PUSHPALATHA GOPAL,CHENNAI vs. ITO, NCW-10(6), CHENNAI

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ITA 104/CHNY/2026Status: DisposedITAT Chennai06 August 2026AY 2020-219 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to the benefit of the enhanced exemption limit of Rs. 25 lakhs under Section 10(10AA)(ii) for leave encashment. Since the amount received was within this limit, it is eligible for exemption.

What were the facts?

The assessee, a retired employee, received leave encashment of Rs. 24,73,867/-. She claimed this amount as exempt under Section 10(10AA) of the Income Tax Act. The Assessing Officer (AO) and the Commissioner (Appeals) denied this exemption.

What were the issues?

Whether the enhanced exemption limit for leave encashment under Section 10(10AA) is applicable retrospectively or to the assessment year in question.

Which sections of the Income-tax Act were involved?

Section 10(10AA)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI GAGAN GOYAL

For Respondent: Mr. Chilaka Marthi Vijay Raju
Hearing: 18.06.2026Pronounced: 06.08.2026

आदेश / O R D E R PER ABY T. VARKEY, JM: This is appeal preferred by the assessee Pushpalatha Gopal against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 20.11.2025 for

ITA Nos. 104 /Chny/2026 (AY 2020-21) Pushpalatha Gopal :: 2 :: the Assessment Year (hereinafter referred to as "AY”) 2020-21 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

2.

Brief facts of case are that the assessee is an individual, retired employee of Tamilnadu Generation and Distribution Corporation Limited (TANGEDCO), who retired from service on 31.01.2020. Upon superannuation, she received Leave Encashment amount & UEL totalling to Rs.24,73,867/-, which fact is evidenced by the communication given by the Superintendent, Assistant Personnel Office/Unit-1/Civil Thermal Projects reproduced as under:-

ITA Nos. 104 /Chny/2026 (AY 2020-21) Pushpalatha Gopal :: 3 :: 3. The assessee had filed her regular return of income u/s.139 of the Act disclosing the receipts and declaring an income of Rs.27,47,470/-. In response to the notice u/s.148 dated 27.03.2023, assessee filed the ROI on 10.7.2024 reiterating the same income as shown u/s.139(1) of the Act. In the course of assessment proceedings, the assessee filed replies wherein assessee filed the computation of total income which comprised of the Leave Encashment on Retirement (Ref. to Page 7 of AO Order). The amount of leave encashment was claimed as exempt under sec. 10(10AA) of the Act. However, the AO on the ground that assessee had not provided the required details including Form 16 in support of the claim of exemption u/s.10(10AA) disallowed inter alia the leave encashment and UEL.

4.

On appeal, the Ld.CIT(A) confirmed the action of AO denying the exemption by observing that the Notification issued by CBDT dated 24th May 2023 w.r.t. quantum of leave salary eligible for exemption u/s.10(10AA) has come into effect from 01/04/2023 only, which is relevant to Assessment Year 2023-24 only. So, according to Ld.CIT(A), the notification would not be effective for the year under consideration in the case of appellant. The Ld.CIT(A) also held that assessee had not furnished documents or evidence to substantiate receipt of Rs.24,73,867/- as leave encashment on retirement in the year under

ITA Nos. 104 /Chny/2026 (AY 2020-21) Pushpalatha Gopal :: 4 :: reference. Thus, he confirmed the disallowance of the exemption claimed and dismissed the appeal. Aggrieved the assessee is before us.

5.

The Ld.AR of the assessee submitted that the exemption claimed under Section 10(10AA) in respect of the leave encashment is no longer res integra and submitted that there are several decisions of the Tribunal allowing it (infra). Further, drawing our attention to the copy of the ITR filed showing the amount claimed as exemption under 10(10AA), and the ITR Acknowledgement, ITR-1 (Sahaj) showing the disclosure of the amount in Part B, Sl. No.2 and the computation of income. The assessee before us also filed the communication received from TANGEDCO on the retirement day, which shows that assessee retired on superannuation on 31.01.2020. And the assessee in the course of hearings, has also filed certified income tax statements for FY 2019-20. The Ld.AR of the assessee referring to the CBDT Notification No. 31/2023/F. No. 200/3/2023-ITA-I, submitted that the exemption limit of leave encashment, on superannuation or otherwise, has been enhanced upto Rs.25 Lakhs from the previous Rs.3 Lakhs. And that the issue regarding retrospective operation of the aforesaid notification stands covered by the ITAT Chennai Bench, and other Tribunal orders where it has been held that the increase in leave encashment exemption limit from Rs.3 Lakhs to Rs.25 Lakhs applies to both government, and non-government

