Vijay Kumar Jain Vs ITO (ITAT Agra)
The Income Tax Appellate Tribunal (ITAT), Agra Bench, decided two connected appeals involving a common legal issue regarding the exemption limit for leave encashment under Section 10(10AA)(ii) of the Income-tax Act for Assessment Years 2019-20 and 2020-21. In ITA No. 175/Agr/2022, the assessee, a retiree from the State Bank of India, received leave encashment of ₹7,51,755 and claimed full exemption while filing the return. The claim was initially accepted during processing. However, the Centralized Processing Centre later passed a rectification order under Section 154, restricting the exemption to ₹3,00,000 on the ground that the assessee was not a Central or State Government employee, applying CBDT Notification dated 31.05.2002 which had prescribed a ₹3,00,000 limit. The Commissioner (Appeals) upheld the rectification.
The Tribunal examined decisions of the Jaipur Bench of the ITAT. In Ram Charan Gupta (order dated 27.06.2023), the Jaipur Bench considered the Delhi High Court’s prima facie observations in Kamal Kumar Kalia regarding the absence of any revision to the exemption limit since 1998 despite increases in pay scales. The Jaipur Bench relied on CBDT Notification No. 31/2023, issued by the Ministry of Finance, which revised the exemption limit for leave encashment to ₹25,00,000. In that case, the Tribunal held that the assessee was entitled to exemption within the revised limit. A similar view was followed in Govind Chhatwani (order dated 31.10.2023), where leave encashment exceeding ₹3,00,000 was treated as exempt in view of the enhanced limit.
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