SAGADEVAN SARAVANAMUTHU,SALEM vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), SALEM

ITA 3177/CHNY/2026Status: DisposedITAT Chennai06 October 2026AY 2023-249 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to the benefit of the enhanced monetary ceiling of Rs. 25,00,000/- under Section 10(10AA)(ii) for the leave encashment received on retirement, even though the retirement occurred prior to 01.04.2023. The reasoning followed the decision of a coordinate bench in Balasubramanian Venkatachalaperumal v. DCIT, which held that the enhancement was beneficial and remedial in nature. The Tribunal noted that while High Court decisions were cited by the Revenue, the precise controversy had been considered by the coordinate bench, and no jurisdictional High Court decision contrary to this view was brought to its notice. Judicial discipline warranted following the coordinate bench decision. Since the actual leave encashment received by the assessee (Rs. 12,98,565/-) was below the enhanced ceiling of Rs. 25,00,000/-, the entire amount is eligible for exemption. The restriction of exemption to Rs. 3,00,000/- was deemed unsustainable. The operative direction is to allow exemption for the entire amount of Rs. 12,98,565/-.

What were the facts?

The assessee, Sagadevan Saravanamuthu, a retired employee of Indian Oil Corporation Limited, received leave encashment of Rs. 12,98,565/- upon retirement. For Assessment Year 2023-24, the assessee initially claimed an exemption of Rs. 3,00,000/-. Subsequently, the assessee sought to claim the entire amount as exempt, citing Notification No. 31/2023 dated 24.05.2023, which enhanced the monetary limit for leave encashment exemption under Section 10(10AA)(ii) from Rs. 3,00,000/- to Rs. 25,00,000/-, effective from 01.04.2023. The Assessing Officer did not accept this claim, and the matter was appealed to the CIT(A). The CIT(A) rejected the substantive claim, holding that the enhanced limit was not applicable to assessees who retired before 01.04.2023. The assessee has now appealed to the ITAT.

What were the issues?

1. Whether the enhanced leave encashment exemption limit of Rs. 25,00,000/- under Section 10(10AA)(ii), as per Notification No. 31/2023, is applicable to assessees who retired prior to 01.04.2023, turning on Section 10(10AA)(ii) and Notification No. 31/2023. Assessee's contentions: The enhancement is beneficial and remedial, merely enlarging an existing monetary ceiling, not creating a new exemption. The Explanatory Memorandum indicates no adverse effect from retrospective application. The assessee relies on various ITAT decisions, including Balasubramanian Venkatachalaperumal v. DCIT, and the principle that a favourable interpretation should be adopted when two views are possible, citing CIT v. Vegetable Products Ltd. and Pradip J. Mehta v. CIT. Revenue's contentions: The assessee retired before the effective date of the notification (01.04.2023), and the applicable limit at the time of retirement was Rs. 3,00,000/-. The notification cannot be applied to retirements that occurred prior to its effective date. The Tribunal cannot override the express effective date prescribed by the Central Government. The Revenue relies on High Court decisions that did not grant relief for retrospective enhancement.

Which sections of the Income-tax Act were involved?

Section 10(10AA)(ii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI

Before: GAGAN GOYAL & SHRI MANU KUMAR GIRI

Hearing: 22.09.2026

PER MANU KUMAR GIRI, JM:

This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as 'the ld. CIT(A)'], dated 30.03.2026, arising out of the intimation/order passed under section 143(1) of the Income-tax Act, 1961 ('the Act'), for the assessment year 2023-24. 2. The assessee has raised the following grounds of appeal

The order continues below.

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