2023 (12) TMI 454 - AT - Income Tax

Leave encashment u/s 10(10AA) - Benefit of full exemption - assessee joined the Department of Telecom in the year 1981 which was corporatized by the Govt.of India in the year 2000 - Presidential Order thereby absorbing the assessee permanently into BSNL with effect from 01.10.2000 was passed and the leave at the credit of the assessee was transferred to BSNL on the date of absorption as provided for under Sub Rule 24(b) of Rule 37-A of the CCS(Pension) Rules - HELD THAT - As per provisions of section 10(10AA(i)) of the Act, the assessee is entitled for exemption on the amount of leave encashment of 280 days leave earned during the period before absorption into BSNL to the tune of Rs. 8,60,776/- and 20 days of leave to the tune of Rs. 61,484/- as per provisions of sub section 2 of section (10AA) - Coordinate Bench of the Ahmedabad Tribunal on similar facts and circumstances allowed the appeal of the assessee in the case of Pradipkumar Bhogilal Modi Vs. ADIT(CPC) Bengaluru 2023 (7) TMI 1328 - ITAT AHMEDABAD - Appeal of assessee allowed.

Summary

Issues:
The judgment involves the denial of exemption claimed under section 10(10AA) regarding leave encashment by the assessee.

Issue 1: Background and Claim for Exemption
The appellant, an individual with income from various sources, filed an appeal against the order of the Commissioner of Income Tax (Appeals) regarding the denial of exemption on leave encashment at the time of retirement. The appellant's argument was based on the fact that the Government of India had assured benefits to employees during the corporatization of the Department of Telecom to BSNL. The appellant sought full exemption of Rs. 9,22,260/- received as leave encashment.

Issue 2: CIT(A) Decision and Legal Interpretation
The CIT(A) held that the appellant, being other than a central or state government employee, was entitled to claim exemption under section 10(10AA)(ii) only up to Rs. 3,00,000/-. The CIT(A) referred to relevant legal provisions and a judicial pronouncement to support the decision to restrict the exemption claim of the appellant.

Issue 3: Grounds of Appeal
The appellant raised multiple grounds of appeal before the Tribunal, challenging the CIT(A)'s decision as erroneous and contrary to the facts of the case. The grounds highlighted the failure to consider the appellant's service history, government employee status, and benefits granted during the corporatization process.

Issue 4: Tribunal Decision and Precedent
After hearing both parties and examining the facts, the Tribunal found merit in the appellant's arguments. Citing a similar case from the Ahmedabad Tribunal, the Tribunal ruled in favor of the appellant. The Tribunal emphasized the permanent absorption of the appellant into BSNL by a Presidential Order and the appellant's service history as a central government employee, thereby allowing the appeal and granting the exemption claimed.

In conclusion, the Tribunal allowed the appeal of the assessee, recognizing the appellant's eligibility for full exemption of leave encashment under section 10(10AA) based on the specific circumstances and legal provisions presented in the case.