Leave encashment exemption ceiling applied to earlier assessment year, requiring recomputation of the taxable addition.

Leave encashment exemption under section 10(10AA) was held to be available at the revised ceiling of Rs. 25,00,000 for AY 2020-21, notwithstanding the assessee's status as a non-government employee. The Tribunal relied on CBDT's 24.05.2023 notification and coordinate bench decisions that had applied the enhanced limit to earlier assessment years. The matter was remanded only for recomputation by the Assessing Officer on the basis of the higher ceiling, and the addition was to be deleted to that extent.

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Issues: Whether the assessee was entitled to the revised ceiling limit of Rs. 25,00,000 for exemption on leave encashment under section 10(10AA) of the Income-tax Act, 1961 for AY 2020-21, and whether the matter required recomputation by the Assessing Officer.

Analysis: The assessee, a retired employee, had received leave encashment and the lower authorities restricted exemption to Rs. 3,00,000 on the footing that he was a non-government employee. The Tribunal noted the CBDT notification dated 24.05.2023 enhancing the exemption ceiling to Rs. 25,00,000 and observed that coordinate bench decisions had already applied the revised limit to earlier assessment years, including AYs prior to the notification. Following those decisions, the Tribunal accepted that the assessee was entitled to the benefit of the revised ceiling for AY 2020-21. The issue was therefore sent back to the Assessing Officer only for recomputation of the exemption amount by applying the enhanced limit.

Conclusion: The assessee succeeded on the substantive issue to the extent that the revised limit of Rs. 25,00,000 was held applicable, and the addition was directed to be deleted upon recomputation.

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