Leave encashment exemption ceiling under section 10(10AA)(ii) cannot be retrospectively enhanced, Tribunal holds.

Leave encashment exemption could not be extended beyond the statutory ceiling of Rs. 3 lakhs under section 10(10AA)(ii) for the relevant assessment year. The Tribunal held that the existing notified upper limit continued to apply and that any retrospective enhancement of the limit was a matter of executive policy, not judicial direction. An earlier Delhi High Court notice order was treated as insufficient authority, while the Kerala High Court decision was treated as binding support for rejecting retrospective revision. The enhanced exemption claim was therefore disallowed and the related addition sustained.

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Issues: Whether exemption in respect of leave encashment could be allowed beyond the statutory upper limit of Rs. 3 lakhs under section 10(10AA)(ii).

Analysis: The claim for enhanced exemption was rejected. The Tribunal noted that the upper limit fixed by the existing notification remained operative for the relevant period and that the question of revising the limit retrospectively lay within executive policy. Reliance on an earlier Delhi High Court notice order was found insufficient, while the Kerala High Court decision, being a final decision, was treated as binding for rejecting retrospective enhancement.

Conclusion: The claim for exemption beyond Rs. 3 lakhs under section 10(10AA)(ii) was disallowed and the addition was upheld.

Final Conclusion: The appeal failed on the sole substantive issue and the revenue-side adjustment was sustained.

Ratio Decidendi: Retrospective enhancement of the statutory ceiling for leave encashment exemption cannot be directed by adjudicatory fora where the matter falls within executive policy and the existing notified limit continues to govern the relevant assessment year.

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