2016 (8) TMI 1436 - AT - Income Tax

Exemption u/s 10(10)(i) and 10(10AA)(i) - Denial of exemption in respect of the amount received by the assessee towards arrears of gratuity and arrears of leave encashment - view taken by the AO that the assessee was not a holder of civil post under the State Government and hence not eligible for exemption u/s 10(10)(i) - assessee was held to be not covered u/s 10(10)(ii) as he did not receive any gratuity under the Payment of Gratuity Act, 1972 - HELD THAT - 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 reassessment. 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).

Summary

Issues: Denial of exemption for arrears of gratuity and leave encashment under sections 10(10)(i), 10(10)(iii), and 10(10AA)(ii) of the Income Tax Act for an employee of Chaudhary Charan Singh Haryana Agricultural University who retired before 24.05.2010.

Analysis:

1. Exemption Denial for Arrears of Gratuity and Leave Encashment:
The main issue in this appeal was the denial of exemption for the amount received by the assessee towards arrears of gratuity and leave encashment. The Assessing Officer (AO) initiated reassessment proceedings, claiming that the assessee wrongly claimed exemption under section 10(10) of the Income Tax Act. The AO argued that since the assessee retired before 24.05.2010, the extended benefit of exemption was not available. The AO held that the correct sections applicable were 10(10)(iii) and 10(10AA)(ii) instead of 10(10)(i). The AO also noted that the exemption limit had been enhanced to ?10 lakh for individuals retiring after 24.05.2010. The CIT(A) upheld the AO's decision, stating that the assessee was not a government employee and thus not eligible for exemption under section 10(10)(i).

2. Judicial Precedents and Application of Exemption:
During the hearing, the assessee's representative referred to two cases where exemption for arrears of gratuity and leave encashment was allowed. The Tribunal had previously allowed exemption in similar cases, citing the provisions of the Income Tax Act. Following these precedents, the current judge extended the benefit of exemption to the assessee under sections 10(10)(i) and 10(10AA)(i). The judge dismissed other grounds raised regarding the initiation of reassessment proceedings since they were not pressed by the assessee's representative.

3. Final Decision and Outcome:
After considering the arguments and legal precedents, the judge partially allowed the appeal, granting the assessee exemption for arrears of gratuity and leave encashment. The decision was based on the interpretation of relevant sections of the Income Tax Act and the application of judicial precedents. The order was pronounced in open court on 10.08.2016, concluding the matter in favor of the assessee regarding the denial of exemption for the specified amounts.

In conclusion, the judgment highlighted the importance of correctly interpreting the provisions of the Income Tax Act concerning exemptions for arrears of gratuity and leave encashment. The decision was based on legal precedents and a thorough analysis of the relevant sections, ultimately resulting in the partial allowance of the appeal in favor of the assessee.