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Lta claim process

Deepak Arora (CA-Final) (398 Points)

04 June 2013

Dear Friends,

In my organisation, 10% of annual basic salary is LTA which employee are entitled to take once complete year with the company. Now employees are insisting that how this much amount can be claimed as they won't be able to submit the bills of this amount.

I read one notification of Supreme Court wherein it was clarified that taking proof of travel from the employee by the employer is not now necessary. Employer can take the declaration from the employee about the use of LTA amount no need of travel bill.

Will you please clarify this. How important it is for the company to gather the actual bills of travel from employee. Is it at the company's discreation whether to take the bills or declaration or is it mandatory to take actual bills of travel.

Please provide me valuable input on this issue.

Regards

Deepak Arora

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1 Replies

CA Aman Gupta (Chartered Accountant) (344 Points)
Replied 04 June 2013

With reference to your query, it is pertinent to note that Hon’ble Apex Court in the case of CIT -vs. ITI Ltd. (2009) 18 DTR 162 (SC) & CIT -vs.- Larsen and Toubro Ltd. (2009) 18 DTR 163 (SC) had dismissed the departmental appeals stating that, in the absence of any CBDT circular requiring the employer u/s 192 to collect and examine the supporting evidence to the declaration of the employee, the employer was not under any obligation to collect such evidence.

However, after the decisions of the Apex Court, recently, vide Circular No. 8/2012 [F.NO. 275/192/2012-IT(B)], dated 05-10-2012, the CBDT has provided for the obligations of the employer in relations to claim to granting exemption u/s 10(5) for leave travel concession as under:

Obligation of the employer -the employer has to satisfy the obligation that leave travel (fare) concession is not taxable in view of section 10(5), the employer is not only required to be satisfied about the ingredients of the said clause but also to keep and preserve evidence in support thereof.

From the perusal of the above, it can be seen that CBDT, after the decisions of the Apex Court, has provided for examination and documentation of evidences in relation to LTC, thereby, in effect, nullifying the effect of the Apex Court decisions and requiring the employee to produce the evidences of their travels.