Shyam Sunder Sahni Vs Asstt. Director of Income Tax (ITAT Delhi)
The appeal before the Income Tax Appellate Tribunal (ITAT), Delhi, arose from an order of the CIT(A)/NFAC, Delhi, for Assessment Year 2021-22 in proceedings under Section 143(1) read with Section 264 of the Income Tax Act. The sole issue in dispute was whether the assessee, a retired employee of Canara Bank, was entitled to exemption of the full leave encashment amount received on retirement under Section 10(10AA) of the Act.
The assessee had claimed exemption of ₹6,97,100 towards leave encashment received on retirement. While processing the return under Section 143(1), the CPC allowed exemption of only ₹3,00,000 and treated the balance amount of ₹3,97,100 as taxable income, resulting in enhancement of the assessed income and creation of a tax demand. The assessee challenged the adjustment before the CIT(A), contending that the bank was controlled and regulated by the Central Government and that bank employees should be treated similarly to government employees for purposes of exemption under Section 10(10AA).
The CIT(A) rejected the claim. Relying on judicial precedents, including the decision of the Delhi High Court in Kamal Kumar Kalia v. Union of India and the Bangalore Tribunal’s decision in KPTCL Davangere v. ITO, the appellate authority held that employees of public sector undertakings and nationalised banks cannot be treated as Central or State Government employees merely because such entities may be regarded as “State” under Article 12 of the Constitution. Accordingly, the exemption was restricted to ₹3,00,000 and the appeal was dismissed.
