Leave Encashment Exemption u/s 10(10AA) allowable up to Threshold of Rs. 25L as per CBDT Notification: ITAT Grants Exemption [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, held that an appellant is entitled to claim full exemption of leave encashment under Section 10(10AA) of the Income Tax Act, 1961 in accordance with the revised limit prescribed by CBDT Notification

The appellant, Satish Chandra Tyagi, had claimed a total leave encashment exemption of ₹8,37,542 under Section 10(10AA) of the Income Tax Act. The Assessingofficer (AO) restricted the exemption to the earlier prescribed limit of ₹3,00,000 and disallowed the remaining amount of ₹5,37,542.

The appellant filed an appeal before the Commissioner of Income Tax (Appeals) (CIT(A)), wherein CIT(A), uphold the order of the AO

The appellant, appearing in person, contended that the Central Board of Direct Taxes (CBDT), vide its notification no. No. 31/2023 had revised the exemption limit to ₹25,00,000 and since the claimed amount was within the prescribed limit, denial of full exemption was unjustified and contrary to law.

Ravi Kant Chaudhary, appearing for the Revenue department, relied upon the orders of the lower authorities and submitted that the restriction imposed during processing was valid.

Madhumita Roy, Judicial Member and Amitabh Shukla, Accountant Member observed that similar issues had already been adjudicated in Neelam Gupta case where the revised CBDT notification was duly considered.

The Tribunal noted that the leave encashment amount claimed by the appellant was within the revised exemption limit and that the benefit of the updated notification could not be denied.

The Tribunal held that the appellant was entitled to claim exemption under Section 10(10AA) up to the revised ceiling limit. Accordingly, the Tribunal allowed the appeal of the appellant.

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