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Facts
The assessee, employed by Punjab & Sind Bank, claimed exemption for leave encashment amounting to INR 14,37,117/- under Section 10(10AA) for AY 2022-23. The CPC restricted this exemption to INR 3,00,000/-, and the CIT(A) upheld this decision.
Held
The Tribunal held that the assessee is eligible for the claimed exemption as the amount of INR 14,37,117/- is less than the enhanced limit of Rs. 25 lakhs notified by the CBDT via Notification No. 31/2023 dated 24.05.2023.
Key Issues
Whether the enhanced exemption limit for leave encashment under Section 10(10AA) as per the CBDT notification dated 24.05.2023 is applicable to the assessee.
Sections Cited
10(10AA), 139(1), 143(3), 154, 250, 253(1), 253(3)
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Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘A’, CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
Order Per Krinwant Sahay, AM: Appeal in this case has been filed by the assessee against the order dated 26.11.2023 of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi 2 1089-c-2024- Vimal Kumar Attrey, Sirsa
Grounds of appeal are as under:
1. 1. Because on the facts and the circumstances of the case, the Ld. DDIT, CPC has erred in determining the fact that the appellant is employed under Punjab and Sind Bank which itself comes under the Ministry of Finance, Government of India and the leave encashment amounting INR 14,37,117/- was ought to be exempt u/s 10(10AA). Is not disputed facts that, the Punjab and Sind Bank falls under the PSU category but as per the facts the Central Government/State Government(s) is having around 98.25% share in the Punjab & Sind Bank and hence it establishes that both the Central Government is having a vital role in handling the operations and management of the bank. The relevant portion of section 10(10AA) which is reproduced here as "Incomes not included in total income. 10. In computing the total income of a previous year of any porn, any income falling within any of the following classes shall not be included – (10AA) (1) any payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned leave this credit at the time off his 3 1089-c-2024- Vimal Kumar Attrey, Sirsa retirement whether on superannuation or otherwise. (ii) any payment of the mature referred to in sub-clause received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise as does not exceed ten months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement whether on superannuation or otherwise, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government Provided that** Provided further that*** Explanation: **** Further for an instance, if the appellant falls under sub clause (ii), then the average salary drawn by the employee during the period of ten months immediately preceding his retirement is amounting INR 20,48,878/- which itself is way more than the total leave encashment amounting INR 14,37,117/- as claimed by the appellant. Relief Claimed: The Mechanical action of disallowing the correct claim by the Ld. 4 1089-c-2024- Vimal Kumar Attrey, Sirsa ADIT, CPC is not within the ambit u/s 10(10AA) and hence arbitrary and liable to be set aside.
2. Because on the facts and the circumstances of the case, the Ld. CIT(A) has grossly erred in considering the fact that the Ld. CBDT on 24.05.2023 has issued a notification and enhanced the exemption limit of 3,00,000/- to 25,00,000/-. Following the notification, the appellant has claimed exemption u/s 10(10AA) amounting INR 14,37,117/- which is less than the enhanced limit of INR 25,00,000/-. For the sake of reference, the copy of the notification dated 24.05.2023 along with the press release dated 25.05.2023 is attached herewith as Annexure-5. Relief Claimed: The appellant is respectfully requesting to kindly give the effect of the notification.
3. Because on the facts and the circumstances of the case the appellant is highly relying the following precedents as passed by the various Hon'ble Benches of ITAT. The relevant portion is reproduced herein as: ➤ "Recently the Central Board of Direct Taxes Suo motu revised the limit for deduction u/s 10(10AA) of the Act and the revised limit now stood at Rs. 25,00,000 as specified vide notification no. 31/2023 issued by the 5 1089-c-2024- Vimal Kumar Attrey, Sirsa ministry of finance. Since the leave encashment amount as claimed by the assessee is amount to Rs. 6,97,100/- which is below the revised limit of leave encashment exempt prescribed by the Board, the assessee is eligible to claim of deduction of said Rs. 6,97,100/-. Based on these observations the Id. AO is directed to allow the claim of the assessee u/s, 10(10AA) of the act within the revised limit as prescribed. In terms of these observations the appeal of the assessee is allowed" ➤ITA No. 385/JP/2023: "We have heard the rival contentions and perused the material placed on record. The bench noted that the apple of discord in this case that the assessee has received a sum of Rs, 17,68,479/- as leave encashment which was claimed in the return of income filed as exempt u/s 10(10AA) of the Act. The CPC and Id. CIT(A) contended that in the light of this specific notification being not issued the leave encashment allowable up to Rs. 3,00,000/- only whereas we note from the submission of the assessee that the assessee has relied upon the notification No. 31/2023/F.No. 200/3/2023-ΠΑ-1 6 1089-c-2024- Vimal Kumar Attrey, Sirsa dated 24th May, 2023 and submitted that the revised limit of Rs. 25,00,000/- increased on account of leave salary is applicable and to be considered in the light of fact that government has issued this notification belatedly. The assessee has already claimed the leave salary On being as exemption the benefit should be given to the assessee. consistent to the said finding, we held that the assessee is entitled to get the deduction as claimed in the return of income u/s 10(10AA) of the Act as the limit has been increased from 3 lac to 25 lacs. In the result, the appeal of assessee is allowed". The copy of the aforesaid order is attached herewith as Annexure - 6. Relief Claimed: The appellant is respectfully making a reference and seeking relief to kindly give the effect of the notification dated 24.05.2023.
