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TMI Blog2025 (3) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... y, JCIT ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM On being aggrieved by the order of the National Faceless Appeal Centre, Delhi dated 12/08/2024 [for short CIT(A)] the above named assessee preferred the present appeal. The dispute relates to the assessment year 2020-21. The said order of the ld. CIT(A) arises because the assessee has challenged the assessment order dated 08.09.2022 passed under section 143(3) r.w.s. 144B of the Income Tax Act, [for short "Act"] by National Faceless Assessment Unit [for short AO]. 2. In this appeal, the assessee has raised following grounds: - "1 Ground-1 10(10AA) DISALLOWANCES OF EXEMPTION AS WE CLAIMED IN REVISED RETURN, BUT IT IS AN ERROR WHICH CAN BE RECTIFIED LATER, The action taken by assessing officer is not correct as all information was in hand with the officer and deduction has been correctly claimed. 2 Ground No. 2:- That the order of Ld. CIT(A), NFAC Delhi denying the exemption claimed u/sec. 10(10AA)(ii) upto Rs. 9,60,409.00 and restricting the same to Rs. 3,00,000.00. (That assessee is a Central Government owned company employee). (1) That during the year the assessee retired from the services of M/s BSNL. (2) He received Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & further also the claim for Refund " but assigned to the completion thereof u/s 143(3) r.w.s. 144B of I.T. Act 1961 involving the abidance under E-online departmental guidelines of the National Faceless Scrutiny Assessment after obtaining the approval accorded from the higher authority together with the approved selected issues or reasons" was to be verified /examined calling for the relevant queries in this regard through the departmental E-online. Accordingly, notices were issued u/s. 143(2) and 142(1) of the Act on various dates. Ld. AO after drawing comparative conclusive analysis in between both Original ITR vis-a vis Revised ITR together the computation as well as Calculation thereof the statistic have been worked out accordingly as per rule & regulation within the ambit of the provisions of section/sub-section of I.T. Act, 1961. Further also the computation of Total income together with the calculation of Tax thereon have been verified / examined & also Test/Cross checked accordingly as per indispensable e-filed submissions/documents papers downloaded & observed and transpired found to be impugned/discrepancy for availing surplus/excess beyond the restricted maximum limit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption u/s 10(10AA) may be allowed as per his claim made in the return by taking into consideration the highest salary of the employee in Government of India in the impugned year. 6.3 I have considered the arguments of the assessee. As per the provisions of section 10(10AA), employees other than the Government employees are eligible to claim maximum leave encashment exemption of Rs. 3 Lakhs at the time of retirement. There was no Government notification increasing the exemption limit for leave encashment at the time of filing the return of income for the impugned year. Of course, there was an amendment to section 10(10AA) w.e.f 1.4.2023 and the limit was increased from Rs 3 lakhs to Rs 25 lakhs vide notification no 31/2023 dated 24.05.2023 but the amended provisions are applicable prospectively. In fact, the employees of different PSUs and scheduled banks who retired from service before 1.4.2023 filed a writ of mandamus in Kerala HC seeking retrospective application of the notification no 31/2013. The HC after considering the facts asserted vide order WP (C) No 3145 of 2022 dated 10.6.2024 that the decision to issue notification fell in the domain of the executive and dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AC, after going into details, documents as held that "As the appellant was not a Central Government Employee as on the deduction claimed by the Appellant is eligible for deduction u/sec. 10(10AA)(ii) of the Income Tax Act & not u/sec. 10(10AA)(i). Whereas the law is very clear. (a) Therefore it is hereby held that the appeal filed by the appellant claiming deduction for Rs. 9,60,409.00 u/sec. 10(1OAA)(i) of the Income Tax Act is devoid of merit and the same is hereby DISMISSED. Ground of Appeal "Ground-1 10(10AA) DISALLOWANCES OF EXEMPTION AS WE CLAIMED IN REVISED RETURN, BUT IT IS AN ERROR WHICH CAN BE RECTIFIED LATER, The action taken by assessing officer is not correct as all information was in hand with the officer and deduction has been correctly claimed. Ground No. 2:- That the order of Ld. CIT(A), NFAC Delhi denying the exemption claimed u/sec. 10(10AA) (ii) upto Rs. 9,60,409.00 and restricting the same to Rs. 3,00,000.00. (That assessee is a Central Government owned company employee). (1) That during the year the assessee retired from the services of M/s BSNL (2) He received Rs. 9,60,409.00 as leave encashment (As per Rules) & claimed exempt u/sec. 10(10AA) of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under sub clause 10(10AA) ii of Income Tax Act, 1961 up to the limit of government employees. If BOT does not want to give the exemption up to the limit of government employees, why did they write that the amount of notification is equal to the limit of government employees? In view of the above it is very clear what the rule is & what is the purpose of notification. Thus from above it is clear