2016 (7) TMI 1257 - AT - Income Tax

Exemption u/s 10(10)(i) and 10(10AA)(i) - arrears of gratuity and arrears of leave encashment - Held that - Both the sides are in agreement that the facts and circumstances of the instant appeal are mutatis mutandis similar to those of the appeal in the case of Ram Kanwar Rana 2016 (6) TMI 687 - ITAT DELHI allowing exemption in respect of the arrears of gratuity and arrears of leave encashment and dismissing the ground about the initiation of re-assessment. Following the view, we extend the benefit of exemption to the extant assessee also in respect of arrears of gratuity and arrears of leave encashment u/s 10(10)(i) and 10(10AA)(i).

Summary

Issues:
Denial of exemption for arrears of gratuity and leave encashment under sections 10(10)(i) and 10(10AA)(i) by the AO and CIT(A).

Analysis:
The appeal before the ITAT Delhi involved the denial of exemption for arrears of gratuity and leave encashment received by the assessee. The AO had initiated reassessment proceedings, contending that the extended exemption limit did not apply to the assessee who retired before the specified date. The AO disallowed the exemption claimed under section 10(10) and instead applied sections 10(10)(iii) and 10(10AA)(ii) of the Income Tax Act. The CIT(A) upheld the AO's decision, ruling that the assessee was not eligible for exemption under section 10(10)(i) as he was not considered a government employee and did not fall under section 10(10)(ii) either. The CIT(A) concluded that the assessee fell under section 10(10)(iii) with a limited exempt gratuity amount, which had been exhausted in a previous year. The assessee challenged this denial of exemption.

Upon hearing the arguments and reviewing the case, the ITAT referred to similar cases where exemption had been allowed for arrears of gratuity and leave encashment. Citing precedents, the ITAT extended the benefit of exemption to the current assessee under sections 10(10)(i) and 10(10AA)(i). The ITAT dismissed other grounds raised regarding the initiation of reassessment proceedings as they were not pressed by the assessee's representative. Consequently, the appeal was partly allowed, granting the exemption for arrears of gratuity and leave encashment.

In conclusion, the ITAT Delhi ruled in favor of the assessee, allowing the exemption for arrears of gratuity and leave encashment under sections 10(10)(i) and 10(10AA)(i). The decision was based on precedents where similar exemptions had been granted. The ITAT dismissed other grounds not pressed by the assessee's representative, resulting in a partial allowance of the appeal.