Leave encashment exemption allowed where claim falls within the revised statutory ceiling under Notification increasing the limit.

The note addresses entitlement to leave encashment exemption under Section 10(10AA), concluding that the assessee, a bank employee, qualifies for exemption to the extent the claimed amount falls within the revised statutory ceiling; the tribunal applied the CBDT Notification revising the exemption ceiling to permit the claim. The operative effect is that the assessee's claimed leave encashment is allowable because it is below the revised limit and the assessing officer is directed to grant the exemption within that revised ceiling.

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Issues: Whether the assessee is entitled to full exemption of leave encashment under Section 10(10AA) of the Income-tax Act, 1961 for the amount claimed (Rs. 6,97,100) despite being a bank employee, for Assessment Year 2020-21.

Analysis: The issue concerns the scope of exemption under Section 10(10AA) of the Income-tax Act, 1961 and the applicable exemption limit. The tribunal considered prior judicial authority on whether employees of nationalised banks or public sector undertakings qualify as Central or State Government employees for the purpose of Section 10(10AA). The tribunal also applied the Central Board of Direct Taxes' revision of the exemption limit by Notification No. 31/2023 which increased the exemption ceiling to Rs. 25,00,000. The tribunal noted that the assessee's claimed leave encashment (Rs. 6,97,100) falls below the revised statutory limit and directed the assessing officer to allow the claim within the revised limit.

Conclusion: The assessee's claim for exemption of Rs. 6,97,100 under Section 10(10AA) of the Income-tax Act, 1961 is allowed and the assessing officer is directed to grant the exemption within the revised limit prescribed by Notification No. 31/2023.

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