Leave Encashment Exemption u/s 10(10AA): ITAT Applies Retrospective ₹25 Lakh Limit Notified by CBDT [Read Order]

The Jaipur Bench of Income Tax Appellate Tribunal ( ITAT ) allowed an appeal filed by a retired State Bank of India employee, holding that the revised ₹25 lakh exemption limit for leave encashment under section 10(10AA) of Income Tax Act,1961 applied retrospectively as notified by the Central Board of Direct Taxes ( CBDT ).

Chandra Prakash Vashistha,appellant-assessee, and a retired employee of the State Bank of India, had filed an appeal against the order dated 18.10.2022 passed by the Commissioner of Income Tax (Appeals) [CIT(A)], which upheld the intimation issued under section 143(1) of the Act on 03.11.2021. The appeal, filed on 16.08.2025, was delayed by 959 days, for which a condonation application was submitted.

The assessee counsel had initially addressed the issue of delay, explaining that the assessee, a retired bank employee aged over 65 years, was unable to file the appeal on time as he had approached several tax consultants before deciding to challenge the impugned order. The counsel had therefore requested that the delay in filing the appeal be condoned.

The two member bench comprising Dr.S.Seethalakshmi (Judicial Member) and Rathod Kamlesh Jayanbhai (Accountant Member) observed that the assessee had filed an affidavit attested before a notary public along with the condonation application. It noted that the assessee, a retired bank employee, had received leave encashment benefits on superannuation.

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Since the assessee had stated on oath that the delay occurred due to consulting several legal experts before filing the appeal, and the statement remained unchallenged, the tribunal accepted the explanation and condoned the delay in filing the appeal

The assessee counsel had submitted that the assessee received ₹13,05,810 as leave encashment under section 10(10AA) of the Act. It was stated that the CBDT, through a notification dated 24.05.2023, had increased the exemption limit for non-government employees to ₹25 lakhs with retrospective effect. The counsel had argued that the CIT(A) failed to apply this notification and therefore erred in confirming the assessment order.

The departmental representative had not disputed the issuance of the notification or the revised limit.

Considering this, the tribunal held that the notification was beneficial to non-government employees and set aside the orders of the Assessing Officer and the CIT(A). The appeal was accordingly allowed, with directions to apply the revised exemption limit.

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