ITA Nos. 104 /Chny/2026 (AY 2020-21) Pushpalatha Gopal :: 5 :: employees. And drew our attention to the relevant portions of the judgements which are reproduced below:

Balasubramanian Venkatachalaperumal Versus The Deputy Commissioner of Income Tax, Non-Corp Circle-4 (1), Chennai (ITAT CHENNAI, AY 2020-21) The solitary issue that arises for our consideration in the present appeal is whether the assessee is entitled to exemption u/s. 10(10AA)(ii) of the Act, in respect of leave encashment received on retirement, to the extent of Rs. 25,00,000/-, as claimed, or whether such exemption is to be restricted to Rs. 3,00,000/- as per the provisions applicable for the assessment year under consideration. 25. In our considered view, the said enhancement is not in the nature of introducing a new exemption but is a measure to rationalize and update an existing provision to reflect present economic realities. The object of the amendment, as discernible from the notification and surrounding circumstances, is to mitigate hardship and ensure parity. It is a settled principle that provisions which are beneficial in nature and intended to remove hardship are to be construed liberally and, in appropriate cases, applied retrospectively, particularly where no vested right of the Revenue is adversely affected. 26. We further note that the explanatory intent behind such enhancement makes it clear that the amendment is remedial in nature. The absence of an express retrospective clause, in such circumstances, cannot be determinative, especially when the amendment merely enlarges the scope of an existing benefit. The Hon’ble Courts have consistently held that beneficial and curative amendments deserve to be applied to pending proceedings so as to advance the cause of justice. Devi Dutt Agarwal ITA No. 1375(A.Y. 2020-21)/JPR/2024 [ITAT JAIPUR BENCH] 4. The only issue for our consideration is whether the assessee is entitles to claim the deduction at Rs.12,13,200/- or at a figure of 3 Lacs as allowed by the AO….. In light of the provisions of sub-clause (ii) [of 10(10AA)] and the latest notification on this subject….. a firm view has already been taken by the coordinate bench respectfully considering the decision of Kamal Kumar Kalia & Ors. v. Union of India, for sake of consistency and view of the Hon’ble Delhi High Court (supra), the grounds raised by the assessee are allowed and the AO is directed to accept the claim of the assessee as claimed in his revised return amounting to Rs. 12,13,200/- u/s. 10(10AA) of the Act.

6.

Relying on the aforesaid case laws, the Ld.AR prayed that the exemption claimed u/s.10(10AA) of Rs.24,73,867/- be granted and the appeal be allowed.

ITA Nos. 104 /Chny/2026 (AY 2020-21) Pushpalatha Gopal :: 6 ::

7.

Per contra, the Ld.DR appearing for the revenue supported the action of the Ld.CIT(A) and doesn’t want us to interfere with the impugned action.

8.

Heard both the parties and perused the records. It is noted that the assessee is an individual, retired employee of Tamilnadu Generation and Distribution Corporation Limited (TANGEDCO), who retired from service on 31.01.2020. Upon superannuation, she received Leave Encashment amount & UEL totalling to Rs.24,73,867/-, which she claimed as exempt u/s.10(10AA) of the Act in her return of income filed u/s.139(1) of the Act. The AO reopened the assessment and has denied the claim on the ground that assessee failed to produce any documents to substantiate that Rs.24,73,867/- was received Leave Encashment amount & UEL. Hence, he disallowed it. On appeal Ld.CIT(A) confirmed the action of the AO. Before us, assessee has filed documents to substantiate that on superannuation she received Rs.24,73,867/- on account of Leave Encashment & UEL. We find that the issue regarding allowing exemption u/s.10(10AA) of the Act in respect of Leave Encashment & UEL is no longer res integra. And notes that based on the decisions passed by Co- ordinate Bench of this Tribunal in the case of Govind Chhatwani Vs. CIT

ITA Nos. 104 /Chny/2026 (AY 2020-21) Pushpalatha Gopal :: 7 :: (Appeals) in ITA No. 385/JP/2023 dated 31-10- 2023 wherein it is held as follows:

"7. We have heard the rival contentions and perused the material placed on record. The bench noted that the apple of discord in this case that the assessee has received a sum of Rs.17,68,479/- as leave encashment which was claimed in the return of income filed as exempt u/s 10(10AA)of the Act. The CPC and Id. CIT(A) contended that in the light of this specific notification being not issued the leave encashment allowable up to Rs.3,00,000/- only whereas we note from the submission of the assessee that the assessee has relied upon the notification No. 31/2023/F.No. 200/3/2023-ITA-1 dated 24th May, 2023 and submitted that the revised limit of Rs.25,00,000/- increased on account of leave salary is applicable and to be considered in the light of fact that government has issued this notification belatedly. The assessee has already claimed the leave salary as exemption the benefit should begiven to the assessee. The similar issue has been decided by the bench in the case of Ram Charan Gupta in ITA No. 408/JP/2022 wherein the bench has already held as under:- "8. We have heard the rival contentions and perused the material placed on record. The bench noted that the assessee relying the decision of Hon'ble Delhi High Court has issued a notice to the Union of India in the case of Kamal Kumar Kalia & Ors. Vs. Union of India & Ors in WP(C) 11846/2019 dated 08.11.2019 wherein the court has given following directions :- "8. We are however of the, prima facie, view that the grievances of the petitioner with regard to exemption limit under Clause (ii) of Section 10 (10AA) not being raised since 1998, appears to be justified. This is so because over the decades, the pay-scales admissible to government servants, and even employees of the Public Sector Undertaking and Nationalised Banks and all others have been up wardly revised, keeping in view, the financial growth in the country as well as on account of rising inflation. The last drawn salaries have increased manifold since time and notification issued under Clause (ii) of Section 10(10AA) was lastly issued, as taken note of hereinabove, on 31.05.2002. We therefore, issue notice to the respondents limited to this aspect. 9. Issue notice, learned counsel for the respondents accepts notice. Respondents should file counter affidavits be filed within six weeks. Rejoinder thereto, if any, be filed before the next date. " 8.1 Recently the Central Board of Direct Taxes Suo motu revised the limit for deduction u/s 10(10AA) of the Act and the revised limit now stood at Rs.25,00,000 as specified vide notification no 31/2023 issued by the ministry of finance. Since the leave encashment amount as claimed by the assessee is amount to Rs.6,97,100/- which is below the revised limit of leave encashment exempt prescribed by the Board, the assessee is eligibletoclaimofdeductionofsaidRs.6,97,100/-.Based on these observations the Id. AO is directed to allow the claim of the assessee u/s. 10(10AA) of the act within the revised limit as prescribed. In terms of these observations the appeal of the assessee is allowed."

ITA Nos. 104 /Chny/2026 (AY 2020-21) Pushpalatha Gopal :: 8 ::

On being consistent to the said finding, we held that the assessee is entitled to get the deduction as claimed in the return of income u/s 10(10AA) of the Act as the limit has been increased from 3 lac to 25 lacs. 5. Further this decision is followed in the case of Devendra Kumar Gupta Vs. CIT(Appeals) in M.A. No. 49/JP/2023 dated 18-02-2025. Thus respectfully following the above decisions, the restricting the deduction u/s. 10(10AA) of Rs. 4,65,404/ made by the lower authorities are not sustainable in law. Therefore the same is liable to be deleted. 6. In the result, the appeal filed by the Assessee is hereby allowed.”

9.

In view of the foregoing, we hold that the assessee is entitled to the benefit of the enhanced exemption limit of Rs.25 lakhs u/s.10(10AA)(ii) of the Act in respect of the leave encashment received on retirement. Since the amount received by the assessee is within the said limit, the entire sum of Rs. Rs.24,73,867/- is eligible for exemption subject to verification at the end of the Jurisdictional Assessing Officer (JAO).

10.

In the result, appeal filed by the assessee is allowed.

Order pronounced on the 06th day of August, 2026, in Chennai.

Sd/- Sd/- (गगन गोयल) (एबी टी. वक�) (GAGAN GOYAL) (ABY T. VARKEY) लेखा सद�/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai, �दनांक/Dated: 06th August , 2026. YS YASHVIR Digitally signed by YASHVIR SINGH SINGH Date: 2026.08.12 15:55:14 +05'30'

ITA Nos. 104 /Chny/2026 (AY 2020-21) Pushpalatha Gopal :: 9 :: आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF

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