AWADHESH KUMAR DIXIT,KANPUR vs. THE DCIT, CIRCLE-2(1)(1), KANPUR

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, LUCKNOW BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.915/LKW/2025 Assessment Year: 2019-20 Awadhesh Kumar Dixit v. The DCIT 8/8, Vijay Nagar Circle 2(1)(1) Kanpur (U.P) Kanpur TAN/PAN:AHBPD3657N (Applicant) (Respondent) Applicant by: Shri Rakesh Garg, Advocate Respondent by: Shri R.R.N. Shukla, D.R. O R D E R This appeal has been preferred by the Assessee against the order dated 15.10.2025, passed by the Addl/JCIT(A)-3, Delhi for Assessment Year 2019-20.

2.0 The brief facts of the case are that the assessee was retired from the service of Union Bank of India, Mumbai on 30.04.2018 and received Rs.12,46,798/- as Leave Encashment. The assessee filed his return of income for the year under consideration on 31.08.2019 and claimed an amount of Rs.3.00 lakhs as exempt under section 10(10AA) of the Income Tax Act, 1961 (hereinafter called 'the Act’). The return filed by the assessee was processed by the Centralized Processing Centre (CPC) under section 143(1) of the Act and vide order dated 08.12.2020, allowed the exemption claimed by the assessee.

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Subsequently, the assessee moved an application under section 154 of the Act claiming deduction under section 10(10AA) of the Act for the entire amount of Leave Encashment received by the assessee, i.e., Rs.12,46,798/-, which was allowed by the CPC, vide order dated 22.12.2021 passed under section 154 of the Act. Subsequently, the CPC, vide rectification order passed under section 154 of the Act, dated 29.10.2021, restricted the exemption claimed by the assessee under section 10(10AA) to Rs.3.00 lakhs and disallowed a sum of Rs.9,46,800/-.

2.1 Aggrieved with the rectification order dated 29.10.2021 passed under section 154 of the Act, the Assessee preferred an appeal before the Ld. First Appellate Authority, who dismissed the appeal of the assessee and confirmed the order of the AO.

2.2 Now the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:

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3.0 During the course of hearing before me, the Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that as per CBDT Notification No.31/2023/F/No.200/3/2023- ITA-I dated 24.05.2023, the benefit of exemption in terms of section 10(10AA)(i)&(ii) has been extended to non-Government employees by raising the limit to Rs.25 lakhs with retrospective effect. The Ld. A.R. submitted that the observations of the authorities below that the said provisions are applicable only to Government employees and not to the employees of the Public Sector, is contrary to the provisions of law, and, therefore, the order of the Ld. CIT(A) may be set aside and the AO may be directed to allow the entire amount of Rs.12,46,798/- claimed by the assessee. The Ld. A.R. also placed reliance on the following orders of the Tribunal and prayed that the appeal of the assessee be allowed:

1 Granedra Panwar vs. ADIT, ITAT Delhi SMC Bench in ITA No.238/DEL/2025, vide order dated 11.02.2026.

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2 Govardhan Deepchand Bhambhani vs. ITO, ITAT Ahmedabad ‘A’ Bench in ITA No.289/AHD/2025, vide order dated 28.07.2025. 3 Uma Dutt Sharma vs. ITO, ITAT Lucknow SMC Bench in ITA No.655/LKW/2025, vide order dated 14.11.2025. 4 Ram Charan Gupta vs. ITO, ITAT, Jaipur SMC Bench in ITA No.408/JPR/2022, vide order dated 27.06.2023. 5 Devi Dutt Agarwal vs. Assessment Unit, ITAT Jaipur SMC Bench in ITA No.1375/JPR/2024, vide order dated 13.03.2025. 6 Vijay Kumar Jain vs. ITO, etc., ITAT Agra Bench in ITA Nos175/AGR/2022 and 187/AGR/2022, vide order dated 18.06.2025.

