TaxTMI 
TaxTMI 
2026 (6) TMI 1508
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The assessee while filing the return of income has claimed the exemption towards leave encashment based on the judgment of Hon'ble Delhi High Court in the case of Kamal Kumar Kalia & others vs. Union of India [WP No.11846 of 2019 dated 08.11.2019]. The return was processed u/s. 143(1) of the Act, where the total income was determined at Rs. 63,65,840/- thereby rejecting the claim of enhanced exemption by the assessee u/s. 10(10A) of the Act. Aggrieved, the assessee filed further appeal before the CIT(A). The CIT(A) dismissed the appeal by holding that: "6.1 In case of an employee other than an employee of Central Government or State Government, any payment as the cash equivalent of leave salary in respect of the period of earned leave at his credit at the time of his retirement is exempt u/s.10(10AA) subject to such limit as the Central Government may, by notification in the official gazette, specify in this behalf. Specified exemption limit applicable in relation to employee who retires after 01.04.1998 is Rs. 3,00,000/- as per Notification No.SO 588(E) dated 31.05.2002. Thus, the provisions of section 10(10AA) is very much clear and exemption to the extent of Rs. 3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....judication of condonation applications, particularly when refusal to condone would result in foreclosing a party's right to have the matter examined on merits. 7. The Hon'ble Jurisdictional High Court of Madras in CIT v. K.S.P. Shanmugavel Nadar (153 CTR 81) has also held that when sufficient cause is demonstrated, the appellate authority is duty-bound to adopt a liberal approach in order to render substantial justice rather than shutting the doors of adjudication on technical grounds. 8. Adverting to the facts of the present case, it is not in dispute that the assessee is an individual retired employee and explained the reasons for delay is only due to the subsequent development on the judicial front and also the notification issued by the CBDT on the impugned issue. These factors explain the circumstances leading to the delay. 9. We find that there is no material on record to indicate that the delay was willful, deliberate or actuated by mala fide intention. Therefore, in our considered view, the explanation offered by the assessee in filing the appeal constituted "sufficient cause" within the meaning of section 249(3) of the Act. 10. It is tri....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case is exactly falling under the this category. I request the Hon'ble Income Tax Appellate Tribunal Chennai bench to kindly condone the delay in the filing. ● That I undertake to produce to produce the original documents before the Hon'ble Appellate Authority if required." 5. Having heard both the parties and considering the decision of the coordinate bench on identical facts, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore following the Hon'ble Supreme Court decision in the case of Collector, Land Acquisition Vs. MST. Katiji & Ors., (167 ITR 471) (SC), we condone the delay in filing the appeal and admit the appeal for adjudication. 6. We have heard the parties, and perused the material available on record. We notice that the Coordinate bench in the case of Balasubramanian Venkatachala Perumal vs. DCIT (supra) has considered the same issue of allowing exemption u/s.10(10A) on the enhanced limits and held that: "12. The only issue raised by the assessee on his grounds of appeal is whether the assessee is eligible for exemption u/s. 10(10AA)(ii) of the Act, upto Rs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w Notification No. 123/2002 dated 31.05.2002 and cannot claim exemption u/s. 10(10AA) (i) of the Act. Further, in the absence of any notification issued by the Govt., the assessee cannot claim parity with Govt. employees for claiming exemption of the entire amount of leave encashment received of Rs.19,05,997/-. 6.22 Under the circumstances, I do not find fault with the AO in restricting the exemption to Rs.3,00,000/-, which resulted in disallowance of exemption to the extent of Rs.16,05,997/-. Thus, the addition/adjustment made by the AO to the extent of Rs.16,05,997/- is confirmed and the grounds of appeal raised by the assessee on this issue are dismissed." 16. Aggrieved by the order of the ld. CIT(A), the assessee preferred an appeal before us. 17. The ld.AR for the assessee assailing the action of the ld. CIT(A) submitted that the denial exemption u/s.10(10AA)(ii) of the Act in respect of leave encashment received on retirement is unsustainable in law in view of subsequent statutory and judicial pronouncements having a direct and decisive bearing on the issue. The ld.AR submitted that the notification issued by the CBDT vide No.31/2023 dated 24.05.202....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent of Rs.25,00,000/-, as claimed, or whether such exemption is to be restricted to Rs.3,00,000/- as per the provisions applicable for the assessment year under consideration. 22. It is an undisputed fact borne out from the records that the assessee, a retired employee of ONGC, received a sum of Rs.19,05,997/- towards leave encashment upon superannuation during the financial year relevant to the assessment year 2020-21. The assessee claimed exemption of the entire amount u/s.10(10AA)(ii) of the Act. However, the CPC, while processing the return u/s.143(1) of the Act, restricted the exemption to Rs.3,00,000/- in accordance with the then prevailing notification, and brought the balance amount to tax. The said action has been confirmed by the ld.CIT(A). 