Harvender Kumar Miglani vs I.T.O. ITO Ward 3(3)(3)

“3.

Succinctly, the f act as culled out from the records is that the assessee who has retired is a bank employee and has clai med an amount of Rs. 6,97,100/- being leave encashment received as exempt u/s 10(10AA) of the Act. However, the AO, CPC while processing the return of income has allowed exem ption of only Rs. 3,00,000/- as against 100% exemption claimed by the ass essee. Hence, thi s appeal.

4.

Aggrieved from the order of the AO, CPC assessee preferred appeal before t he ld. CIT(A). A propose to the grounds so raised the relevant finding of the ld. C IT(A) is reit erated here in bel ow:

"5.2.2

I have considered the facts of the case as also the submissions of the appellant. The appellant is a retiree from Bank and not any government organization. Here, reliance is placed on the deci sion of Hon'ble Delhi High Court in the case of Kamal Kumar Kalia v/s Union of India (2020) 268 Taxman 398/313 CTR 779 (Del hi ) (HC) dated 08.11.2019, where the issue under consideration was whether the appellant being employee of Public sector undertaking (PSU) Ram Charan Gupta vs. ITO and Nationalized banks can be treat ed as government employee from the purposes of exemption u/s 10(10AA) of the I.T. Act. In the said case, the Hon'ble High Court held as under:-

"The pet itioner, who were the employees of the Public Sector undertaking and N ationalized banks, filed writ contending that they were discriminated against Central Government and State Government. T he C entral Government and Stat e Government employees are granted complete exempti on in respect of the cash equivalent of the leave salary for the period of earned leave standing to their credit at the time of t hei r retirement. Di smissing the petition the Court held that merel y because Public Sector Undertaking and N ationalized Banks are considered as State under articl e 12 of the Constituti on of India for the purpose of entertainment of proceedings under Article 226 of the Constit ution and for enforcement of fundamental right under the Constit ution, it does not follow that the employees of such Public Sector Undertaking, Nationalized Banks or other institutions which are classified as 'State' Assume t he status of Central government and State Government employees. Accordingly the petition is rej ected."

5.2.3

Further, in the case of KPTCL Davangere V/s ITO (2018), the Hon'ble ITAT, Bangalore vide it s order in ITA No. 170 ITD 587 (Bang.) (Trib.) has held t hat assessee being a statutory corporation its employees coul d not be regarded as State or Central Government employees and therefore exemption under S. 10(10AA)(i) w as not available and assesse was liable to deduct tax at source. 5.2.4 In view of the above, t he action of the AO of restricting the exemption u/s 10(10AA) to Rs. 3,00,000/- is found to be in order. This grounds of appeal are therefore, dismissed."

5.

Feeli ng dissatisfi ed with the order of the l d. CIT(A) the assessee has preferred this appeal before this tribunal on the grounds as raised by the assessee as reit erated here i n above para 2. To support the various grounds so raised by the assessee, the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below;

"1.

Under the facts and circumstances of the case l earned CIT (Appeal) was not justified whil e confirming the order passed by AO u/s 143(1) Assessing t otal income Rs 1188620.00 C onfi rming Demand of Rs. 118280 Our submission Initially return was processed u/s 143(1) (vide document identification no. cpc/2021/A3/186338352 dt.02/12/2021) allowing the claim of Rs.300000.00 u/s 10(10AA)-Earned Leave Encashment on Retirement. meaning thereby that there was enhancement in the income amounting by Rs.397100.00 and assessing total income at Rs 1188620.00 T his was made w ithout providing any opportunity of being heard as it appears t hat this addition was made by treating the employee as non-government employee although no specific reasons has been informed to appellant In fact, this organization is regul ated by Bylaws made by central Government, thus by no means of stretch of imagination this organization can be treated as non- central government. Therefore, AO was not justified to disallow the claim upto the ext ent Rs 397100.00 without assigning any specific reasons and raisi ng the demand of RS 118820.00 U/S 143(1).

2.

Under the facts and circumstances CIT (Appeal) was not justified while rest ricting the claim Amounting To Rs 300000 u/s 10(10AA) and rejecting the amounting to Rs. 397100.00 out of Rs 697100.00 whi ch is earned leave encashment on retirement made by AO. Our submissi on:-it is to explain that he is govt. employee therefore he clai med full amount of leave encashment u/s 10(10AA) Rs 697100.00 in his return copy of computation is enclosed and marked as annexure B however w hile processing u/s 143(1) it appears that clai m amounting to Rs 397100.00 out of Rs 697100.00 has been disallowed which is leave encashment u/s 10(10AA) from the order of CPC Banglore wit hout assigning any cogent reasons in fact the appellant is bank employee and nowhere in the section it has been mentioned that it is allowabl e onl y up to Rs 3.00 lacs in the case bank employee definition of other empl oyee and govt. has not been in described in section 10(10AA) therefore it can be safely conclude that appellant is govt. employee and he is entitle for full exemption of for the sake of argument bank employee cannot be put on diff erent footing for purpose of treatment of govt. employee. This is also clear from the fact that bank are nationalized and their management and administration is controlled by central govt. even CMD is appointed by govt. therefore there i s no reasons to not to treat as govt. employee and resultantly appellant is the govt. employee and he cannot be denied the benefit of exemption u/s 10(10AA) it is also to clarify that in the defi nition of non govt. employee bank empl oyee are not specified therefore he is govt. employee and is eligible for remaining balance of l eave encashment Ram Charan Gupta vs. ITO amounting to RS 397100.00 meaning t hereby that he is entitled for deduction of RS 10(10AA).

3.

Under the f acts and circumstances of the case CIT (Appeal) was not justifi ed whi le confirming t he order of AO treating the employer as non-government instead of government organizat ion Our submission: it is to submit that although no reason has been mentioned in intimation send u/s 143(1) for disal lowance of Rs 397100.00 out of Rs 697100.00 u/s 10(10AA) how ever it appears that bank has not been treated as govt. employee and disallowance has been effected which is not a correct proposition as per principal of natural justice it becomes mandatory on the part of assessing officer to provide the opportunit y of being heard however factually employer of the appellant is govt. therefore he is entitle f or deduction of Rs 697000.00.

4.

Kindly stay the demand. As disallowance has been made on incorrect presumption therefore demand i s liable to be quashed.

5.

Assessee craves to add alter any of the grounds of appeal before or at the time of hearing. This ground of appeal is general in nature therefore no submission are being submit."

"8.

We are however of the, pri ma facie, view that the grievances of the pet itioner with regard to exemption limit under Clause (ii ) of Section 10 (10AA) not being raised since 1998, appears t o be justified. This is so because over the decades, the pay-scales admissible to government servants, and even employees of the Public Sector Undertaking and Nationalized Banks and all others have been upwardl y revised, keeping in view, the financi al growth in the country as w ell as on account of rising inflation. The last drawn salari es have increased mani fold since time and notificati on issued under Clause (ii) of Secti on 10(10AA) was lastly issued, as taken note of hereinabove, on 31.05.2002. We therefore, i ssue notice to the respondents limited to this aspect. 9. Issue notice, learned counsel for the respondents accepts noti ce. Respondents should fi le counter affidavits be f iled wit hin six weeks. Rejoinder thereto, if any, be fil ed before the next date."