SURINDER SINGH,RUPNAGAR vs. INCOME TAX OFFICER, WARD-2(2), ROPAR , ROPAR

आयकर अपील�य अ�धकरण,च�डीगढ़ �यायपीठ, च�डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL BENCH, ‘SMC’ CHANDIGARH BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 63/CHD/2026 �नधा�रण वष� / Assessment Year: 2019-20

Shri Surinder Singh, The ITO, C/o Shri Tej Mohan Singh, Advocate Vs Ward 2(2), # 527, Sector 10-D, Chandigarh. Ropar. �थायी लेखा सं./PAN NO: AMYPS6711J अपीलाथ�/Appellant ��यथ�/Respondent Assessee by : Shri Tej Mohan Singh, Advocate Revenue by : Smt. Ranjit Kaur, Addl. CIT, Sr.DR Date of Hearing : 24.06.2026 Date of Pronouncement : 07.07.2026

(HYBRID HEARING) O R D E R

The assessee is in appeal before the Tribunal against the order of the Commissioner of Income Tax (Appeals) NFAC [in short ‘the CIT (A)’] dated 18.05.2023 passed for assessment year 2019-20.

ITA No.63/CHD/2026 A.Y.2019-10 2

explaining the delay. It was submitted that the delay was neither

intentional nor deliberate and has occurred due to unavoidable

circumstances which were beyond his control. The ld. DR did not

seriously object to the condonation of delay. Considering the

contents of the affidavit and the totality of facts and

circumstances, I am satisfied that the assessee was prevented by

sufficient cause from filing the appeals within the prescribed

limitation period. Accordingly, the delay of 896 days in filing the

appeals is condoned and the appeal is admitted for adjudication

on merits.

that the authorities below have erred in law and on facts in denying

the assessee the exemption under section 10(10AA) of the Income-

tax Act in respect of the leave encashment received by him on

retirement. It was contended that the assessee had originally

joined service with the Punjab State Electricity Board, which was

a State Government undertaking, and subsequently, upon

unbundling and restructuring of the Board, became an employee

of Punjab State Power Corporation Limited (PSPCL). The

subsequent change in the status of the employer, according to the

ITA No.63/CHD/2026 A.Y.2019-10 3

Ld. AR, was not on account of any voluntary act of the assessee

but was the result of a statutory restructuring undertaken by the

State Government.

the assessee had substantially accrued during the period when he

was serving under the State Government undertaking and,

therefore, the exemption under section 10(10AA)(i) could not be

denied merely because, at the time of retirement, the employer had

undergone restructuring or privatization. It was argued that the

nature and character of the service rendered by the assessee with

the State Government undertaking remained unchanged and the

benefit available under the statute should extend, at least, to the

leave encashment relatable to such qualifying period of service.

covered by the decision of the Coordinate Bench of the Tribunal in

ITA No. 769/Chd/2023, wherein, after considering the earlier

decision in the case of Ashwani Kumar Sharma vs. ITO in ITA

No.652/Chd/2023, the Tribunal held that exemption under section

10(10AA) is available in respect of the leave encashment

attributable to the period during which the employee had served

ITA No.63/CHD/2026 A.Y.2019-10 4

with the State Government undertaking. It was, therefore, prayed

that the assessee be granted the exemption in accordance with the

aforesaid decisions and the orders of the lower authorities be

modified accordingly.

strongly relied upon the orders of the Assessing Officer as well as

the learned Commissioner of Income-tax (Appeals). It was

submitted that the exemption under section 10(10AA)(i) is

specifically available only to employees of the Central Government

or the State Government. The assessee admittedly retired from

Punjab State Power Corporation Limited, which is a statutory

corporation/company and not the State Government. Therefore,

according to the Ld. DR, the authorities below were fully justified

in restricting the exemption to the amount prescribed for non-

Government employees under section 10(10AA)(ii) of the Act.

provide for extending the benefit of complete exemption merely

because an employee had earlier served in a Government

Undertaking. The eligibility has to be examined in accordance with

the provisions of the Act and the legal status of the employer at

ITA No.63/CHD/2026 A.Y.2019-10 5

the relevant point of time. It was, therefore, argued that the order

of the learned CIT(A), which upheld the action of the Assessing

Officer, does not suffer from any legal or factual infirmity and

deserves to be sustained.

that if the issue is already covered by the decisions of the

Coordinate Bench of the Tribunal relied upon by the assessee, the

matter may be decided in accordance with the ratio laid down

therein.

available on record. The solitary issue involved in the present

appeal is whether the assessee is entitled to claim complete

exemption under section 10(10AA)(i) of the Income-tax Act, 1961

in respect of the leave encashment received on retirement.

assessee had initially been employed with a State Government

undertaking and, therefore, was to be treated at par with a State

Government employee for the purpose of exemption under section

10(10AA) of the Act. It was further submitted that the subsequent

ITA No.63/CHD/2026 A.Y.2019-10 6

restructuring and privatization of the undertaking would not

deprive the assessee of the exemption available in respect of the

period during which he had rendered service under the State

Government undertaking.

extent. An identical issue had come up for consideration before the

Coordinate Bench of the Tribunal in ITA No. 769/Chd/2023,

wherein, after considering the earlier decision of the Chandigarh

Bench in the case of Ashwani Kumar Sharma Vs. ITO in ITA

No.652/Chd/2023, the Tribunal held that the benefit of exemption

under section 10(10AA)(i) is available in respect of the leave

encashment relatable to the period of service rendered under the

State Government undertaking. However, once the undertaking

ceased to be a State Government undertaking on account of

privatization/restructuring and the employee thereafter continued

in the service of a private entity, such subsequent period of service

cannot be regarded as service under the State Government so as

to qualify for complete exemption under section 10(10AA)(i).

Coordinate Bench, and in the absence of any distinguishing

ITA No.63/CHD/2026 A.Y.2019-10 7

feature having been brought to my notice, I hold that the assessee

is entitled to exemption under section 10(10AA) only in respect of

the leave encashment attributable to the period during which he

served under the State Government undertaking. The leave

encashment relatable to the subsequent period of service rendered

after the undertaking stood privatized/merged into a private entity

shall not qualify for exemption as available to Government

employees and shall be governed by the provisions applicable to

non-Government employees, subject to the statutory monetary

limit prescribed under the Act.

leave encashment with reference to the qualifying period of service

and allow exemption in accordance with law after granting due

opportunity of hearing to the assessee.

by the assessee claiming complete exemption under section

10(10AA) for the entire amount of leave encashment cannot be

accepted and, to that extent, the appeal fails. However, the

assessee shall be entitled to exemption in respect of the leave

encashment relatable to the period during which he served with

ITA No.63/CHD/2026 A.Y.2019-10 8

the State Government undertaking, subject to the maximum

exemption admissible under the Act. For the period of service

rendered after the undertaking stood privatized and became a

private entity, the assessee shall not be entitled to the benefit

available to a Government employee.

accordingly and grant consequential relief.

Order pronounced on 07 th July,2026.

Sd/-

(LALIET KUMAR) JUDICIAL MEMBER “Poonam” आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�/ CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File

सहायक पंजीकार/ Assistant Registrar