2016 (7) TMI 1309 - AT - Income Tax

Denial of exemption u/s 10(10) in respect of the amount received by the assessee towards arrears of gratuity and arrears of leave encashment - Held that - It is observed that the Delhi bench of the tribunal in Shri Ram Kanwar Rana vs. ITO Ward-3 Hisar 2016 (6) TMI 687 - ITAT DELHI has allowed exemption in respect of the arrears of gratuity and arrears of leave encashment and dismissed the grounds about the initiation of re-assessment. Similar view has been taken in the case of Raghubir Singh Panghal vs. ITO 2016 (6) TMI 1163 - ITAT DELHI . Following the same extend the benefit of exemption to the instant assessee also in respect of arrears of gratuity and arrears of leave encashment u/s 10(10)(i) and 10(10AA)(i). - Decided in favour of assessee.

Summary

Issues:
- Denial of exemption for arrears of gratuity and leave encashment under sections 10(10)(i) and 10(10)(ii)
- Applicability of exemption limit for gratuity under section 10(10)(iii)
- Interpretation of employee status under Government for exemption eligibility

Analysis:
1. The primary issue in this case was the denial of exemption for arrears of gratuity and leave encashment under sections 10(10)(i) and 10(10)(ii). The Assessing Officer (AO) had disallowed the exemption as the assessee had already exhausted the exemption limit in the earlier year. The AO held that the extended benefit of exemption was not available since the assessee retired before the cutoff date. The CIT(A) upheld this view, stating that the assessee was not a 'holder of civil post under the State Government' and thus not eligible for exemption under section 10(10)(i). However, the tribunal referred to similar cases where exemption was allowed and extended the benefit of exemption to the assessee under sections 10(10)(i) and 10(10AA)(i).

2. Another issue was the applicability of the exemption limit for gratuity under section 10(10)(iii). The AO contended that the Notification enhancing the limit to ?10 lakh was not applicable to the assessee as he retired before the specified date. The tribunal, following precedents, allowed the exemption under section 10(10)(i) and 10(10AA)(i) without considering the enhanced limit under section 10(10)(iii).

3. The interpretation of the employee status under the Government for exemption eligibility was also a crucial aspect. The AO and CIT(A) held that the assessee, being an employee of a specific university, was not covered under sections 10(10)(i) or 10(10)(ii). They considered the assessee to be covered under section 10(10)(iii) with a limited exempt gratuity amount. However, the tribunal, based on previous judgments, extended the exemption benefit to the assessee under sections 10(10)(i) and 10(10AA)(i), disregarding the employee's status under the Government.

In conclusion, the tribunal allowed the appeal partly, granting exemption for arrears of gratuity and leave encashment under sections 10(10)(i) and 10(10AA)(i) to the assessee, following precedents where similar exemptions were allowed. The tribunal dismissed the other grounds not pressed by the appellant.