2025 (1) TMI 639 - AT - Income Tax

Denying exemption u/s. 10(10AA) - Receipts towards Leave Encashment on his retirement - HELD THAT - The assessee has given the bifurcation of the Leave Encashment which comprises of sum received from Department of Telecommunications (Govt. of India) which is eligible for exemption u/s. 10(10AA) of the Act and the remaining amount received from BSNL. While filing the application u/s. 154 of the Act, the assessee has enclosed the letter dated 04.05.2012 regarding Leave Encashment amount, issued by Taxation section of BSNL, New Delhi. Copy also provided of the pay-slip regarding Leave Encashment period (DOT BSNL) issued by BSNL which indicates the receipt of Leave Encashment for DOT BSNL period separately. These facts remain uncontroverted at the end of the Revenue authorities at any stage. Section 10(10AA)(i) of the Act applies to the Central and State employees and section 10(10AA)(ii) to Non-Government employees. Leave Encashment for Central/State Govt. is fully exempt and therefore the amount received by the assessee from Department of Telecommunications (Govt. of India) deserves to be exempt from taxation u/s. 10(10AA)(i) of the Act. As far as the remaining amount is concerned, the same being less than Rs. 3.00 lakh is also exempt u/s. 10(10AA)(ii) of the Act. Therefore, the impugned order denying exemption u/s. 10(10AA) of the Act is reversed. Grounds of appeal raised by the assessee are allowed.

Summary

In the case of the appeal by the assessee for the Assessment Year 2018-19, the ITAT Pune addressed the denial of exemption under Section 10(10AA) of the Income-tax Act, 1961, concerning Leave Encashment received upon retirement. The assessee, a retired employee of BSNL, initially claimed an exemption of Rs. 10,87,092, which was limited to Rs. 3 lakh by the Centralized Processing Center (CPC), resulting in an addition of Rs. 7,87,092.

The Tribunal noted that the assessee received Rs. 8,35,256 from the Department of Telecommunications (DOT), qualifying for exemption under Section 10(10AA)(i) applicable to Central/State government employees, and Rs. 2,51,836 from BSNL, which, being less than Rs. 3 lakh, is exempt under Section 10(10AA)(ii) for Non-Government employees. The Tribunal found that these facts were uncontroverted by the Revenue authorities.

The Tribunal reversed the National Faceless Appeal Centre's order, which had upheld the CPC's decision, and allowed the appeal, granting the full exemption claimed by the assessee. The order was pronounced on January 7, 2025.