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Judgment
This assessee’s appeal for assessment year 2020-21, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, [in short, the “Ld. CIT(A/NFAC”], Delhi’s order dated 10/08/2022 passed in case no. CIT(A), Delhi-NFAC/2019-20/10093841, involving proceedings under section 147 r.w. Section of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case file perused.
2 For the reasons stated in the assessee’s condonation averments, delay of 596 days in filing of the instant appeal is condoned in light of Collector, Land & Acquisition vs. Mst. Katiji& Others (1987) 167 ITR 471 (SC).
It transpires during the course of hearing that the assessee’s sole substantive ground raised in the instant appeal challenges both the learned lower authorities’ action denying section 10(10AA) leave encashment exemption thereby holding that he is not entitled for the same since employed with M/s Canara Bank and not a central or state government department.
It is next noticed that recently the tribunal in Ram Charan Gupta, Jaipur vs. ITO, Ward 4(2), Jaipur, in ITA No. 408/JPR/2022 dated 27.06.2023 has already rejected the Revenue’s very stand as under:
“3.Succinctly, the f act as culled out f rom the records is that the assessee who has re tired is a bank e mployee and has claimed an amo unt of Rs. 6,97,100/- be ing le ave encashmen t rece ived as exe mpt u/s 10(10AA) of the Ac t. Ho wever, the AO, CPC while process ing the re turn of inco me has allo wed exe mption of only Rs. 3,00,000/- as ag ains t 100% exemp tion claimed by the ass essee. Hence, this appe al.
4.Aggrieved f rom the order of the AO, CPC assessee pref erred appe al bef ore the ld. C IT(A). A propose to the grounds so raised the relev an t f inding of the ld. C IT (A) is re iterated here in belo w:
"5.2.2I have cons idered the f acts o f the case as als o the submiss ions of the appe llant. The appellant is a retiree f rom Bank and no t any government organizatio n. Here, reliance is placed on the decis ion of Hon'ble De lhi H igh Cour t in the case of Kamal Kumar Kalia v/s Union of India (2020) 268 Tax man 398/313 CTR 779 (Delhi) (HC) date d 08.11.2019, where the issue under cons ideratio n was whe ther the appe llan t be ing e mployee of Public sector under taking (PSU) Ram Charan Gupta vs. ITO and Nationalized banks can be tre ated as governmen t e mplo yee f rom the purposes of exemptio n u/s 10(10AA) of the I. T. Act. In the s aid case, the Hon'ble H igh Court he ld as unde r:-
"The pe titio ner, wh o were the e mployees of the Public Sector undertaking and Natio nalized banks, f iled writ contendin g that they were dis criminated ag ains t Cen tral Government and State Government. The Central Government and S tate Governmen t e mployees are granted co mple te exemp tion in respect of the cash equiv alent of the le ave salary f or the period of earned le ave s tanding to the ir credit at the time of the ir re tire men t. Dis miss ing the pe tition the Court he ld that merely be cause Public Se ctor Undertaking and Natio nalized Banks are cons idered as State under article 12 of the Cons titu tion of India f or the purpose of enter tainmen t of proceedings under Article 226 of the Cons titu tio n and f or enf orceme nt of f undamen tal righ t under the Cons titu tion, it does no t f ollo w that the e mplo ye es of such Public Sector Undertaking, Nationalized Banks or other ins titu tions which are class if ied as 'State ' Assume the s tatus of Central government and State Government e mployees. According ly the pe titio n is re jec te d."
5.2.3Further, in the case of KPTCL Davangere V/s ITO (2018), the Hon'ble ITAT, Bang alore v ide its order in IT A No. 170 ITD 587 (Bang.) (Trib.) has he ld that as sessee being a s tatu tory corporation its e mplo yees could no t be regarded as State or Central Governme nt e mployees and theref ore exemption under S. 10(10AA)(i) was no t av ailable and assesse was liable to deduc t tax at source. 5.2.4 In v ie w of the abov e, the action of the AO of res tric ting the exemp tion u/s 10(10AA) to Rs. 3,00,000/- is f ound to be in order. This grounds of appe al are theref ore, dis missed."
Feeling diss atis f ied with the orde r of the ld. C IT(A) the assessee has pref erred this appe al be f ore this tribunal o n the grounds as raised by the assessee as reiterated here in above para 2. To suppo rt the v arious gro unds so raised by the assessee, the ld. AR appe aring on behalf of the assessee has placed the ir writte n submiss ion which is ex trac ted in be low;
"1.Under the f acts and circums tances of the case le arne d CIT (Appe al) was no t jus tif ied while conf irming the order passed by AO u/s 143(1) Assess ing to tal inco me Rs 1188620.00 Conf irming De mand of Rs. 118280 Our submiss ion Initially re turn was processed u/s 143(1) (v ide documen t iden tif ication no. cpc/2021/A3/186338352 dt.02/12/2021) allo wing the claim of Rs.300000.00 u/s 10(10AA)-Earned Le ave Encashmen t on Re tire men t. me aning there by that there was enhance men t in the inco me amo unting by Rs.397100.00 and assess ing to tal inco me at Rs 1188620.00 This was made witho ut prov iding any oppor tunity of be ing he ard as it appears that this addition was made by tre ating the e mployee as non-governmen t e mplo yee although no specif ic re asons has been inf ormed to appe llant In f act, this organization is regulated by Bylaws made by central Government, thus by no me ans of s tre tch of imag ination this organizatio n can be treated as non-central governme nt. Theref ore, AO was no t jus tif ied to dis allo w the claim up to the ex te nt Rs 397100.00 witho ut ass igning any specif ic re asons and rais ing the de mand of RS 118820.00 U/S 143(1).
