Tanaji Kedari Sapkal Vs ITO (ITAT Pune)
Income Tax Appellate Tribunal (ITAT) Pune, in a recent ruling, has clarified the tax treatment of leave encashment received by employees, particularly those with service periods spanning both government and non-government entities. The Tribunal, in the case of Tanaji Kedari Sapkal vs. ITO (Assessment Year 2018-19), overturned decisions by the National Faceless Appeal Centre (NFAC) and the Centralized Processing Centre (CPC), emphasizing that leave encashment from government and non-government departments must be examined separately for exemption under Section 10(10AA) of the Income-tax Act, 1961.
The appellant, Tanaji Kedari Sapkal, a retired Deputy General Manager from Bharat Sanchar Nigam Limited (BSNL), a Public Sector Undertaking, had retired on superannuation on May 31, 2017. In his tax return for Assessment Year 2018-19, he claimed a total exemption of Rs. 10,87,092 for leave encashment under Section 10(10AA) of the Act. However, the CPC, in processing his return, limited the exemption to Rs. 3,00,000, adding the remaining Rs. 7,87,092 to his taxable income. This disallowance was based on the premise that the assessee, as a non-government salaried employee (referring to his BSNL service), was not entitled to total exemption for leave encashment.
Sapkal challenged this decision by filing a rectification application under Section 154 of the Act, which was also rejected by the lower authorities. Subsequently, his appeal before the NFAC also failed to provide relief, leading him to approach the ITAT.
