TANAJI KEDARI SAPKAL,KOLHAPUR vs. ITO WARD (1), KOLHAPUR

This appeal by the assessee pertaining to Assessment Year 2018-19 is directed against the order dated 23.10.2024 passed by National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) which inturn is arising out of the Rectification Order passed u/s.154 dated 29.10.2021.

The grievance of the assessee is that ld.NFAC has confirmed the action of the CPC denying exemption u/s.10(10AA) of the Act at Rs.7,87,092/-received towards Leave Encashment on his retirement.

Facts in brief are that the assessee is an individual who was the employee of the BSNL (a public Sector Undertaking) retired on superannuation on 31.05.2017. In the return of income furnished on 30.06.2018, the assessee claimed exemption for Leave Encashment of Rs.10,87,092/- u/s.10(10AA) of the Act. The return was processed by the CPC by limiting exemption to the extent of Rs.3.00 lakh and made addition of Rs.7,87,092/- disallowing the claim of exemption. The assessee filed an application u/s.154 of the Act on 14.11.2021 but failed to get any relief on the ground that the assessee being a Non-Government salaried employee is not allowed for total exemption of Leave Encashment u/s.10(10AA) of the Act.

Aggrieved assessee preferred appeal before the ld. NFAC but failed to succeed. Now the assessee is in appeal before the Tribunal.

When the appeal was called for, none appeared on behalf of the assessee despite due service of notice of hearing, I therefore proceed to dispose of the appeal with the able assistance from the ld. Departmental Representative exparte qua the assessee.

I have heard the ld. Departmental Representative and perused the record placed before me. I have also gone through the contents of the Rectification application filed by the assessee before the lower authorities and also the proof of appointment of the assessee as Deputy General Manager with Department of Telecommunications, Maharashtra Circle vide order dated 31.10.1983. The assessee has given the bifurcation of the Leave Encashment of Rs.10,87,092/- which comprises of Rs.8,35,256/- received from Department of Telecommunications (Govt. of India) which is eligible for exemption u/s.10(10AA) of the Act and the remaining amount of Rs.2,51,836/- received from BSNL. While filing the application u/s.154 of the Act, the assessee has enclosed the letter dated 04.05.2012 regarding Leave Encashment amount, issued by Taxation section of BSNL, New Delhi. Copy also provided of the pay-slip regarding Leave Encashment period (DOT & BSNL) issued by BSNL which indicates the receipt of Leave Encashment for DOT & BSNL period separately. These facts remain uncontroverted at the end of the Revenue authorities at any stage. Section 10(10AA)(i) of the Act applies to the Central and State employees and section 10(10AA)(ii) to Non-Government employees. Leave Encashment for Central/State Govt. is fully exempt and therefore the amount of Rs.8,35,256/- received by the assessee from Department of Telecommunications (Govt. of India) deserves to be exempt from taxation u/s.10(10AA)(i) of the Act. As far as the remaining of Rs.2,51,836/- is concerned, the same being less than Rs.3.00 lakh is also exempt u/s.10(10AA)(ii) of the Act. Therefore, the impugned order denying exemption u/s.10(10AA) of the Act is reversed. Grounds of appeal raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.