to the
include relief to the poor, for education per cent of the salary exceeding Rs
rules governing LTC, travel must be
and medical relief, preservation of the 15,000 per month. This will facilitate
done from one designated place in In-
environment (including watersheds, for- the subscribers to contribute higher to
dia to another within India.
ests and wildlife), preservation of monu- the scheme and get enhanced benefits
ments, and the advancement of any accordingly. Two, the SC said LTC should be paid for
other object of public utility. the shortest route between the two
Trade unions have demanded that the
Many institutions doing trade/com- government call an extraordinary places. It ruled that SBI should have
merce used the 'general public utility' meeting of the central board of trust- deducted TDS on LTC before paying its
clause to gain exemption for profits on ees of the retirement fund body EPFO employees. Employees wishing to avail
such trade/commerce since the mean- for quick implementation of the apex of LTC must ensure they comply with
ing is ambiguous. The court has now court order. its rules (Rule 2B of I-T Rules).
20 | 2022 | DECEMBER | BANKING FINANCE