Anil Kumar Gupta vs Income Tax Officer

“3 . Succi nctly, t he fact as c ull ed out fr om the r ecords is tha t the assessee who has retired is a bank employee and has claimed an amount of Rs. 6,97,100/- bei ng l eave enc ashment rec eived as exempt u/s 10(10AA) of t he A ct. Ho wever, the AO, CPC whil e proc essing the retur n of income has allowe d e xempti on of only Rs. 3,00,000/- as against 100% exempti on cl aimed by the assess ee. He nce, this appeal.

4.

Aggrieved fr om the order of the AO, CPC assessee preferr ed appeal before the ld. CIT(A). A pr opos e to t he grounds so r aised the relevant findi ng of the ld. C IT(A) is reit erat ed here i n bel ow:

"5 .2.2 I have considered the fa cts of the case as als o t he submissi ons of the appellant. The appellant is a reti ree from Bank and not any government or ganization. Here, relia nce is plac ed on the decision of H on'bl e Del hi High Court i n t he c as e of K amal Kuma r Kalia v/s Uni on of Indi a (2020) 268 Taxm an 398/313 CTR 779 (Del hi ) (HC ) dat ed 08.11.2019, where the issue under c onsideration was whether t he appellant b ei ng employe e of Public sector unde rtaking (PS U) Ram Char an Gupta vs . IT O and Na tionalized banks can be t reated as government employee from the purp oses of e xempti on u/s 10(10AA) of the I.T. Act. In the said case, t he Hon' ble High C ourt held as under:-

"The petitioner , who were t he employ ees of the Public Sector undertaki ng and Nati onalized banks, fi led writ contending t hat they were discrimi nated a gai nst Central Gov ernment and State G over nment. The C entral Gov ernment and State Government emplo yees are granted c omplete exempti on i n respe ct of the cas h equi val ent of the leave salary for the period of earned leave standing to their credit at the ti me of t heir retirement. Dismissing the petition the C ourt held that mer ely becaus e Public Sect or Under taki ng and Na tionalized Banks are c onsidered as State under article 12 of t he C onsti tuti on of India for t he purpos e of ent ertainment of proceedi ngs under Article 226 of the Constitution and for enforcement of fundamental ri ght under the Constit uti on, it does not follow t hat the employees of suc h Public Sector Undertaki ng, Na tionalized Banks or other i ns tituti ons which are classi fied as 'St ate' Assume the status of C ent ral gov ernment and Stat e G overnm ent empl oyees. Accordi ngly t he petition is r eject ed."

5.2.3

Further, in the case of KPTCL Davangere V /s ITO (2018), the Hon'bl e ITAT, Ba ngal ore vide its order in ITA No . 170 ITD 587 (B ang.) (Trib.) has held that assess ee bei ng a statut ory corporati on its em ployees c ould not be regarded as State or C ent ral Government employ ees and theref ore exemption und er S. 1 0(10AA)(i ) was no t availabl e and assesse was liable to deduc t tax at sour ce.

5.2.4

I n vi e w of the above, the action of the A O of res tricting the exempti on u/s 10 (10AA) t o Rs. 3,00,000/-is fo und to be in order. T his gr ounds of appeal are theref ore, dismissed."

5.

Fe eling di ssatisfied wi t h t he order of the ld. C IT(A) t he assessee has preferred this appeal be fore this tribunal on the grounds as raised by the assessee as r eiterated here in above para 2. To support the vari ous grounds so raised by t he ass essee , the ld. AR appeari ng on behalf of the assessee has placed their writt en submissi on whi ch is extracted i n bel ow;

"1 . Under the facts and ci rcumstances o f t he case lear ned C IT (Appeal ) was not j usti fied whil e c onfirming the order p ass ed by AO u/s 143(1) Ass essi ng total income Rs 1188620.00 Confirmi ng Demand of Rs. 118280 Our submission Initial ly ret ur n was process ed u/s 143(1) (vide document identificati on no. cpc/2021/A3/186338352 dt.02/12/2021) allowi ng the claim of Rs.300000.00 u/s 10(10AA)-Earned Leave Encas hment on R eti rement. meani ng t hereby that there was enhancem ent in t he i nc ome amounting by Rs.397100.00 and assessi ng total incom e at Rs 1188620.00 This was ma de without providing any opportunity of bei ng heard as it appears that this additi on was made by treating the emplo yee as non-gov ernment empl oy ee alt hough no specific reasons has bee n i nfo rmed to appellant In f act, this or ganization is regulated by Byla ws made by c entral Governm ent, thus by no means of stretch of imagi nation this organizati on can be treated as non- central governm ent. Therefore, AO was not justifi ed to disallo w the claim upto the extent Rs 397100.00 without assi gni ng any specific reas ons and raising the demand of RS 118820.00 U/S 143(1).