4. Jurisdictional ground on the violation of natural justice: Because on the facts and the circumstances of the case the appellant is respectfully submitting that the last notification was of dated 31.05.2002 which specifies the limit of 3 lakh for tax exemption 7 1089-c-2024- Vimal Kumar Attrey, Sirsa on leave encashment on retirement of non- government salaried employees was last fixed in the year 2002, when the highest basic pay in the government was 30,000/- pm. While considering the inflation along with periodically hike in the salary of the employees there was no notification enhancing the limit. Further the Ld. CBDT issued notification and enhanced the limit to INR 25,00,000/- and on that issue, there are already cases pending before the Hon'ble High Court of Delhi having case no. W.P.(C) 11846/2019 and before Hon'ble High Court of Jaipur having case no. D.B. Civil Writ Petition No. 8535/2024. The details of the aforesaid pending cases is attached herewith as Annexure-7. Relief claimed: The action of not considering the circular issued by the Ld. CDBT is wholly unjust and against the statue which is against the principle of natural justice and shall liable to be quash.
5. Further the appellant carves the leave of the Hon'ble Tribunal to add, alter, delete or modify any other grounds of law at the time of arguments.
8 1089-c-2024- Vimal Kumar Attrey, Sirsa 3. As per the statement of facts filed by the Assessee, brief facts of the case are as under: -
That the appellant is an individual assessee and was employed with the Punjab and Sind bank which comes under the jurisdiction of Ministry of Finance, Government of India from last 37 years and was retired on 31.08.2021.
2. That during the concerned AY 2022-23, the appellant has filed his Income Tax Return on 27.06.2022 under section 139(1) via Acknowledgment No. 707809710270622, declared total income 14,34,450/-. The copy of the Income Tax Return dated 27.06.2022 filed under section 139(1) along with the Computation of Income is enclosed herewith as Annexure-
1. 1.
3. That while filing the ITR, the appellant and claimed exemption u/s 10 (10) amounting INR 20,00,000/-, u/s 10(10AA) amounting INR 14,37,117, u/s 10(13A) amounting INR 12,668/- and u/s 10(10A) amounting INR 21,01,538/-. The Ld. CPC, has processed the 9 1089-c-2024- Vimal Kumar Attrey, Sirsa ITR u/s 143(1) on 17.03.2023 and restricted the claim u/s 10(10AA) to extend INR 3,00,000/- and disallowed the claim amounting INR 11,37,117/-.
4. That against the intimation order dated 17.03.2023, the appellant has filed the rectification u/s 154 on 20.03.2023 and the Ld. DDIT, CPC has passed the impugned order u/s 154 on 11.07.2023 which uphold the variation as proposed by the Ld. CPC. The copy of the impugned order dated 11.07.2023 passed u/s 154 is attached herewith as Annexure-2.
5. That aggrieved by the impugned order dated 11.07.2023, the appellant has preferred to file an appeal before the Ld. CIT(A) on 03.08.2023 by filing Form 35. The copy the Form 35 dated 03.08.2023 along with the acknowledgement is attached herewith as Annexure-3.
That the Ld. CIT(A) without consider the facts and the circumstances of the case, has passed the order u/s 250 on 26.11.2023 and dismissed the appeal & restricted the claim to INR 10 1089-c-2024- Vimal Kumar Attrey, Sirsa 3,00,000/-. The copy of the order passed by the Ld. CIT(A) is attached herewith as Annexure-4.
That aggrieved by the order of Ld. CIT(A), the appellant has preferred to file this instant appeal Before the Hon'ble ITAT u/s 253(1).
That the limitation as per section 253(3) has expired on 25.01.2024 and for that an application with affidavit of requesting condonation of delay has been separately filed along with this appeal citing the reason for the delay.
At the very outset, during proceedings before us, the ld. Counsel for the Assessee brought into the notice of the Bench a Press Release issued by the CBDT dated 25.5.2023 on the issue of ‘Increased limit for tax exemption on leave encashment for non-government salaried employees notified.’ As per this Circular, the Central Government has notified the increased limit for tax exemption on leave encashment on retirement or otherwise for government 11 1089-c-2024- Vimal Kumar Attrey, Sirsa salaried employees to Rs. 25 lakhs w.e.f 1.4.2023. In fact, during the assessment proceedings, this exemption was restricted to Rs. 3 lakhs and the same was confirmed by the Ld. CIT(A) but after the issuance of this Circular vide Notification No.31/2023 dated 24.5.2023, issued on 25.05.2023, the exemption limit has been enhanced to Rs. 25 lakhs. Since the leave encashment amount involved in the present case is Rs. 14,37,117/-, which is less than the enhanced prescribed limit of Rs. 25 lakhs, the appeal of the Assessee on this issue stands allowed.
In the result, appeal of the Assessee is allowed.