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2019 (2) TMI 2069 - AT - Income TaxDenying exemption u/s 10(10AA)(i) - leave encashment received at the time of retirement - 263 days of leave as on the date of absorption - assessee had been in service under the Department of Telecommunication Govt. of India and his stamps of appointment and pay-scale were governed by the Central Govt. Rules and assessee was absorbed in MTNL a Govt. of India Undertaking w.e.f 01.10.2000 vide order dated 19.01.2004 - HELD THAT - As per the provisions of section 10(10AA)(i) of the Act the assessee is entitled for exemption on the amount of leave encashment of leave earned during the period before absorption in MTNL as per section 10(10AA)(i) of the Act as applicable to Central Govt. because before that date he was employee of Govt. of India that the Central Government. The amount of leave encashment in respect of leave accrued after absorption in MTNL will be governed by the exemption as per section 10(10AA)(ii) of the Act. Facts are clearly in favour of assessee and for 263 days of leave as on the date of absorption was available to the assessee which was earned and unutilized from Government service i.e. Central Government and will be governed by 10(10AA)(i) - The balance 37 days of leave earned is from MTNL and will be governed as per the provisions of section 10(10AA)(ii) of the Act. Accordingly, allow the appeal of the assessee and direct the AO to recompute the exemption proportionately as directed above - Appeal of assessee is allowed.
Issues:
Delay in filing appeal, Exemption under section 10(10AA)(i) of the Income Tax Act, 1961. Delay in Filing Appeal: The appeal arose from the order of the Commissioner of Income Tax (Appeals) where the assessee filed a condonation petition for a delay of 129 days in filing the appeal. The delay was attributed to the advice of the chartered accountant, which led to the appeal not being filed initially. The Tribunal found the delay reasonable as the assessee acted in good faith based on professional advice. The delay was condoned, and the appeal was allowed to proceed. Exemption under Section 10(10AA)(i) of the Act: The main issue revolved around the exemption of leave encashment received at the time of retirement. The assessee, a retired pensioner from the Department of Telecommunications, sought full exemption for the leave encashment amount. The CIT(A) had restricted the exemption to Rs. 3 lakhs, leading to the appeal. The Tribunal analyzed the employment history of the assessee, noting his service under the Government of India before absorption by Mahanagar Telephone Nigam Ltd (MTNL), a PSU. The Tribunal determined that leave earned before absorption in MTNL was eligible for full exemption under section 10(10AA)(i) of the Act, as the assessee was a Central Government employee during that period. The leave encashment accrued after absorption was subject to a different exemption provision under section 10(10AA)(ii) of the Act. Consequently, the Tribunal allowed the appeal, directing the Assessing Officer to recompute the exemption accordingly. In conclusion, the Tribunal addressed the delay in filing the appeal and the issue of exemption under section 10(10AA)(i) of the Income Tax Act, 1961. The decision highlighted the assessee's employment history, distinguishing between leave earned before and after absorption by MTNL. Ultimately, the Tribunal allowed the appeal, granting the assessee the appropriate exemption based on the provisions of the Act.
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