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2023 (5) TMI 691 - AT - Income TaxExemption u/s 10(10AA) - Eligible amount of exemption - eligibility of leave encashment exemption to the highest paid employee in the central government - assessee contended that leave encashment amount received at the time of retirement is exempt from tax to the extent of eligibility of leave encashment exemption to the highest paid employee in the central government - HELD THAT - As not disputed that the CBDT has not issued the notification for increase in the limit and even in the case stated herein in KAMAL KUMAR KALIA ORS. 2019 (11) TMI 1143 - DELHI HIGH COURT has issued a notice in the matter to the Union of India. In the light of these facts and prayer of the assessee that even the Hon ble Finance Minister while giving the speech in the budget indicated in the increase in the limit but the relevant notification/clarification yet not received the bench feels that if the CBDT issue the notification and revise the limit in that case the assessee may seek the relief based on that future events but presently considering the fact that the relevant limit is fixed at Rs. 3,00,000/- for which there is already relief granted to the assessee considering the present provision read with the notification. Based on these observations we are of the view that if the limit fixed in 2002 revised, consequent to the directions or the proceedings before the Hon ble Delhi High Court or the CBDT revise the limit then in that situation the assessee may approach the jurisdictional AO for taking the benefit of increase in limit but presently considering the fact that in the absence of the relevant notification benefit cannot be granted to the assessee more than Rs. 3 lacs. Based on these observations the appeal of the assessee is disposed off.
Issues Involved:
1. Restriction of Exempted Income under Section 10(10AA) of the Income Tax Act. 2. The Assessee's Claim for Full Exemption. 3. Notification and Limit Revision by CBDT. Summary of Judgment: Issue 1: Restriction of Exempted Income under Section 10(10AA) of the Income Tax Act The assessee retired from National Insurance Co. Ltd. and received Rs. 11,97,796 as earned leave encashment. The assessee claimed full exemption under Section 10(10AA)(ii) in the Income Tax return for AY 2020-21. The Centralized Processing Center (CPC) restricted the exemption to Rs. 3,00,000 based on the provision applicable to private employees, resulting in an addition of Rs. 8,97,796 to the income. Issue 2: The Assessee's Claim for Full Exemption The assessee contended that the exemption limit should be aligned with the highest paid employee in the central government, currently Rs. 29.25 lakhs. The CIT(A) upheld the CPC's decision, stating that for private employees, the exemption is limited to Rs. 3,00,000 as per the notification dated 31.05.2002. Issue 3: Notification and Limit Revision by CBDT The assessee argued that the limit should be revised in line with the increase in government salaries over the years. The Delhi High Court, in a related case, issued a notice to the Union of India regarding the non-revision of the exemption limit since 1998. The Finance Minister, in the budget speech, proposed increasing the limit to Rs. 25 lakhs, but no notification had been issued at the time of the judgment. Tribunal's Decision: The tribunal acknowledged the pending proceedings before the Delhi High Court and the Finance Minister's budget proposal. However, it concluded that, in the absence of a revised notification, the current limit of Rs. 3,00,000 must be adhered to. The tribunal dismissed the appeal but allowed the assessee to seek relief if the limit is revised in the future. Conclusion: The appeal of the assessee is dismissed with the provision that the assessee may approach the jurisdictional AO for relief if the limit is revised by future notifications or court directions.
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