23. The contention of the ld.AR is that the subsequent enhancement of the exemption limit to Rs.25,00,000/- vide CBDT Notification No.31/2023 dated 24.05.2023, being beneficial in nature, ought to be applied retrospectively, particularly in view of the legislative intent to remove disparity between government and non-government employees. It has further been argued that such amendment is curative and intended to mitig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ious decisions, as relied upon by the ld.AR, have taken a consistent view that the enhanced limit under Notification No.31/2023, being beneficial, should be applied in a liberal manner. Our above view, is supported by the decision of the Jaipur Tribunal in the case of Ram Dev Daiya (supra), wherein the Tribunal has allowed the enhanced deduction of leave encashment in the similar set of facts, by holding as under: 21. Taking up now the appeal of the assessee, the grounds raised by the assessee read as under:- "Leave Encashment Fully Exempted 1. Any payment received by an employee of the Central Govt. OR a State Govt. as the cash equivalent of the leave salary in respect of the period of Earned Leave at his credit at the time of his retirement (whether) on superannuation OR otherwise. 12 ITA No. 1280/JPR/2025 Ram Dev Daiya 2. Any such payment (as given in para (i) above) received by an employee other than employee Central OR State Govt in respect of so much of period of EL as does not exceed 10 months calculated on the basis of the average salary drawn by the employee during the period of 10 months immediately preceding his retirement. (Section 10(10AA) of the I-T ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Vijay Kumar Jain ITA No.175/AGR/22 State Bank of India 2019-20 Agra 18.06.2025 14. Mr.Anil Kumar Khatri ITA No.187/AGR/22 State Bank of India 2020-21 Agra 18.06.2025 15. Mr.Goverdhan Bhambhani ITA No.289/AHD/25 Punjab National Bank 2020-21 Ahmedabad 28.07.2025 16. Mrs.Sujata Gupta ITA No.915/JPR/25 State Bank of Bikaner & Jaipur 2022-23 Jaipur 31.07.2025 17. Mr.Om Prakash Khandelwal ITA No.887/JPR/25 Life Insurance Corporation of India 2022-23 Jaipur 06.08.2025 18. Mr.Ashok Arora ITA No.2942/DEL/25 Punjab & Sind Bank 2021-22 Delhi 28.08.2025 19. Mr. Chandra Prakash Vashishtha ITANo.1139/JPR/25 State Bank of India 2021-22 Jaipur 07.10.2025 20. Mr.Rajiv Kumar Wadhwa ITA No.5897/DEL/25 Canara Bank 2020-21 Delhi 29.10.2025 21 Mr. Vijay Pal Gupta ITA No.5915/DEL/25 Canara Bank 2021-22 Delhi 29.10.2025 22. Mr.Sudhakar G.Paldewar ITA No.1781/PUN/25 State Bank of India 2020-21 Pune 31.10.2025 24. Ld. DR fairly agreed that the issue was covered in favour of the assessee as pointed out by the Ld. Counsel before....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ximum) u/sec 10(10AA) (ii) of Act: The CIT(A) considering at this notification is not with retrospective effect but w.e.f 01.04.2023 &n since Appellate has already retired in F.Y. 2019-20, hence the claim of assessee for Rs.7,65,404/- u/sec. 10(10AA) is tenable and has restricted to Rs.3,00,000/-. .................. 3. The CBDT's Notification dated 24.05.2023 (No. 31/2023/F.No. 200/3/2023-ITA-1) (copy enclosed Page no. 1) clearly states that "S.O. 2276(E).-In exercise of the powers conferred by sub clause (ii) of clause (1044) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government, having regard to the maximum amount receivable by its employees as cash equivalent of leave salary in respect of the period of earned leave at their credit at the time of their retirement, whether superannuation or otherwise, hereby specifies the amount of Rs.25,00,000 (twenty-five lakhs rupees only) as the limit in relation to employees mentioned in that sub clause who retire, whether on superannuation or otherwise. 2. This notification shall be deemed to have come into force with effect from the 1st day of April, 2023. [N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cation belatedly. The assessee has already claimed the leave salary as exemption the benefit should be given to the assessee. The similar issue has been decided by the bench in the case of Ram Charan Gupta in ITA No. 408/JP/2022 wherein the bench has already held as under:- "8. We have heard the rival contentions and perused the material placed on record. The bench noted that the assessee relying the decision of Hon'ble Delhi High Court has issued a notice to the Union of India in the case of Kamal Kumar Kalia & Ors. Vs. Union of India & Ors in WP(C) 11846/2019 dated 08.11.2019 wherein the court has given following directions :- "8. We are however of the, prima facie, view that the grievances of the petitioner with regard to exemption limit under Clause (ii) of Section 10(10AA) not being raised since 1998, appears to be justified. This is so because over the decades, the pay scales admissible to government servants, and even employees of the Public Sector Undertaking and Nationalised Banks and all others have been upwardly revised, keeping in view, the financial growth in the country as well as on account of rising inflation. The last drawn salaries have incre....