2023 (7) TMI 1328 - AT - Income Tax

Leave encashment u/s. 10(10AA) - D.R. submitted that the organization that is BSNL is a Public Sector Unit and therefore, the same is not exempted in respect of leave encashment - HELD THAT - The assessee was absorbed in the Department of Telecommunication in respect of BSNL vide Presidential Order dated 23.09.2019 which has given the permanent absorption effective from 01.10.2000. The assessee was initially appointed on 28.11.1983 in the Department of Indian Post and Telegraphs and therefore, he was initially appointed in the Central Government which was affirmed in the certificate from the Accounts Officer of BSNL on 18.01.2023 that the leave encashment for 300 earned leave was of Department of Telecommunication originally that of Indian Post and Telegraph Department and therefore, the same cannot be treated as a PSU and the assessee is entitled for exemption under Section 10(10AA). CIT(A) as well as the Assessing Officer has not taken cognizance of these facts and wrongly denied the benefit of exemption of leave encashment under Section 10(10AA) of the Act. In fact, in Para 4.3 of the CIT-A s order the decision of the Tribunal, Mumbai Bench in case of Babulal Patel 2019 (2) TMI 2069 - ITAT MUMBAI has been quoted but the same was not at all considered. Therefore, the appeal of the assessee is allowed.

Summary

Issues Involved:
The appeal against the order passed by the Ld. Commissioner of Income Tax (Appeals) regarding the disallowance of exemption on leave encashment under Section 10(10AA) of the Income Tax Act, 1961 for A.Y. 2020-21.

Details of the Judgment:

1. The assessee filed the return of income declaring total income, but the intimation under Section 143(1) assessed the total income higher due to disallowance of exemption claim on leave encashment under Section 10(10AA).

2. The appeal was filed by the assessee against the order under Section 143(1), and the CIT(A) dismissed the appeal, upholding the disallowance of exemption.

3. The Ld. A.R. argued that the assessee was absorbed into BSNL after being initially appointed in the Department of Indian Post and Telegraph Department, making the leave encashment fully exempt under the Income Tax Act, which was ignored by the Assessing Officer and CIT(A).

4. The Ld. D.R. contended that BSNL is a Public Sector Unit and not exempted for leave encashment, relying on the previous orders.

5. After hearing both parties and examining the material, it was found that the assessee's absorption into BSNL from the Department of Telecommunication entitled him to exemption under Section 10(10AA) as he was initially appointed in the Central Government. The CIT(A) and Assessing Officer failed to consider these facts and wrongly denied the exemption. The Tribunal's decision in a similar case was not taken into account by the lower authorities.

Result:
The appeal of the assessee was allowed, and the benefit of exemption on leave encashment under Section 10(10AA) was granted.