Leave encashment exemption and retrenchment compensation claims may be revisited through recomputation and fresh factual examination.

CBDT Notification No. 31/2023 enhancing the leave-encashment exemption ceiling was treated as applicable to the assessee's claim under section 10(10AA), so the exempt amount was directed to be recomputed on that basis. The Tribunal also accepted an additional legal ground that ex-gratia received under BSNL's retirement scheme could be examined as retrenchment compensation exempt under section 10(10B), because a bona fide ground may be entertained when correct tax liability depends on it. As the character of the receipt had not been factually examined below, the matter was remitted for fresh adjudication.

---

---

Issues: (i) Whether the assessee was entitled to the enhanced exemption limit of Rs. 25,00,000 for leave encashment under section 10(10AA); (ii) Whether the additional ground claiming that the ex-gratia received under BSNL's retirement scheme was retrenchment compensation exempt under section 10(10B) could be admitted and required fresh examination.

Issue (i): Whether the assessee was entitled to the enhanced exemption limit of Rs. 25,00,000 for leave encashment under section 10(10AA).

Analysis: The appeal on this issue turned on the effect of CBDT Notification No. 31/2023 enhancing the ceiling for exemption on leave encashment. The Tribunal noted that coordinate Benches had applied the revised limit to earlier assessment years, and no contrary authority was cited. In the circumstances, the assessee's claim was treated as covered by the enhanced limit, warranting recomputation of the exempt amount.

Conclusion: The issue was decided in favour of the assessee, and the matter was remanded to the Assessing Officer for limited recomputation of exemption under section 10(10AA) on the basis of the enhanced ceiling.

Issue (ii): Whether the additional ground claiming that the ex-gratia received under BSNL's retirement scheme was retrenchment compensation exempt under section 10(10B) could be admitted and required fresh examination.

Analysis: The Tribunal accepted that an additional legal ground may be entertained where it is bona fide and where correct tax liability requires adjudication. It noted the assessee's plea that the scheme, though styled as voluntary retirement, was asserted to be in substance a retrenchment-driven closure measure, and also noted the reliance placed on earlier decisions allowing similar claims. However, since this characterisation had not been examined at the assessment stage and required factual verification, the proper course was to admit the ground and remit the matter for de novo consideration.

Conclusion: The additional ground was admitted and the issue was remanded to the Assessing Officer for fresh adjudication.

Final Conclusion: The appeal succeeded only to the extent of reopening both disputed tax claims for limited or fresh examination, with the leave-encashment issue remitted for recomputation and the ex-gratia classification issue remitted for de novo decision.

Ratio Decidendi: An appellate tribunal may admit a bona fide additional legal ground, and where the claim requires factual inquiry not undertaken below, it may remand the matter for fresh adjudication; similarly, an enhanced statutory exemption notified later may be applied to earlier years where coordinate precedent so holds.

---