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Issues: (i) whether leave encashment received on resignation was exempt under section 10(10AA)(ii) of the Income-tax Act, 1961; (ii) whether standard deduction under section 16(i) of the Income-tax Act, 1961 was allowable at Rs. 5,000 despite receipt of conveyance allowance.
Issue (i): Whether leave encashment received on resignation was exempt under section 10(10AA)(ii) of the Income-tax Act, 1961.
Analysis: The expression "retirement on superannuation or otherwise" was applied to cover resignation. Leave salary received in encashment of earned leave at the time of resignation was therefore treated as falling within the exemption provision.
Conclusion: The addition relating to leave encashment was deleted and the exemption was allowed in favour of the assessee.
Issue (ii): Whether standard deduction under section 16(i) of the Income-tax Act, 1961 was allowable at Rs. 5,000 despite receipt of conveyance allowance.
Analysis: The proviso that earlier restricted the higher standard deduction in cases of conveyance allowance had been deleted by the Finance Act, 1981 with effect from 1 April 1982. For the relevant assessment year, employees receiving conveyance allowance were entitled to the enhanced standard deduction.
Conclusion: Standard deduction of Rs. 5,000 was directed to be allowed in favour of the assessee.
Final Conclusion: The assessee succeeded on both substantive issues, resulting in relief by deletion of the disputed additions and allowance of the higher standard deduction.
Ratio Decidendi: The words "retirement on superannuation or otherwise" in section 10(10AA)(ii) include resignation, and after deletion of the restrictive proviso by the Finance Act, 1981, conveyance allowance does not disqualify an employee from the higher standard deduction under section 16(i).
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