ASHWANI KUMAR SHARMA,PANCHKULA vs. INCOME TAX OFFICER, WARD- 1 PANCHKULA, PANCHKULA

ITA 652/CHANDI/2023Status: DisposedITAT Chandigarh24 June 2025AY 2020-20211 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that Section 10(10AA)(i) of the Income Tax Act, 1961, strictly applies only to employees of the Central Government or a State Government. It does not extend this benefit to statutory corporations or government-owned companies unless expressly provided. The Tribunal found that while HVPNL is a public sector utility wholly owned by the State Government, its employees do not qualify as 'State Government' employees for the purposes of Section 10(10AA)(i). The Tribunal noted that the assessee's employer, HVPNL, is not synonymous with the State Government itself for the purpose of this exemption. The Tribunal disagreed with the assessee's reliance on coordinate bench rulings, stating that they did not conclusively settle the legal character of the employer vis-à-vis Section 10(10AA)(i) and that legislative framework and judicial precedents require strict interpretation of exemption provisions. The Tribunal emphasized that consistency cannot override a correct legal interpretation, especially when the statutory language is clear and unambiguous, and that there is no scope for equity or equality in interpreting taxing statutes. Therefore, the assessee is eligible only for exemption under Section 10(10AA)(ii), which is limited to Rs. 3,00,000/-. The appeal was dismissed.

What were the facts?

The assessee, Shri Ashwani Kumar Sharma, retired as Chief Engineer from Haryana Vidyut Prasaran Nigam Ltd. (HVPNL) on September 30, 2019. In his original return for Assessment Year 2020-21, he claimed an exemption of Rs. 3,00,000/- for leave encashment. Subsequently, he filed a revised return claiming the entire leave encashment of Rs. 20,87,840/- as exempt. The Assessing Officer (AO) restricted the exemption to Rs. 3,00,000/-, holding that HVPNL employees are not Central or State Government employees eligible for full exemption under Section 10(10AA)(i). The CIT(A) upheld this decision, noting that while the exemption limit for non-government employees was enhanced to Rs. 25,00,000/- from April 1, 2023, this was not applicable to the assessee's retirement year. The assessee appealed to the ITAT.

What were the issues?

1. Whether the assessee, an employee of Haryana Vidyut Prasaran Nigam Ltd. (HVPNL), a State Government-owned utility, is entitled to full exemption on leave encashment under Section 10(10AA)(i) of the Income Tax Act, 1961, or if the exemption is limited to Rs. 3,00,000/- under Section 10(10AA)(ii). Assessee's Contention: The assessee argued that HVPNL adopted the Haryana Civil Service (Pension) Rules, 2016, and that employees transferred to HVPNL were entitled to benefits not less favourable than those applicable before transfer, including pension and death-cum-retirement benefits. The assessee relied on coordinate bench decisions in Shri Jagdeep Singh vs. AO and others, which held that employees of State Government undertakings adopting State Service Rules were eligible for exemption under Section 10(10AA)(i). Revenue's Contention: The revenue contended, as upheld by the AO and CIT(A), that Section 10(10AA)(i) strictly applies only to employees of the Central or State Government, and not to statutory corporations or government-owned companies, unless expressly provided. They argued that being owned or controlled by the State Government or governed by State Service Rules does not make an employer a 'State Government' for the purposes of the Income Tax Act. They also emphasized the principle of literal interpretation of statutory provisions and that consistency cannot override a correct legal interpretation.

Which sections of the Income-tax Act were involved?

Section 10(10AA),Section 10(10AA)(i),Section 10(10AA)(ii),Section 143(2),Section 142(1),Section 143(3),Section 144B

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Cases cited in this judgment(5)Show list

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आयकर अपीलीय अधिकरण, चण्डीगढ़ न्यायपीठ “B”, चण्डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE श्री ललित कुमार, न्यायिक सदस्य एवं श्री कृणवन्त सहाय, लेखा सदस्य BEFORE: SHRI. LALIET KUMAR, JM & SHRI. KRINWANT SAHAY, AM आयकर अपील सं. / ITA No. 652 /Chd/2023 निर्धारण वर्ष / Assessment Year : 2020-21 Shri Ashwani Kumar Sharma Flat No. 105, Parvati Durga Society, GH-5, MDC, Sector-6, Panchkula, Haryana-134109 स्थायी लेखा सं./ PAN NO: AKNPS6440F अपीलार्थी/Appellant निर्धारिती की ओर से/Assessee by : राजस्व की ओर से / Revenue by : बनाम The ITO Ward-1, Panchkula प्रत्यर्थी / Respondent Shri M.R. Sharma, Advocate Shri Vivek Vardhan, Addl. CIT, Sr. DR सुनवाई की तारीख / Date of Hearing : 23/06/2025 उदघोषणा की तारीख/Date of Pronouncement : 24/06/2025 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/ NFAC Delhi dt. 24/08/2023 pertaining to Assessment Year 2020-21. 2. The sole issue raised by the Assessee in this appeal relates to whether he is entitled to exemption under section 10AA of the Act, in respect of the entire amount of Leave Encashment received from his employer or t

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