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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 385/JP/2023
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 385/JP/2023 fu/kZkj.k o"kZ@Assessment Years : 2020-21 cuke Govind Chhatwani CIT (Appeals), Vs. Flat No. G-2, P. No. 485E, Devi Delhi Nagar New Saganer Road, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAMPC 3261 F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : None jktLo dh vksj ls@ Revenue by : Sh. A. S. Nehra (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 17/10/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 31/10/2023 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM
This appeal filed by assessee is arising out of the order of the National Faceless Appeal Centre, Delhi dated 05.06.2023 [here in after ld. NFAC/CIT(A) ] for assessment year 2020-21 which in turn arise from the order dated 19.10.2021 passed under section 143(1) of the Income Tax Act, 1961 [ here in after to as Act ] by ADIT, CPC, Bangalore.
In this appeal, the assessee has raised following grounds: -
2 Govind Chhatwani vs. CIT(A), Delhi “1. That the order of Ld. CIT(A), NFAC, Delhi denying the exemption claimed u/sec. 10(10AA)(ii) upto Rs. 17,68,479/- and restricting the same to Rs. 3,00,000/-. 2. That assessee is a Rajasthan State Government owned company employee. 3. Any other matter with prior permission of the chair.”
Succinctly, the fact as culled out from the records is that CPC/AO passed intimation u/s 143(1) of the Act on 19.10.2021 wherein the CPC added a sum of Rs. 14,68,480/- not allowing benefit to the assessee u/s 10(10AA) of the Act contending that deduction is available to the extent of Rs. 3,00,000/- only and therefore, the amount was added.
Aggrieved from the order of the CPC, the assessee preferred an appeal before ld. CIT(A) and the same was dismissed, the appeal of the asseseee holding that exemption u/s 10(10AA) of the Act is allowable to the extent of Rs. 3,00,000/- only and the balance was added rightly based on the notification prevalent at the time of deciding the appeal of the assessee.
As the assessee did not find any favour against the appeal filed before NFAC, assessee has preferred this appeal before this tribunal. To support the grounds of appeal so raised by the assessee the ld. AR which is extracted in below;
“The brief of facts of case are as under:- (1) That assessee was a employee of M/s Rajasthan Rajya Vidhyut Prasaran Nigam Ltd., (A Rajasthan Government State Undertaking whose 100% share holding is with Governor of Rajasthan, Jaipur). (2) The assessee retired during the year & received Rs. 17,68,479.00 as LEAVE – ENCASHMENT. Which was claimed in return filed as exempt u/sec. 10(10AA). (3) The A.O. while processing the return u /sec. 143(1) of Act on 19.10.2021; has disallowed their claim u/sec. 10(10AA) for Rs. 17,68,479.00 & has restricted to Rs. 3,00,000.00 & balance Rs. 14,68,479.00 (Rs. 17,68,479.00 – Rs. 3,00,000.00) has been added to income. Later u/sec. 154 this claim (Restriction of Rs. 3,00,000.00 u/sec. 10(10AA) was allowed to Rs. 17,68,479.00 on 07.12.2022 by ADIT, CPC, Banglore. (4) In between assessee also filed appeal CIT(A) NFAC for order u/sec. 143(1) of Act. (5) The LD. CIT(A) NFAC, after going into details, documents as held that “As the appellant was not a State Government Employee as on 31.07.2019 the deduction claimed by the Appellant is eligible for deduction u/sec. 10(10AA)(ii) of the Income Tax Act & not u/sec. 10(10AA)(i). Whereas the law is very clear. (a) Therefore it is hereby held that the appeal filed by the appellant claiming deduction for Rs. 17,68,479.00 u/sec. 10(10AA)(i) of the Income Tax Act is devoid of merit and the same is hereby DISMISSED. Ground of Appeal Ground No. 1:- That the order of Ld. CIT(A), NFAC Delhi denying the exemption claimed u/sec. 10(10AA)(ii) upto Rs. 17,68,479.00 and restricting the same to Rs. 3,00,000.00. (That assessee is a Rajasthan State Government owned company employee). (1) That during the year the assessee retired from the services of M/s Rajasthan Vidhyut Prasaran Nigam Ltd., (RVPN), A electric distribution company of Rajasthan State Government, Jaipur. (2) He received Rs. 17,08,479.00 as leave encashment (As per Rules) & claimed exempt u/sec. 10(10AA) of Act. (3) The Ld. CIT(A) has disallowed this claim (Though earlier u/sec. 154 of Act their claim has been allowed; which was denied earlier under processing) of Rs. 17,68,479.00 even the basic exemption of Rs. 3,00,000.00 has not considered. (4) The Ld. CIT(A) has disallowed the claim of assessee for only reason that he is not a Government Employee so his case does not fall in the category of section 10(10AA)(i) but falls in the category of section 10(10AA)(ii).
