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Issues:
- Interpretation of section 10(10AA) of the Income-tax Act, 1961 regarding deduction for cash equivalent of unutilised earned leave upon resignation from employment. Analysis: The High Court of Bombay addressed a reference under section 256(1) of the Income-tax Act, 1961, where the question was raised concerning the eligibility of an individual for deduction under section 10(10AA) of the Act upon resigning from employment. The individual, an employee of Shipping Corporation of India Ltd., resigned during the previous year relevant to the assessment year 1982-83. The Income-tax Officer initially rejected the claim for deduction under section 10(10AA) on the grounds that the employee had resigned from the employment. However, the Commissioner of Income-tax (Appeals) accepted the claim, leading to an appeal by the Revenue. The High Court examined the provisions of section 10(10AA) which exempt any payment received by an employee as the cash equivalent of leave salary at the time of retirement, whether on superannuation or otherwise. The court highlighted that the clause aims to provide relief to retiring employees and was amended to include retirement by resignation within its scope. The court emphasized that retirement, in the context of employment, signifies the conclusion of a career, which includes resignation as a mode of retirement. Thus, the court concluded that resignation amounts to retirement within the meaning of section 10(10AA), making the employee eligible for the deduction. The court cited the decision of the Madras High Court in a similar case to support its interpretation. Consequently, the court ruled in favor of the assessee, affirming their entitlement to the benefit under section 10(10AA) upon resignation.
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