Case Law Details
Pradipkumar Bhogilal Modi Vs ADIT (CPC) Bengaluru (ITAT Ahmedabad)
Introduction: The Income Tax Appellate Tribunal (ITAT) in Ahmedabad recently passed a significant order in the case of Pradipkumar Bhogilal Modi Vs ADIT (CPC) Bengaluru. The appeal centered around the exemption of leave encashment under Section 10(10AA) of the Income Tax Act for employees working in the Department of Telecommunication. The decision is notable as ITAT deleted the disallowance previously made by the authorities.
Analysis:
1. Background: The assessee, initially appointed in the Department of Indian Post and Telegraph, was permanently absorbed in the Department of Telecommunication in Bharat Sanchar Nigam Ltd. (BSNL). A disallowance of exemption claim amounting to Rs. 7,20,600/- for leave encashment under Section 10(10AA) was contested.
2. Arguments: The assessee’s representative argued that the exemption was fully applicable under the Income Tax Act, while the Department Representative maintained that BSNL, being a Public Sector Unit, was not exempted.
3. Decision: The ITAT highlighted the fact that the assessee was originally appointed in the Central Government, thereby entitling him to the exemption under Section 10(10AA) of the Act. The Tribunal observed that both the Assessing Officer and CIT(A) had ignored vital details, leading to the wrong denial of the benefit.
Conclusion: The ruling of ITAT Ahmedabad in favor of the assessee emphasizes the importance of careful consideration of the facts and the application of the relevant provisions of the law. The decision reaffirms the exemption on leave encashment under Section 10(10AA) for employees working in the Department of Telecommunication and sets a precedent for similar cases. It also showcases the Tribunal’s commitment to ensuring that the law is correctly interpreted and applied.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The appeal filed by the assessee is against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi on 14.12.2022 for A.Y. 2020-21.
2. The grounds of appeal raised by the assessee are as under:
“1. The intimation issued u/s 143(1) of I.T. Act and confirmed by First Appellate Authority is bad in law and deserves to be uncalled for.
2. The assessing officer as well as first appellate authority has erred in law and on facts in disallowing exemption of Rs. 7,20,600/- on account of leave encashment u/s. 10(10AA) of the Act. The same deserves to be deleted.
3. The appellant craves to reserve his right to add, alter, amend or delete any ground of appeal during the course of hearing.”
3. The assessee filed his return of income declaring total income of Rs. 7,05,050/-. Intimation under Section 143(1) of the Income Tax Act, 1961 received by the assessee thereby assessing the total income at Rs. 14,25,640/-by making disallowance of exemption claim on account of leave encashment under Section 10(10AA) of the Act amounting to Rs. 7,20,600/-.
4. Being aggrieved by the said order under Section 143(1) of the Act the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee.
5. The Ld. A.R. submitted that the assessee was initially appointed as General Engineer in the Department of Indian Post and Telegraph Department vide order dated 28.11.1983. Subsequently, the assessee was provisionally appointed as Junior Telecom Officer by the Department on 12.09.1990. The Ld. A.R. further submitted that the Government of India Department of Telecommunication issued Presidential Order dated 23.09.2019 thereby permanently absorbing the assessee in the Department of Telecommunication in Bharat Sanchar Nigam Ltd. (in short “BSNL”) w.e.f. 01.10.2000. The Ld. A.R. submitted that while absorbing into BSNL the period for leave encashment was calculated in respect of assessee’s working in the Department of Telecommunication and the same is fully exempted under Income Tax Act. The Ld. A.R. submitted that the Assessing Officer as well as the CIT(A) totally ignored this.
6. The Ld. D.R. submitted that the organization that is BSNL is a Public Sector Unit and therefore, the same is not exempted in respect of leave encashment. The Ld. D.R. relied upon the order under Section 143(1) and order of the CIT(A).
7. Heard both the parties and perused all the relevant material available on record. The assessee was absorbed in the Department of Telecommunication in respect of BSNL vide Presidential Order dated 23.09.2019 which has given the permanent absorption effective from 01.10.2000. The assessee was initially appointed on 28.11.1983 in the Department of Indian Post and Telegraphs and therefore, he was initially appointed in the Central Government which was affirmed in the certificate from the Accounts Officer of BSNL on 18.01.2023 that the leave encashment for 300 earned leave was of Department of Telecommunication originally that of Indian Post and Telegraph Department and therefore, the same cannot be treated as a PSU and the assessee is entitled for exemption under Section 10(10AA) of the Act. The CIT(A) as well as the Assessing Officer has not taken cognizance of these facts and wrongly denied the benefit of exemption of leave encashment under Section 10(10AA) of the Act. In fact, in Para 4.3 of the CIT-A’s order the decision of the Tribunal, Mumbai Bench in case of Babulal Patel has been quoted but the same was not at all consider. Therefore, the appeal of the assessee is allowed.
8. In result, the appeal of the assessee is allowed.
This Order pronounced in Open Court on 19/07/2023
