THUMMALAPALLI DASARATHY,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R

PER MANU KUMAR GIRI, JM:

The captioned Appeal filed by the Assessee is directed against the order of the Ld. Commissioner of Income Tax, (Appeals), ADDL/JCIT (A)-1, Ahmedabad [CIT(A)] dated 25.02.2026 Assessment Year 2021-22. 2. Grounds of appeal raised by the assessee are as under:

ITA No 2175/Chny/2026 (AY 2021-22) Thummalapalli Dasarathy Ltd Vs ITO :: 2 :: 3. The ld. CIT(A) failed to appreciate that the appellant is entitled to higher exemption in view of judicial pronouncements holding that enhancement of exemption limit, being beneficial in nature, is applicable to earlier assessment years. 4. The ld. CIT(A) erred in not considering the CBDT Notification dated 24.05.2023 in its proper perspective and the ratio laid down in the decisions relied upon by the appellant. 5. The ld. CIT(A) erred in confirming the disallowance without properly considering the submissions and case laws, thereby violating principles of natural justice. 6. The appellant craves leave to add, alter, amend or withdraw any of the above grounds at the time of hearing.

The assessee, an individual, filed the return of income for Assessment Year 2021-22 declaring a total income of Rs.12,83,460/-. During the relevant previous year, the assessee retired from the State Bank of India on 31.07.2020 and received leave encashment of Rs.10,35,184/-. The entire amount was claimed as exempt u/s. 10(10AA) of the Income-tax Act, 1961. The return was processed u/s. 143(1) by the Centralized Processing Centre (CPC). Subsequently, an order u/s. 154 was passed restricting the exemption u/s. 10(10AA) to Rs.3,00,000/- and disallowing the balance amount of Rs.7,35,184/-. Aggrieved by the rectification order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) [CIT(A)], who upheld the action of the CPC. The CIT(A) observed that during the relevant Previous Year 2020-21 applicable to Assessment Year 2021-22, the statutory ceiling for exemption u/s. 10(10AA) in the case of non-government employees was Rs.3,00,000/-. The CIT(A) further held that CBDT Notification No. 31/2023 dated 24.05.2023 enhancing the exemption limit to Rs.25,00,000/- specifically provides that it shall be deemed to have come into force with effect from 01.04.2023. Accordingly, the enhanced exemption is applicable

ITA No 2175/Chny/2026 (AY 2021-22) Thummalapalli Dasarathy Ltd Vs ITO :: 3 :: only from Assessment Year 2024-25 onwards and cannot be extended to Assessment Year 2021-22. The CIT(A) also observed that the explanatory memorandum accompanying the notification cannot override the express language of the notification. According to the CIT(A), although the assessee relied upon various decisions of the Tribunal extending the benefit of the enhanced exemption to earlier assessment years, such decisions were held to be fact- specific and incapable of overriding the express effective date prescribed in the notification. Consequently, the restriction of exemption to Rs.3,00,000/- and the rectification order u/s. 154 were confirmed. Against the order of the CIT(A), the assessee is in further appeal before the Tribunal. 4. The ld. Authorised Representative submitted that the authorities below erred in restricting the exemption u/s. 10(10AA) to Rs.3,00,000/- despite the CBDT having enhanced the exemption limit to Rs.25,00,000/- vide Notification No. 31/2023 dated 24.05.2023. It was contended that the enhancement of the exemption limit is a beneficial measure intended to remove hardship faced by retiring employees. The notification and the explanatory memorandum clearly indicate that no taxpayer would be adversely affected by giving retrospective effect. Therefore, the beneficial notification deserves to be applied to pending assessments and appeals relating to earlier assessment years. The ld. AR further submitted that several Benches of the Tribunal have consistently held that the enhanced monetary limit of Rs.25,00,000/- is applicable even to assessment years prior to Assessment Year 2024-25, treating the notification as beneficial and curative in nature. It was argued that the authorities below failed to appreciate

