2023 (3) TMI 312 - AT - Income Tax

Deduction u/s 10(10AA) - leave encashment on retirement - Rejection of claim holding that the employer of the assessee is a Non-Govt. Organisation - HELD THAT - We find from the records that the assessee had been working in Malviya National Institute of Technology, Jaipur (Raj) and as per Govt. Order/ Gazette Notification of Govt. of India issued on 6th June 2007 (PB 10-12) and Office order dated 11-10-2022 (PB 21A), it is demonstrated that Malviya National Institute of Technology, Jaipur (Raj) is a Govt. Organisation. Nothing rebuttal has been filed by the Revenue Authority and even no fault has been pointed out by the Revenue Authority in the said Gazette Notification and Office Order relied upon by assessee. Therefore, we have no option except to rely upon un-rebutted public documents in the shape of Gazette Notification and Office Order for reaching the conclusion that Malviya National Institute of Technology, Jaipur (Raj) is a Govt. Organisation. CIT(A) while rejecting the claim of the assessee has solely relied upon the decision of Kamal Kumar Kalia vs Union of India ( 2019 (11) TMI 1143 - DELHI HIGH COURT which is altogether different from the facts of the present case - It was an undisputed fact that the petitioner in that case was employee of public sector undertaking and Natonalised Bank. Thus, it was held by the Hon ble Court that public sector undertaking and nationalized banks cannot be treated as Govt. Employee. However, the facts in the present case of the assessee are altogether different. Assessee has placed on record the Govt. Gazette Notification and Office Order to demonstrate that Malviya National Institute of Technology, Jaipur (Raj) is a Govt. Organisation. Thus findings of the ld. CIT(A) are based on incorrect assumption of facts. Since as per the documents, Malviya National Institute of Technology, Jaipur (Raj) is a Govt. Institution, therefore, the assessee being an employee of Malviya National Institute of Technology, Jaipur (Raj) is entitled for full exemption of earned leave encashment on retirement.The appeal of the assessee is allowed.

Summary

Issues:
1. Rejection of claim u/s 10(10AA) regarding earned leave encashment on retirement.
2. Determination of the nature of the employer as a government or non-government organization.

Detailed Analysis:
1. The primary issue in this case pertains to the rejection of the claim under section 10(10AA) concerning earned leave encashment on retirement. The appellant, an employee of Malviya National Institute of Technology, Jaipur, a government institution, sought exemption under section 10(10AA)(ii) of the Income Tax Act. However, the ld. CIT(A) denied the exemption, citing the decision of the Hon'ble Delhi High Court in a similar case. The ld. CIT(A) upheld the exemption of Rs. 3,00,000, as per the statutory limit, and dismissed the appeal. The appellant contended that the institution was a government organization, thus eligible for full exemption. The Tribunal noted that the facts of the present case differed from the cited judgment, as the appellant's employer was a government organization. Relying on un-rebutted public documents, including a Gazette Notification and Office Order, the Tribunal concluded that the appellant, being an employee of a government institution, was entitled to full exemption of earned leave encashment on retirement. Consequently, the appeal of the assessee was allowed.

2. The secondary issue involved determining the nature of the employer, whether a government or non-government organization. The ld. AR of the assessee provided evidence through a Gazette Notification and an Office Order demonstrating that Malviya National Institute of Technology, Jaipur, was a government organization. Despite the ld. CIT(A) relying on a previous judgment regarding public sector undertakings and nationalized banks, the Tribunal found that the facts of the present case indicated that the employer was indeed a government institution. As per the documents presented, the Tribunal concluded that the employer was a government organization, thereby entitling the assessee to full exemption of earned leave encashment on retirement. The Tribunal allowed the appeal based on the correct assessment of the employer's nature and the entitlement to exemption under section 10(10AA) of the Income Tax Act.

In conclusion, the Appellate Tribunal ITAT Jaipur allowed the appeal of the assessee, emphasizing the correct classification of the employer as a government organization and the consequent entitlement to full exemption under section 10(10AA) for earned leave encashment on retirement. The decision highlighted the importance of factual accuracy and proper assessment in determining tax liabilities and exemptions under the Income Tax Act.