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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 ..... 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. 9,60,409.00 as leave encashment (As per Rules) & claimed exempt u/sec. 10(10AA) of Act. (3) The Ld. CIT(A) has disallowed this claim (Though earlier u/sec. 143(1) of Act their claim has been allowed; which was denied earlier under processing) of Rs. 9,60,409.00 even the basic exemption of Rs. 3,00,000.00 has not considered. (4) The Ld. CIT(A) has disallowed the claim of assessee for only reason that he is not a Government Employee so his case does not fall in the category of section 10(10AA)(i) but falls in the category of section 10(10AA)(ii). 3 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." 3. Succinctly, the fact as culled out from the records is that the assessee claimed to be a central Government Public Sector Undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of Rs. 3,00,00/- by the consequential differential amount of Rs. 6,60,409- (i.e. worked out Rs. 9,60,409/--Rs. 3,00,000/) on behalf of the said assessee in Revised ITR e-filed on 31.03.2021 with the ambit of the provisions of sections/subsections 10(10AA) of I.T. Act, 1961 in case of Public Sector Undertaking/Ltd. Employees. Thus in view of above Excess/surplus amount of Encashment of Earned leave (EL) beyond the extent of restricted Maximum Exemption limit as per Rule & Regulation availed by the said assessee is absolutely wrong and contrary or violation to the provisions of Section 10(10AA) of I.T. Act, 1961 which is also prejudicial to the interest of revenue in the case of employees officiating/working under Public Sector Undertakings/Ltds. Hence forth, the aforesaid consequential worked out Excess/surplus Exemption/Deduction of Rs. 6,60,409/- ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duled 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 dismissed the writ petition. 6.4 Another aspect to be noted is that the assessee filed the original return of income u/s 139(1) claiming the exemption of Rs 3 lakhs u/s 10(10AA) and subsequently revised the return u/s 139(5) with an enhanced claim of exemption. In a catena of cases, the Courts have held that the revision of return is permissible only in cases of omission or wrong statement due to bonafide inadvertence or mistake on the part of the assessee. Whereas in the instant case, the claim of exemption of Rs 3 lakhs u/s 10(10AA) as on the date of filing the original return of income was a valid claim and there was no omission or wrong statement in the return of income. The conditions precedent to revise the return were therefore not fully satisfied. Considering the facts, the action of the AO was conformity with the extant provisions of law and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed 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 Act (3) The Ld. CIT(A) has disallowed this claim (Though earlier u/sec. 143(1) of Act their claim has been allowed, which was denied earlier under processing) of Rs. 9,60,409.00 even the basic exemption of Rs. 3,00,000.00 has not considered. (4) The Ld. CIT(A) has disallowed the claim of assessee for only reason that he is not a Government Employee so his case does not fall in the category of section 10(10AA) (1) but falls in the category of section 10(10AA)(i). Whereas the law is very clear. "As per chapter 3 of Income Tax Act 1961. for employees other than central & state Govt. Employees, the rule issued by the CBDT under sub clause 10(10AA) it is a mentioned below: 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 the behalf to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 explanatory memorandum to this notification has further clarified that "No person is being adversely affected by giving retrospective effect to this notification" It is requested to consider the facts & grant relief the CIT(A) has straight way not even granted the basis old exemption u/sec. 10(10AA)(ii) of Rs. 3,00,000.00 & has disallowed the whole of claim of Rs. 9,60,409.00." (5) It is clear from the above rule that the exemption, in respect of the amount of leave encashment for the employees covered under subclause 2, is allowed by CBDT up to the limit of Central government employees. Gazette notification is only a medium to inform the limit of leave encashment entitlement of the government employee. The importance of gazette notification is not more than that. The gazette notification is not determining the exemption limit because the exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 have not properly studied the original rule issued by CBDT and not interpreted/ understood the rule correctly. (10) The CBDT had issued 10 gazette notification from 1982 to 2002. They forgot to issue further gazette notifications. If CBDT has forgotten to issue the notification for the last 19 years, that does not make any difference as the limit under sub 11 clause 10(10AA) ii of income tax act, 1961 is linked with the limit of government employee ie. cabinet secretary. The limit of Rs. 3.00 lakhs specified in the last gazette notification has no relevance and hence not valid as on date because this is not as per rules of CBDT as the same was prepared on the basis of the then salary of the cabinet secretary Rs. 30,000/- in 1998. As on date, the salary of the cabinet secretary is Rs. 2.925 lakhs. So the exempted limit for employees of subclause 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 is 29.25 lakhs. So as per CBDT rule if a non-govt emp gets up to Rs. 29.25 lakhs, he is not supposed to pay a single rupees as tax. If he received more than Rs. 29.25 lakhs then only he has to pay the tax on the differential amount. When I read point number 4 I found that CBDT wants to give exemption up to the maximum limit of a govt, emps but due to increase in the salary regularly this limit also increased simultaneously so the non-govt employer can know at present what is the limit of govt. Emps. So to solve this problem CBDT wrote in their rule that they will declare this amount through a GN equal to the limit of a govt. emps. So the GN is only a tool to inform the LE entitlement of the CS. From 1982 to 2002, 10 GNs were issued by CBDT on certain intervals & all GN amounts were equal to the entitlement of the CS. Last GN issued by CBDT on 31. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment 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 ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the limit of leave encashment which has been enhanced by CBDT should be given benefit to the assessee considering the facts of the case after considering the direction of Delhi High Court and therefore, that clarification so issued by CBDT equally applies to the facts of the assessee. 7. Per contra, Ld. DR relied upon the order of lower authorities and submitted that when the assessment order passed. The assessee was given the benefit to the extent of exemption at that time and therefore, he prayed to sustain the addition. 8. We have heard the rival contentions and perused the material placed on record. The bench noted that apple of discord in this case whether the claim of the assessee for leave encashment received at the time of retirement for an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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