that GAZETE NOTIFICATION is only a medium for limit, but it does not determine the exemption limit because the exemption limit has been clearly specified in the above rule which stipulates the exemption limit for all non government employees to be equal to the limit of Government Employees Since the Cabinet Secretary has been getting the highest salary in Government hence this should be entitlement of leave encashment by all non employees too. Though the CBDT has issued a press release dated 25.05.2023 in form of notification no 31/2023 dated 24.05.2023 where the limit of Rs. 3.00 lakh u/sec 10(10AA)(ii) has been raised to Rs. 25.00 lakhs w.e.f. 01.04.2023. There is no link for the period 01.04.2022 to 31.03.2023 & back where there is no such notification. (Copy enclosed) The e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t: "In exercise of the powers conferred by Sub-Clause ii of clause (10AA) of section 10 of the income Tax Act, 1961, (43 of 1961), the central government, having regard to the maximum amount receivable by its employees as cash equivalent of leave salary in respect of the period of earned leave at their credit at the time of their retirement, whether superannuation or otherwise, hereby specifies the amount of Rs. 3.00 Lakhs as the limit in relation to employees mentioned in that Sub-clause who retire, whether on superannuation or otherwise, after the 1st day of April, 1998." (Copy attached). (9) It again is amply clear from the above notification that the amount mentioned in gazette notification is linked with maximum amount receivable by government employees. On 2nd April 1998, the exemption limit of a government employee was Rs. 3.00 Lakhs & also for employees of sub-clause 10(10AA) il it was also Rs. 3.00 Lakhs. After that government employees are getting tax exemption up to Rs. 29.25 lakhs while employees of sub-clause 10(10AA) ii are getting only up to Rs. 3.00 Lakhs. How is it possible? In view of the above it is clear that, since beginning, the BANKS & SEMI GOVERNMENT & LIC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age salary. 4. Subject to such a limit as the central govt may by gazette notification (GN) in the official gazette, specify in this behalf having regard to the limit applicable in this behalf to the emps of that govt. As per above rules CBDT is giving exemption equal to exemption receivable by the govt emps. on LE amount received at the time of retirement. In these four points, no points says that CBDT wants to make a difference between Govt. emps & Non govt. emps. By making subclause 2nd CBDT is saying that the non-govt emps can get the exemption up to the entitlement of LE amount of the highest paid govt. emps and not more than that. This is the maximum limit fixed by CBDT. suppose an emps of private sector is getting a salary of Rs. 1 crore pm then his LE will be 10 crores & if the CBDT didn't make the sub-section 2nd & simply write in the rule that this payment is non-taxable then the whole amount of Rs. 10 crore will be tax exempted. The main purpose for making the sub-clause 2 is to give the exemption benefit to the nongovt emps is equal to the limit of govt. emps. At present the CS is holding the highest post & his salary is Rs, 2.925 lakhs & his entitlement of LE i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I claim full exemption as per CBDT rule, but you have allowed exemption for 3 lakhs only which is not correct. Please allow me full exemption. Asst. Director of Income Tax, CPC Bengaluru LEAVE ENCASHMENT 240000 NOTE SHEET Office Note sheet of Notification Rs. 3 Lakhs Leave Encashment Fully Exempted 143 and 10(10AA) any payment of the nature referred to in sub-clause (1) received by an employee, 8 other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise as does not exceed ten months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement whether on superannuation or otherwise, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government: Ground 3: The Assessee craves the right to add, delete, amend, or abandon any of the grounds of this appeal at the time or before the actual hearing of the case." 6. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial growth in the country as well as on account of rising inflation. The last drawn salaries have increased manifold since time and notification issued under Clause (ii) of Section 10(10AA) was lastly issued, as taken note of hereinabove, on 31.05.2002. We therefore, issue notice to the respondents limited to this aspect. 9. Issue notice, learned counsel for the respondents accepts notice. Respondents should file counter affidavits be filed within six weeks. Rejoinder thereto, if any, be filed before the next date." 8.1 Recently the Central Board of Direct Taxes Suo motu revised the limit for deduction u/s 10(10AA) of the Act and the revised limit now stood at Rs. 25,00,000 as specified vide notification no. 31/2023 issued by the ministry of finance. Since the leave encashment amount as claimed by the assessee is amount to Rs. 6,97,100/- which is below the revised limit of leave encashment exempt prescribed by the Board, the assessee is eligible to claim of deduction of said Rs. 6,97,100/-. Based on these observations the ld. AO is directed to allow the claim of the assessee u/s. 10(10AA) of the act within the revised limit as prescribed. In terms of these observations the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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