TMI Blog2007 (5) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 10(10AA)( ii ) of the Act. The assessee had taken up premature retirement in the army on 14-6-1994. On retirement from the army, he had received a sum of Rs. 81,378 being the leave encashment of 215 days in the assessment year 1995-96 the assessee had claimed Rs. 81,370 as exemption under section 10(10AA)( i ) of the Act. After his retirement from the army the assessee worked with M/s. Microwave Communications Ltd. and resigned from this company in January, 2004. At the time of his resignation from Microwave Communications Ltd. He received a total sum of Rs. 6,89,448. Out of this he claimed that a sum of Rs. 2,15,449 as exempt under section 10(10AA)( ii ) of the Act. The sum received during the P.Y. represents leave encashment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing reasons the Assessing Officer disallowed the claim for exemption to the extent of Rs. 1,13,707. "The submissions made by the assessee are not correct because it has been clarified in the proviso that where any such payment or payments was or were received in any one or more earlier previous years also and the whole of any part of the amount of such payment or payments was or were not included in the total income of the assessee of such previous year or previous years, the amount exempt from income-tax under this sub-clause shall not exceed the limit so specified as reduced by the amount or as the case may be the aggregate amount not included in the total income of any PY or PYs. Thus, the assessee is not entitled to claim the exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) : Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this sub-clause (shall not exceed the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment employee and 10 months as a private employee may be encashed for the purpose of exemption from income-tax at the time of retirement or resignation subject to the ceiling monetary limit of Rs. 3,00,000 in accordance with the proviso to section 10(10AA)( ii ). Sub-clauses ( i ) and ( ii ) of section 10(10AA) are independent provisions and, therefore, it does not mean that once a Government employee avails his full period of leave encashment i.e., ten months under sub-clause ( i ) he is debarred from encashing any period of leave salary under sub-clause ( ii ). The above interpretation would put the Government employee to a disadvantage when he takes up a job in the private sector and such a consequence could not have been the inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Mad.). Wherein the Chennai Bench of the ITAT had explained the scheme of allowing exemption under section 10(10AA). Prior to introduction of section 10(10AA) even leave encashment on retirement from Government service was taxable. While introducing the exemption the Legislature categorized Government and Non-Government employees and in respect of the conditions to be present in a scheme of leave encashment had thought it fit to apply the parameters that were prevailing in the Government schemes as a condition even in respect of leave encashment scheme of employees other than Central and State Government. This also shows that both sub-clauses ( i ) and ( ii ) of section 10(10AA) are mutually exclusive. ( b ) In the case of CIT v. N. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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