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

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 not classified as a State Government employee. The Tribunal granted condonation for the 1-day delay in filing the appeal due to postal delays beyond the appellant's control. The decision relied on the SC's clarification that employees of State Government Undertakings are not considered State Government employees.

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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, 1961

The 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 Appeal

The 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 Employee

The 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.

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