Leave encashment exemption increased; retrospective notification requires applying the higher exemption to eligible non government employees.

Notification dated 24.05.2023 increases the leave encashment exemption to Rs. 25 lakhs and extends the benefit to non government employees; it operates retrospectively, so administrative and appellate orders that failed to apply the notification must be set aside and the exemption granted where the assessee's receipt falls within the increased limit. The delay in filing the appeal was condoned and did not preclude substantive relief. The practical effect is that eligible non government employees are entitled to the higher exemption and prior assessments or orders denying the balance must be reopened or corrected accordingly.

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Issues: Whether the benefit of notification dated 24.05.2023, which increased the exempt limit for leave encashment to Rs. 25 lakhs with retrospective effect, applies to the assessee's leave encashment received during the year and whether the assessment and appellate orders denying exemption for the balance amount should be set aside.

Analysis: The notification dated 24.05.2023 raises the exemption limit for leave encashment to Rs. 25 lakhs and is addressed to extend benefit to non-government employees. The notification is a public instrument that enlarges the tax exemption available under the statutory provision governing leave encashment. The assessee received leave encashment within the increased limit. The impugned intimation under section 143(1) and the appellate order under challenge did not apply the benefit conferred by the notification. The small delay in filing the appeal was condoned and does not affect substantive consideration of whether the notification applies.

Conclusion: The notification dated 24.05.2023 applies with retrospective effect to the assessee's leave encashment and the orders denying exemption are set aside; the appeal is allowed in favour of the assessee.

Ratio Decidendi: A beneficial notification increasing the exemption limit for leave encashment to Rs. 25 lakhs and given retrospective effect must be applied to grant exemption to eligible non-government employees, and administrative or appellate orders failing to apply such a notification shall be set aside.

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