Pointing out that the limit of leave encashment to be allowed to a government retiree taxpayer was revised to Rs. 25 lacs vide Gazette Notification No. 31/2023, dated May 24, 2023, the Pune Income Tax Appellate Tribunal (ITAT) ruled that the appellant, as a retired employee of SBI bank, had rightly claimed exemption of leave encashment under Section 10(10AA)(i) of the Income Tax Act, by treating himself as Government employee.
Therefore, while quashing the assessment order passed by the Assessing Officer, whereby he had restricted the exemption to Rs. 3 lacs, the Appellate Tribunal allowed the appeal in favour of the retired taxpayer.
The Division Bench comprising R.K. Panda (Vice President) and Astha Chandra (Judicial Member) observed that the impugned issue is covered in favour of the appellant by the decision of the co-ordinate bench of the Tribunal in the case of Govind Chhatwani v. CIT(A) [IT Appeal No. 385/JP/2023], wherein the taxpayer was held to be entitled to get the exemption under section 10(10AA).
The Bench also quoted that the Central Board of Direct Taxes had suo motu revised the limit for deduction under Section 10(10AA) and the revised limit now stands at Rs. 25 lacs, as specified vide Notification no. 31/2023 issued by the Ministry of Finance. Accordingly, the AO was directed to allow the claim as per the revised limit.
Briefly, the appellant, a retired employee of SBI, had received a certain amount as leave encashment, which he claimed as exempted under section 10(10AA)(i) of the Income Tax Act, treating himself to be an employee of the Government before his retirement. Accordingly, he claimed a refund of Rs. 1.96 lacs.
The AO, however, restricted the exemption to Rs. 3 lakhs and brought the balance encashment of unutilized earned leave to tax, thereby reducing the quantum of refund to Rs. 1.31 lakhs as against the refund claimed by the appellant in his return. This was upheld by the CIT(A) on appeal.
Cases Relied On:
Neelam Gupta v. Addl/JCIT(A) [IT Appeal No. 81/DEL/2025, dated Apr 21, 2025]
Govind Chhatwani v. CIT(A) [IT Appeal No. 385/JP/2023, dated Oct 31, 2023]
Appearances:
Sudhakar Gundappa Paldewar, for the Appellant/ Taxpayer
JCIT Milind Debaje, for the Respondent/ Revenue
