2023 (5) TMI 355 - AT - Income Tax

Gratuity and Leave Encashment Exemption Limited for State Undertaking Employees; 1-Day Filing Delay Excused by Tribunal.

Shivaram Gopal Awate Versus ITO, National e-Assessment Centre, Delhi.

The Tribunal dismissed the assessee's appeal, affirming the AO's decision to limit the exemption for Gratuity and Leave Encashment, as the appellant was ... Exemption u/s 10(10) and section 10(10AA) applicable to a non-State Government employee - whether an employee of the State Government Undertaking can be treated as employee of State Government? - HELD THAT:- The issue is no longer res integra, as the Hon’ble Supreme Court in the case of Indian Institute of Science vs. DCIT [2022 (10) TMI 242 - SC ORDER]held that though the State Government Undertaking may be considered as a State instrumentality within the definition of article 12 of the Constitution of India, the same cannot be treated as Central or State Government, consequently the employees of such undertakings cannot be treated as a Central or State Government employee. The Hon’ble Supreme Court had affirmed the decision of Indian Institute of Science vs. DCIT [2021 (7) TMI 1052 - KARNATAKA HIGH COURT] Therefore, in the light of this settled position of law, the action of the Assessing Officer in restricting the exemption u/s 10(10) and section 10(10AA) of the Act to extent applicable to a non-State Government employee is correct in law and, therefore, no merits in the appeal filed by the assessee. Issues involved:The appeal filed by the assessee against the order of the National Faceless Appeal Centre, Delhi for the assessment year 2018-19.Issue 1: Exemption of Gratuity and Leave Encashment under section 10(10) and 10(10AA) of the Income Tax Act, 1961The appellant, an individual deriving income under the head 'salaries,' filed a revised return seeking exemption for Gratuity and Leave Encashment received after retirement from the services of Maharashtra State Electricity Transmission Company. The Assessing Officer restricted the exemption based on the appellant not being an employee of the State Government or Central Government. The NFAC upheld this decision, citing a previous ITAT Bangalore Bench case. The appellant appealed to the Tribunal.Issue 2: Condonation of Delay in Filing AppealThe appellant filed a condonation petition for a 1-day delay in filing the appeal, attributing it to a delay in Speed Post delivery. The Tribunal considered the petition and granted condonation, acknowledging the delay was caused by the postal authority.Issue 3: Employee of State Government Undertaking vs. State Government EmployeeThe main issue for consideration was whether an employee of a State Government Undertaking can be treated as an employee of the State Government. The Tribunal referred to a Supreme Court decision in the case of Indian Institute of Science vs. DCIT, which clarified that employees of State Government Undertakings cannot be considered as Central or State Government employees. Based on this legal position, the Tribunal found the Assessing Officer's decision to restrict the exemption to a non-State Government employee as correct in law, leading to the dismissal of the appeal by the assessee.Conclusion:The Tribunal dismissed the appeal filed by the assessee, upholding the Assessing Officer's decision to restrict the exemption for Gratuity and Leave Encashment based on the appellant not being classified as a State Government employee. The condonation of the 1-day delay in filing the appeal was granted due to reasons beyond the appellant's control. The legal position established by the Supreme Court regarding employees of State Government Undertakings was crucial in determining the outcome of the case.