2.Under the f acts and circums tance s CIT (Appe al) was no t jus tif ied while res tric ting the claim Amoun ting To Rs 300000 u/s 10(10AA) and re jecting the amo unting to Rs. 397100.00 out of Rs 697100.00 which is e arne d le ave encashme nt on re tire men t made by AO.
Our submiss ion: -it is to explain that he is gov t. emplo yee theref ore he claimed f ull amount of le ave encashment u/s 10(10AA) Rs 697100.00 in his re turn copy of computation is enclosed and marked as annexure B ho wever while process ing u/s 143(1) it appe ars that claim amoun ting to Rs 397100.00 out of Rs 697100.00 has been dis allo wed wh ich is le ave encashmen t u/s 10(10AA) f ro m the order of CPC Banglore witho ut ass igning any cog ent re asons in f act the appe llan t is bank e mployee and no where in the sec tio n it has been mentioned that it is allo wable only up to Rs 3.00 lacs in the case bank e mployee def inition of other e mployee and gov t. has no t been in de scribed in section 10(10AA) theref ore it can be saf ely conclude that appe llant is gov t. e mplo yee and he is entitle f or f ull exemp tion of f or the sake of argument bank e mployee canno t be put on dif f erent f oo ting f or purpose of tre atmen t of govt. e mployee. This is also cle ar f rom the f act that bank are natio nalized and the ir manage men t and adminis tration is contro lled by ce ntral gov t. even CMD is appo inted by gov t. theref ore there is no reasons to no t to tre at as gov t. e mplo yee and resultan tly appellant is the gov t. e mployee and he canno t be denied the benef it of exe mption u/s 10(10AA) it is also to clarif y that in the def inition of non govt. e mployee bank e mployee are no t specif ied theref ore he is gov t. e mployee and is elig ible f or re maining balance of leave encashment Ram Charan Gupta vs. ITO amounting to RS 397100.00 me aning thereby that he is entitled f or deduction of RS 10(10AA).
3.Under the f acts and circums tances of the case C IT (Appeal) was no t jus tif ied while conf irming the order of AO tre ating the e mployer as non-governmen t ins te ad of governmen t organizatio n Our s ubmiss ion: it is to submit that although no reason has been mentio ned in in timation send u/s 143(1) f or dis allo wance of Rs 397100.00 out of Rs 697100.00 u/s 10(10AA) ho wever it appe ars that bank has no t been treated as gov t. e mployee and dis allo wance has been eff ected wh ich is no t a correc t pro pos itio n as per principal of natural jus tice it beco mes mandatory on the par t of assessing off icer to prov ide the opportunity of be ing he ard ho wev er f actually e mplo yer of the appe llan t is gov t. theref ore he is entitle f or deduction of Rs 697000.00.
Kindly s tay the de mand. As dis allo wance has been made o n incorrect presumption theref ore demand is liable to be quashed.
Assessee craves to add alter any of the grounds of appe al bef ore or at the time of hearing. This ground of appeal is general in nature theref ore no submis s ion are be ing submit. "
In additio n to the above de tailed writte n submiss ion the ld. AR of the assessee also submitte d that in the recen t budge t speech Hon'ble Finance Minis ter indicated that f or incre ase in the limit and the relate d no tif ication is issued. The ld. AR thus based on the s aid no tif ication submitte d that the re lief be gran ted to the assessee.
The ld. DR is heard who has relie d on the f indings of the lo wer authorities and lef t the decis io n on bench to grant the relief to the assessee as per no tif ication dated 24.05.2023.
We have heard the riv al conte ntio ns and perus ed the mate rial placd on record. The bench no ted that the ass essee relying the decis io n of Hon'ble De lhi H igh Court has iss ued a no tice to the Union of India in the cas e of Kamal Kumar Kalia & Ors. Vs. Union o f India & Ors in WP(C) 11846/2019 dated 08.11.2019 where in the court has g iv en f ollo wing directions:-
"8.We are ho we ver of the, prima f acie, v ie w that the griev ances of the pe titio ner with regard to exe mp tio n limit under Clause (ii) of Section 10 (10AA) no t be ing raised s ince 1998, appe ars to be jus tif ied. This is so be cause ove r the decades, the pay-scales admiss ible to governme nt servan ts, and even e mplo ye es of the Public Sector Undertak ing and Nationalized Banks and all o thers have been up wardly rev ised, keeping in v ie w, the f inancial gro wth in the co untry as we ll as on account of ris ing inf lation. The las t drawn salaries have increased manif old since time and no tif ication issued under Clause (ii) of Sectio n 10(10AA) was las tly issued, as taken no te of hereinabo ve, on 31.05.2002. We theref ore, issue no tice to the respondents limite d to this aspe ct.
9.Issue no tice, le arned counse l f or the respondents accepts no tice. Respondents should f ile counter af f idav its be f ile d with in s ix wee ks. Re jo inder there to, if any, be f iled bef ore the nex t date."
8.1Recently the Central Bo ard of Direct Taxes Suo-mo tu rev ised the limit f or deductio n u/s 10(10AA) of the Ac t and the rev ised limit no w s tood at Rs. 25,00,000 as specif ied v ide no tif ication no. 31/2023 issued by the minis try of f inance. Since the le ave encashme nt amount as claimed by the assessee is amount to Rs. 6,97,100/- which is be low the rev ised limit of leave encas hment e xe mp t prescribed by the Board, the assessee is elig ible to claim of deduction o f said Rs. 6,97,100/-. Based on these observatio ns the ld. AO is direc ted to allo w the claim of the as sessee u/s. 10(10AA) of the act within the rev ised limit as pres cribed. In terms of these observations the appeal of the assessee is allo wed.”
I adopt the above extracted detailed reasoning mutatis mutandis to accept the assessee’s instant sole ground in very terms. Ordered accordingly.
This assessee’s appeal is allowed.