Rajendra Kumar Vs ITO (ITAT Ranchi)
The ITAT Ranchi allowed the appeal of an assessee challenging the restriction of exemption under Section 10(10AA)(ii) of the Income-tax Act for leave encashment received on retirement. The assessee, a retired UCO Bank employee, had received leave encashment of ₹13,20,280 during the relevant financial year and claimed exemption for the entire amount in the return of income. However, while processing the return under Section 143(1), the Assessing Officer restricted the exemption to ₹3 lakh. The CIT(A) upheld the restriction on the ground that the assessee was not a Central or State Government employee and therefore was not entitled to exemption of the entire amount.
The appeal before the Tribunal was filed with a delay of 1,186 days. The assessee sought condonation of delay on the basis of CBDT Notification No. 31/2023 dated 24.05.2023, issued with retrospective effect, which increased the exemption limit to ₹25 lakh. The Department did not seriously oppose the request, and the Tribunal condoned the delay.
On merits, the assessee contended that in view of the CBDT notification and earlier Tribunal decisions, the entire leave encashment amount of ₹13,20,280 was exempt under Section 10(10AA)(ii). The Tribunal, following the decisions of its Coordinate Bench and the Jaipur Bench, held that the assessee was entitled to the benefit of deduction under Section 10(10AA)(ii). Accordingly, it allowed the claim and the appeal.
