2017 (2) TMI 320 - AT - Income Tax

Exemption claimed u/s 10(10)(i) - arrear of gratuity received from the State Government after retirement - Held that - As decided in assessee s own case for previous AY the assessee is found to be an employee holding a civil post under a State, in considered opinion, the provisions of section 10(10)(i) are fully attracted in this case entitling him to exemption for the amount under consideration. Once a case falls under clause (i) of section 10(10), the same cannot be brought within the purview of clause (iii) of section 10(10). Therefore, hold that the assessee is entitled to exemption u/s 10(10)(i) in respect of gratuity amount received in total upto ₹ 10 lac, which covers a sum of ₹ 6,50,000/- received during the year. Overturning the impugned order on this score, allow exemption u/s 10(10)(i) to the arrears of gratuity received by the assessee at ₹ 6,50,000/- during the instant year. As regards the second amount received by the assessee during the year towards the arrears of leave encashment AR submitted that there is not much difference in the language of section 10(10)(i) and 10(10AA)(i) and the view taken in respect of arrears of gratuity u/s 10(10) should be followed for arrears of leave encashment u/s 10(10AA). The ld. DR supported this proposition. 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, desisting from independently examining the later provision. In view of the fact that 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:
1. Correctness of the order dated 23.12.2015 of the CIT(A), Hisar pertaining to 2010-11 AY.
2. Making an addition of ?6,50,000/- on account of arrear of gratuity received from the State Government after retirement by restricting the exemption claimed u/s 10(10)(i) of the Act to ?3,50,000/-.
3. Making an addition of ?2,01,170/- on account of arrear of leave encashment received from the State Government after retirement by restricting the exemption claimed u/s 10(10AA) of the Act.

Analysis:
1. The appeal challenged the correctness of the CIT(A) order for the 2010-11 assessment year. The Ld.AR contested only Ground Nos. (iv) and (v) related to the additions made on account of gratuity and leave encashment exemptions. The issues were found to be consistently decided in favor of the assessee by the ITAT in similar cases involving employees of Chaudhary Charan Singh HAU. The ITAT had upheld that the employees were eligible for exemptions under sections 10(10)(i) and 10(10AA) of the Income Tax Act, 1961. The CIT(A) confirmed the assessing officer's order, which was based on the premise that the assessee was not eligible for the exemptions. However, the ITAT, relying on previous orders, concluded in favor of the assessee, stating that the exemptions were applicable. The consistent view of the ITAT in similar cases supported the assessee's claim for exemptions.

2. The first issue involved the addition of ?6,50,000 on account of arrear of gratuity received after retirement. The Revenue treated it as falling under section 10(10)(iii) instead of section 10(10)(i). The ITAT analyzed the provisions of section 10(10) and determined that the assessee, as an employee holding a civil post under the State, was entitled to exemption under section 10(10)(i) for the gratuity amount. The ITAT allowed the exemption under section 10(10)(i) for the arrears of gratuity received by the assessee, overturning the assessing officer's decision.

3. The second issue concerned the addition of ?2,01,170 on account of arrear of leave encashment received after retirement. The assessing officer denied the exemption claimed under section 10(10AA)(i), considering it covered under section 10(10AA)(ii). The ITAT, following the decision on gratuity exemptions, allowed the benefit of exemption under section 10(10AA)(i) for the arrears of leave encashment. Both parties agreed that the view taken for gratuity exemptions should apply to leave encashment as well. Consequently, the ITAT allowed the exemption under section 10(10AA)(i) for the arrears of leave encashment received by the assessee.

In conclusion, the ITAT allowed the appeal of the assessee, holding that the exemptions claimed under sections 10(10)(i) and 10(10AA)(i) were applicable, based on the assessee's status as an employee holding a civil post under the State. The ITAT's decision was consistent with previous judgments and supported the assessee's entitlement to the exemptions for gratuity and leave encashment received after retirement.