2024 (4) TMI 666

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....s of present case are that; 2.1 The assessee an individual and was an employee of Maharashtra State Electricity Distribution Company Ltd [in short 'MSEDCL'], a State Government of Maharashtra [in short 'GoM'] owned company, wherefrom the assessee retired and was in receipt of gratuity of Rs.1581460/- & leave encashment of Rs.859730/- as his retirement benefit in the year under consideration. 2.2 The assessee in his return of income [in short 'ITR'] had claimed above amount of Gratuity u/s 10(10)(i) and Leave Encashment receipts u/s 10(10AA)(ii) of the Act as fully exempt from taxes. 2.3 While framing scrutiny assessment u/s 143(3) of the Act vide order dt. 25/03/2021, the Ld. AO bringing the fact on record that MSCDL is a public se....

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.... the appellant assessee was in service previously with Maharashtra Electricity Board [in short 'MSEB'] which was constituted in 1960 & operating under the direct control of GoM. Owning to reforms by virtue of amendment brought in Electricity Act, 2003 the erstwhile MSEB demerged its three principal activities i.e. generation, transmission and distribution through restructuring and assigned it to three newly formed companies for the stated purpose. The appellant's employer MSEDCL is one of such company engaged in distribution of electricity, from which the appellant assessee received afforested gratuity & leave encashment as his retirement entitlement/benefits in terms of MSEDCL employee service regulation, 2005. 5. Undisputedly, the appe....

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.... entitled to full exemption being Government Service. The balance gratuity thus represents accrued from MSEDCL being non-governmental service which alone can only be subjected to ceiling limit prescribed u/s 10(10)(ii) of the Act. Applying this ratio in relation to Leave Encashment, the receipt attributable to any leave accumulated and standing to appellant's credit as on the date he became an employee of state PSU i.e. MSEDCL must qualify for full exemption u/c (i) of section 10(10AA) and balance receipt should have only been subjected to ceiling limit of Rs.3Lakhs since such encashment was attributable to service rendered to MSEDCL. However the tax authorities have perfunctory pressed into service the ceiling without first analysing the f....