Man gets leave encashment tax benefit, but limit hiked later; ITAT allows Rs 12.27L
The ITAT Chennai bench viewed the increase from Rs 3 lakh to Rs 25 lakh as an enhancement of an existing benefit, rather than the creation of a new exemption. The Tribunal also found the change beneficial and remedial in nature and said it was intended to reduce hardship and bring parity between government and non-government employees.
A retired bank employee received leave encashment worth Rs 12.27 lakh. Initially, he claimed Rs 3 lakh as exempt from tax under Section 10(10AA)(ii) of the Income Tax Act. However, the exemption limit was later increased to Rs 25 lakh by the CBDT Notification No. 31/2023, which came into effect from April 1, 2023. The Income Tax Appellate Tribunal (ITAT), Chennai ruled in favor of the employee, allowing him to claim exemption for the entire amount of his leave encashment.
The tribunal held that enhancing an existing benefit should be interpreted liberally and applied retrospectively, particularly if it did not adversely affect the Revenue’s vested rights.
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