4 Govind Chhatwani vs. CIT(A), Delhi Whereas the law is very clear. “As per chapter 3 of Income Tax Act’ 1961, for employees other than central & state Govt. Employees, the rule issued by the CBDT under sub – clause 10(10AA) it is a mentioned below: 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 the behalf to the employees of that government. It is clear from the above rule that the exemption, in respect of the amount of leave encashment for the employees covered under sub – clause 2, is allowed by CBDT up to the limit of Central Government employees. Gazette notification is only a medium to inform the limit of leave encashment entitlement of the government employee. The importance of gazette notification is not more than that. The gazette notification is into determining the exemption limit because the exemption limit has been clearly specified in the above rule which stipulates the exemption limit for all non – government. Employees to be equal to the limit of government employees. Since beginning the cabinet secretary has been getting the highest salary in government. Therefore, entitlement of leave encashment to the cabinet secretary is the limit of government employees since beginning. At present entitlement of leave encashment of the cabinet secretary is Rs. 29.25 lacs. All employees of Banks & LIC are getting much less leave encashment at the time of retirement in comparison to the cabinet secretary and therefore, leave encashment amount received by them is tax exer. As per above rule CBDT is bound to issue gazette notification as and when the leave encashment entitlement of the cabinet secretary is enhanced. But unfortunately, it was an inadvertent lapse on the part of CBDT of not issuing gazette notification after the last gazette notification no. SO 588 E dated 31.05.2002. The CBDT wants to give the tax exemption under sub – clause 10(10AA) ii of Income Tax Act, 1961 up to the limit of government employees. If BDT does not want to give the exemption up to the limit of government employees, why did they write that the amount of notification is equal to the limit of government employees? In view of the above it is very clear what the rule is & what is the purpose of notification.
Thus from above it is clear that GAZETE NOTIFICATION is only a medium for limit; but it does not determine the exemption limit because the exemption limit has been clearly specified in the above rule which stipulates the exemption limit for all non government employees to be equal to the limit of Government Employees
Since the Cabinet Secretary has been getting the highest salary in Government; hence this should be entitlement of leave encashment by all non employees too.
5 Govind Chhatwani vs. CIT(A), Delhi Though the CBDT has issued a press release dated 25.05.2023 in form of notification no. 31/2023 dated 24.05.2023 where the limit of Rs. 3.00 lakh u/sec. 10(10AA)(ii) has been raised to Rs. 25.00 lakhs w.e.f. 01.04.2023. There is no link for the period 01.04.2022 to 31.03.2023 & back where there is no such notification. (Copy enclosed) The explanatory memorandum to this notification has further clarified that “No person is being adversely affected by giving retrospective effect to this notification”. It is requested to consider the facts & grant relief the CIT(A) has straight way not even granted the basis old exemption u/sec. 10(10AA)(ii) of Rs. 3,00,000.00 & has disallowed the whole of claim of Rs. 17,68,479.00.”
Per contra, the ld. DR relied upon the order of the lower authorities.
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 ld. 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-ITA-1 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 the benefit should be given to the assessee. The similar issue has been decided by the bench in the case of Ram Charan Gupta in wherein the bench has already held as under:-
“8. We have heard the rival contentions and perused the material placed on record. The bench noted that the assessee relying the decision of Hon’ble Delhi High Court has issued a notice to the Union of India in the case of Kamal Kumar Kalia & Ors. Vs. Union of India & Ors in WP(C) 11846/2019 dated 08.11.2019 wherein the court has given following directions :- “8. We are however of the, prima facie, view that the grievances of the petitioner with regard to exemption limit under Clause (ii) of Section 10 (10AA) not being raised since 1998, appears to be justified. This is so because over the decades, the pay-scales admissible to government servants, and even employees of the Public Sector Undertaking and Nationalised Banks and all others have been upwardly revised, keeping in view, the financial growth in the country as well as on account of rising inflation. The last drawn salaries have increased manifold since time and notification issued under Clause (ii) of Section 10(10AA) was lastly issued, as taken note of hereinabove, on 31.05.2002. We therefore, issue notice to the respondents limited to this aspect.
Issue notice, learned counsel for the respondents accepts notice. Respondents should file counter affidavits be filed within six weeks. Rejoinder thereto, if any, be filed before the next date.”
8.1 Recently the Central Board of Direct Taxes Suomotu 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 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 ld. 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.” 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.
Order pronounced in the open court on 31/10/2023. Sd/- Sd/- ¼ lanhi xkslkbZ ½ ¼ jkBkSM deys’k t;arHkkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 31/10/2023 *Ganesh Kumar, PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Govind Chhatwani, Jaipur 2. izR;FkhZ@ The Respondent- CIT(Appeals), Delhi vk;dj vk;qDr@ The ld CIT 3. vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 385/JP/2023) vkns'kkuqlkj@ By order,
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