ITA No 2175/Chny/2026 (AY 2021-22) Thummalapalli Dasarathy Ltd Vs ITO :: 4 :: the ratio laid down in those decisions and denied the legitimate exemption to the assessee. Accordingly, it was prayed that the exemption u/s. 10(10AA) be allowed to the full extent of Rs.10,35,184/-. 5. The ld. Departmental Representative (DR) supported the orders of the lower authorities. It was submitted that the CBDT Notification No. 31/2023 expressly stipulates that it shall come into force with effect from 01.04.2023. Therefore, the enhanced exemption limit is applicable only from Assessment Year 2024-25 onwards. It was further argued that neither the Tribunal nor the appellate authorities can rewrite or enlarge the scope of a statutory notification by giving retrospective operation where the notification itself prescribes the effective date. The explanatory memorandum cannot override the statutory notification. The ld.DR therefore submitted that the CPC correctly restricted the exemption to Rs.3,00,000/- and the CIT(A) rightly confirmed the same. 6. We have heard the rival submissions and carefully perused the material available on record. The short controversy before us is whether the enhanced exemption limit of Rs.25,00,000/- u/s. 10(10AA), notified by CBDT Notification No. 31/2023 dated 24.05.2023, can be extended to the assessee for Assessment Year 2021-22. It is an undisputed fact that the assessee retired on 31.07.2020 and received leave encashment of Rs.10,35,184/-. The CPC restricted the exemption to Rs.3,00,000/- while processing the return and the said restriction was subsequently confirmed u/s. 154 as well as by the CIT(A). We find that identical controversy has been considered by various Benches of the Tribunal, wherein it has been consistently held that the enhancement of exemption u/s. 10(10AA) from Rs.3,00,000/- to Rs.25,00,000/- is a beneficial and

ITA No 2175/Chny/2026 (AY 2021-22) Thummalapalli Dasarathy Ltd Vs ITO :: 5 :: curative measure intended to remove hardship caused due to the prolonged non-revision of the exemption limit. The Tribunal has observed that beneficial fiscal provisions deserve liberal interpretation and should ordinarily be applied to pending proceedings unless specifically prohibited. 7. The Hon'ble Supreme Court in Allied Motors (P.) Ltd. v. CIT 224 ITR 677 SC held that a provision introduced to remove unintended hardship should be treated as retrospective in operation. Similarly, in CIT v. Alom Extrusions Ltd. 319 ITR 306 SC, the Hon'ble Supreme Court reiterated that curative and beneficial amendments intended to remove hardship are required to receive retrospective application. 8. We further note that several Benches of the Tribunal, while interpreting CBDT Notification No. 31/2023, have extended the enhanced exemption limit to earlier assessment years by following the above principles and holding that the notification is beneficial in nature and intended to remove an anomalous situation arising from the non-revision of the exemption limit for several decades. Reference may be made to Co-ordinate Bench orders in Balasubramanian Venkatachalaperumal v. DCIT, Non-Corporate Circle-4(1), Chennai, ITA No.96/Chny/2026, order dated 04.05.2026 and Vattikundala Prabhakara Rao v. DCIT, ITA No.3852/Chny/2025, order dated 12.06.2026, wherein the Chennai Bench held that the enhancement of exemption u/s. 10(10AA)(ii) to Rs.25,00,000 by CBDT Notification No.31/2023 is a beneficial and curative measure intended to remove hardship and, following the principles laid down by the Supreme Court in Allied Motors (P.) Ltd. v. CIT (224 ITR 677) and CIT v. Alom Extrusions Ltd. (319 ITR 306), extended the benefit to earlier assessment years as well.

ITA No 2175/Chny/2026 (AY 2021-22) Thummalapalli Dasarathy Ltd Vs ITO :: 6 :: 9. Respectfully following the aforesaid judicial precedents, we are unable to concur with the view adopted by the ld.CIT(A). The beneficial enhancement of exemption u/s. 10(10AA) deserves to be extended to the assessee. Since the leave encashment received by the assessee is Rs.10,35,184/-, which is within the enhanced ceiling of Rs.25,00,000/-, the assessee is entitled to exemption of the entire amount. Accordingly, we direct the Assessing Officer/CPC to allow exemption u/s. 10(10AA) amounting to Rs.10,35,184/- and delete the addition of Rs.7,35,184/-. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on the 06th day of July 2026

Sd/- Sd/- (प�ावती एस) (मनु कुमार िग�र) (PADMAVATHY S) (MANU KUMAR GIRI) लेखा सद)या/ACCOUNTANT MEMBER �या�यक सद)य/JUDICIAL MEMBER चे�नई/Chennai, *दनांक/Dated: 06th July, 2026. SNDP, Sr. PS 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

Digitally signed SANDEE by SANDEEP KUMAR P KUMAR Date: 2026.07.08 10:06:06 +05'30'