Leave Encashment Exemption Granted for BSNL Employee u/s 10(10AA) of Income Tax Act 1961.

The appeal was allowed, granting the assessee the benefit of exemption on leave encashment under Section 10(10AA) of the Income Tax Act, 1961. The Tribunal found that the assessee, initially appointed in the Central Government and later absorbed into BSNL, was entitled to the exemption. The lower authorities, including the CIT(A) and Assessing Officer, had incorrectly disallowed the exemption by failing to consider the assessee's initial appointment and relevant Tribunal decisions.

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Issues Involved:
The appeal against the order passed by the Ld. Commissioner of Income Tax (Appeals) regarding the disallowance of exemption on leave encashment under Section 10(10AA) of the Income Tax Act, 1961 for A.Y. 2020-21.

Details of the Judgment:

1. The assessee filed the return of income declaring total income, but the intimation under Section 143(1) assessed the total income higher due to disallowance of exemption claim on leave encashment under Section 10(10AA).

2. The appeal was filed by the assessee against the order under Section 143(1), and the CIT(A) dismissed the appeal, upholding the disallowance of exemption.

3. The Ld. A.R. argued that the assessee was absorbed into BSNL after being initially appointed in the Department of Indian Post and Telegraph Department, making the leave encashment fully exempt under the Income Tax Act, which was ignored by the Assessing Officer and CIT(A).

4. The Ld. D.R. contended that BSNL is a Public Sector Unit and not exempted for leave encashment, relying on the previous orders.

5. After hearing both parties and examining the material, it was found that the assessee's absorption into BSNL from the Department of Telecommunication entitled him to exemption under Section 10(10AA) as he was initially appointed in the Central Government. The CIT(A) and Assessing Officer failed to consider these facts and wrongly denied the exemption. The Tribunal's decision in a similar case was not taken into account by the lower authorities.

Result:
The appeal of the assessee was allowed, and the benefit of exemption on leave encashment under Section 10(10AA) was granted.

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