184. Amount received on encashment of leave salary due to employee either in service or at the time of retirement – Whether taxable as part of salary income
1. A large number of references have been received by the Board on the decision of the Income-tax Appellate Tribunal, Madras Bench, in the case of N.B. Tendolkar v. ITO [1980] 4 Taxman 129. In this decision the Tribunal has held that the amount received by an assessee on encashment of leave due to him is not taxable.
2. The Income-tax Department has not accepted the aforesaid decision of the Tribunal and is in reference before the Madras High Court. The stand of the department is that the amounts received on encashment of leave salary due to an employee either in service or at the time of his retirement are taxable as part of salary income.
3. All Income-tax Officers working in your charge and in particular the Income-tax Officers assessing salary cases may be apprised of this stand taken by the department.
Circular : No. 312 [F. No. 200/187/81-IT(A-I)], dated 31-8-1981.
