Shri Dinesh Kumar Tyagi Vs CIT (Appeals)/ National Faceless Appeal Centre (ITAT Delhi Bench)
Section 10(10Aa): ₹3 Lakh Ceiling Retires Before The Banker Does-₹25 Lakh Limit Applied To Ay 2020-21
Retired banker receives ₹13.93 lakh leave encashment
The assessee retired as a General Manager of Andhra Bank & received ₹13,92,645 towards leave encashment at the time of retirement.
In the assessment completed u/s 143(3) r/w section 144B, the AO restricted the exemption u/s 10(10AA) to ₹3 lakh. The restriction was confirmed by the CIT(A), NFAC.
The assessee contended before the ITAT that the enhanced exemption ceiling of ₹25 lakh notified by CBDT Notification No. 31/2023 dated 24.05.2023 should be applied to his case.
Since his leave-encashment receipt of ₹13.93 lakh was below the revised ceiling, he claimed exemption of the entire amount.
Bank employee is not automatically a Government employee
The historical dispute arose because section 10(10AA) provides complete exemption to Central & State Government employees, while employees falling in the other category are entitled to exemption subject to the notified monetary ceiling.
Employees of nationalised banks have frequently argued that their institutions are Government-controlled & therefore they should receive the same treatment as Government employees.
However, in Kamal Kumar Kalia v. Union of India [2020] 268 Taxman 398 (Delhi), the Delhi High Court held that merely because a nationalised bank or public-sector undertaking qualifies as “State” under Article 12 of the Constitution, its employees do not thereby acquire the status of Central or State Government employees for section 10(10AA).