4.0 Per contra, the ld. D.R., placing reliance of the order of the Ld. First Appellate Authority, submitted that as observed by the Ld. First Appellate Authority, the limit/amount of Leave Encashment was raised to Rs.25,00,000/- vide Notification No.31/2023/F/No.200/3/2023-ITA-I dated 24.05.2023 w.e.f. 01.04.2023 and, therefore, in the case of the assessee, who had retired from the service on 30.04.2018, i.e., much prior to the date of issuance of the said Notification, this will not be applicable. The ld. D.R. further submitted that the employees other than Central Government and State Government are eligible for deduction on account of Leave Encashment to the extent of Rs.3.00 lakhs and, therefore, the authorities below were justified in allowing the claim in respect of Leave Encashment at

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Rs.3.00 and, hence, no interference is called for in the order of the Ld. CIT(A). He submitted that the appeal of the assessee be dismissed.

5.0 I have heard the rival submissions and have also perused the material on record. The sole grievance of the assessee in this appeal pertains to the action of the Ld. CIT(A) in confirming the disallowance made by the AO, whereby the assessee's claim for exemption on account of Leave Encashment under Section 10(10AA) (ii) of the Act was restricted to the erstwhile statutory ceiling of Rs.3,00,000, thereby disallowing the remaining balance received by the assessee upon retirement.

5.1 However, I find that the CBDT, in exercise of powers conferred under sub-clause (ii) of clause (10AA) of Section 10 of the Act, has issued a fresh Notification No. 31/2023 [F. No. 200/3/2023-ITA-I] dated 24th May, 2023. By virtue of this Notification, the Central Government, taking into account the macroeconomic realities and escalating pay scales, has substantially enhanced the maximum exemption limit for leave salary encashment from Rs.3,00,000 to Rs.25,00,000 (Rupees Twenty-Five Lakhs only). The relevant operative part of the Notification reads as under:

"In exercise of the powers conferred by sub-clause (ii) of clause (10AA) of section 10 of the Income-tax Act, 1961

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(43 of 1961), the Central Government, having regard to the maximum amount receivable by its employees as cash equivalent of leave salary in respect of the period of earned leave at their credit at the time of their retirement, whether on superannuation or otherwise, hereby specifies the amount of Rs.25,00,000 (twenty-five lakhs rupees only) as the limit in relation to employees mentioned in that sub-clause who retire, whether on superannuation or otherwise." 5.2 It is pertinent to observe that the Explanatory Memorandum to the said Notification explicitly certifies that no taxpayer is being adversely affected by the operation of this Notification. The enhancement is fundamentally a remedial and beneficial amendment designed to correct a long-standing historical stagnation of the exemption ceiling which had not been revised since the year 2002.

5.3 It is a well-settled canon of tax jurisprudence that beneficial provisions and notifications issued to alleviate the tax burden on retiring employees must be given a liberal and purposive interpretation. Where an assessment or appellate proceeding is pending, or where the retirement falls within the intended relief window, the benefit of the enhanced statutory cap of Rs.25,00,000 cannot be denied to an eligible assessee by rigid adherence to a superseded limit. The Co-ordinate Benches of this Tribunal, as has also been relied upon by the Ld. A.R., have

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consistently affirmed that the revised threshold of Rs.25,00,000 is fully applicable to eligible claims under Section 10(10AA)(ii) of the Act.

5.4 In view of the above facts, I direct the Assessing Officer to re-compute the tax liability of the assessee by allowing the exemption under Section 10(10AA) (ii) of the Act up to the enhanced limit of Rs.25,00,000 or the actual amount received by the assessee, whichever is lower. Accordingly, the grounds of appeal raised by the assessee are allowed.

6.0 In the result, the appeal of the assessee stands allowed.

Order pronounced in the open Court on 15/05/2026.

Sd/- [SUDHANSHU SRIVASTAVA] JUDICIAL MEMBER DATED:15/05/2026 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order Assistant Registrar/DDO