2016 (9) TMI 1507 - AT - Income Tax

Denial of exemption u/s 10(10AA)(ii) towards Leave Encashment - HELD THAT - As decided in RAM KANWAR RANA VERSUS ITO, WARD-3, HISAR 2016 (6) TMI 687 - ITAT DELHI as both the sides are consensus ad idem on the position that the view taken in the context of section 10(10) as applicable to leave gratuity be followed here in the context of section 10(10AA) in the context of leave encashment, I am desisting from independently examining the later provision - thus held the assessee to be entitled to exemption u/s 10(10)(i) in respect of arrears of gratuity, following the same, extend the benefit of exemption u/s 10(10AA)(i) in respect of arrears of leave encashment. - Decided in favour of assessee.

Summary

Issues:
Appeal against denial of exemption u/s 10(10AA)(ii) of the Income Tax Act, 1961 towards Leave Encashment.

Analysis:
1. The appellant contested the denial of exemption u/s 10(10AA)(ii) for Leave Encashment amounting to ?1,94,340 as per the order of the ld. CIT(A), Hisar. The AO observed that the appellant claimed exemption on the entire Leave Encashment amount, but the AO limited it to ?3,00,000 as per the Act. This led to an addition of ?1,94,340 to the assessed income, totaling it to ?6,00,340. The AO argued that the appellant, being an employee of a university, did not qualify as a Govt. employee under the Act, hence the exemption was not applicable.

2. The ld. CIT(A) upheld the AO's decision, stating that full exemption under Section 10(10AA) is only available to Central and State Government employees, not to employees of other entities like the appellant, who was an employee of a university. The CIT(A) concluded that the appellant's case fell under Section 10(10AA)(ii) and not Section 10(10AA)(i), hence the addition was justified.

3. The appellant relied on decisions from various ITAT benches in Delhi where similar issues were decided in favor of the assessees. The appellant presented orders from different cases supporting their claim for exemption. The ld. DR supported the lower authorities' orders.

4. The ITAT Delhi referred to a similar case and held that since the facts were identical to the case of Sh. Ram Kanwar Rana, where exemption was allowed for Leave Encashment, the impugned order was set aside. The ITAT directed the AO to allow the appellant's claim for Leave Encashment exemption.

5. Consequently, the appeal of the assessee was allowed, and the order in favor of the appellant was pronounced on 28/09/2016.