2.

Under t he facts and circums tances CIT (Appeal ) was not justifi ed whil e restricting the claim Amounti ng To Rs 300000 u/s 10(10 AA) and rejecti ng the a mounti ng to Rs. 397100.00 out of Rs 697100.00 which is earned leave enc ashment on retirement made by AO.

Our s ubmission:-it is to e xplai n that he is govt . empl oy ee theref ore he claimed f ull am ount of leav e encashment u/s 10(10AA) Rs 697100.00 in his r etur n copy of c omputati on is enclos ed and mark ed as annexure B however while proc essi ng u/s 14 3(1) it appears that clai m amounti ng to Rs 397100.00 out of Rs 697100.00 has been disall owed whic h is leave encashment u/s 10 (10AA) from t he or der of C PC Banglore without assigni ng any c ogent reas ons in fact the appellant is bank empl oyee and nowhe re i n t he section it has been me nti oned that it is allowable onl y up to Rs 3.00 lacs in the case ba nk employee defi nitio n of ot her employee and govt . has no t bee n i n descri bed in se ctio n 10(10AA) ther efor e it can be safely c onclude tha t appellant is govt. empl oy ee and he is entitl e for f ull exemption of for the sa ke of argument bank employee cannot be put o n differ ent foot ing for purpose of tr eatment of govt. employee. T his i s also clear from t he fact t hat bank ar e nationalized and their management and admi ni str ati on is c ontrolled by c entr al govt. even CMD is appoi nted by govt. therefore there is no reasons to no t to treat as govt. e mpl oyee and res ultantly appellant is the govt . empl oyee and he cannot be d eni ed the bene fit of exe mpti on u/s 10(10A A) it is als o to clarify tha t in the definiti on of non govt . empl oyee b ank employee are not s pecified therefore he is govt . employee and is eli gibl e for remai ni ng balance of leave enc ashment R am Charan Gupta vs. ITO amounting t o RS 397100.00 meani ng ther eby t hat he is entitled for deduction of RS 10(10AA).

3.

U nder the fac ts and circumstances of the case CIT (Appeal ) was not jus tified while confirmi ng the order of AO treati ng t he employer as non-gov ernment instea d of gov ernment organization O ur submi ssion: it is t o sub mit tha t although no reason has been menti oned in intim ati on s end u/s 143(1) for disallowanc e of Rs 397100.00 out of Rs 697100.00 u/s 10(10AA) however it appears t hat bank has not been treated as govt . employee and disallowa nce has been effected whic h is not a correc t propositi on as per pri ncipal of nat ural justice it becomes mandatory on the part of assess ing offic er to provide the oppor tunity of being heard howe ver fact ually empl oyer of the appellant is govt. ther efo re he is entitle fo r deduction of Rs 697000.00.

4.

Kindl y st ay the demand. As disallowance has been made on incorr ect pres umption ther efor e demand is liable to be quashed.

5.

Assessee craves to add alter any of t he grounds of appeal befor e or at t he ti me of heari ng. Thi s gro und of appeal is general in nature therefore no submission a re bei ng submit."

"8 . We ar e however of the, prima facie, view t hat the grievances of the pe ti tione r wit h re gard to exemption limit under Claus e (ii) of S ecti on 10 (10AA) not being raised since 1998, appears t o be justified. This is so because over the dec ades , the pay-scales admissible to gov ernment serv ants, and even employees of the Public Sector Under taki ng and Natio nalize d Banks and all others hav e be en upwardly revised, keeping i n view, t he financial growth i n the c ountry as well as on acc ount of risi ng inflati on. The last drawn sal ari es hav e i ncreased manifold si nce time and notificati o n issued under Claus e (ii) of S ecti on 10(10AA) was lastly iss ued, as taken note of herei nabove, on 31.05.2002. We therefor e, issue notice to the respondents limit ed to this aspec t. 9. Issue notice, learned couns el for the r esp ondents accepts notice . R espondents should fil e counte r affidavi ts be filed withi n six weeks . R ejoi nder t heret o, if a ny, be filed b efor e t he next dat e."