Leave Encashment Exemption extended to non-government employees, resulting in exclusion of the receipt from tax after delay condoned.

Condonation of a 959-day delay was granted after an uncontested notarised affidavit explained reliance on multiple tax advisers, and the appeal was entertained. A subsequent beneficial notification increasing the leave-encashment exemption to Rs. 25 lakhs was held applicable to non-government employees; where the revenue did not contest the notification, the assessment and appellate orders taxing the appellant's leave encashment were set aside and the appellant was held entitled to the increased exemption under section 10(10AA). The appeal was allowed on delay and merits.

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Issues: (i) Whether the delay of 959 days in presenting the appeal should be condoned; (ii) Whether notification dated 24.05.2023 raising the exempt limit for leave encashment to Rs. 25 lakhs applies so as to exempt the appellant's receipt under section 10(10AA) of the Income-tax Act, 1961.

Issue (i): Whether the delay of 959 days in presenting the appeal should be condoned.

Analysis: Appellant, a retired bank employee aged over 65, filed a notarised affidavit stating that consultations with multiple tax/legal advisers caused the delay; this deposition remained unchallenged. The facts show a substantial delay of 959 days, and the affidavit provided an explanation addressing the cause of delay.

Conclusion: Delay in filing the appeal is condoned.

Issue (ii): Whether notification dated 24.05.2023 raising the exempt limit for leave encashment to Rs. 25 lakhs applies so as to exempt the appellant's receipt under section 10(10AA) of the Income-tax Act, 1961.

Analysis: Notification No. 31/2023 dated 24.05.2023 increased the exempt limit for leave encashment to Rs. 25 lakhs and was not disputed by the revenue. The appellant received Rs. 13,05,810 as leave encashment. The notification is a beneficial instruction extending the exemption to non-government employees and, when applied, affects the taxability of the amount received by the appellant.

Conclusion: The notification applies to the appellant's leave encashment; the assessment and appellate orders confirming taxability are set aside and the appellant is entitled to the benefit.

Final Conclusion: The appeal is allowed after condonation of delay and on merits by applying Notification No. 31/2023 dated 24.05.2023 to grant the increased exemption for leave encashment to the appellant.

Ratio Decidendi: A beneficial notification increasing the exempt limit for leave encashment to Rs. 25 lakhs (Notification No. 31/2023 dated 24.05.2023) applies to non-government employees and, when uncontested, must be given retrospective effect to set aside assessments taxing amounts within the revised exemption limit.

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