Enhanced leave encashment limit of Rs. 25 lakh applies

Enhanced leave encashment limit of Rs. 25 lakh applies retrospectively to remove disparity for PSU retirees.

Issue

Whether the delay of 1165 days in filing the appeal could be condoned on the grounds that it was caused by waiting for subsequent judicial developments and the issuance of a beneficial CBDT notification.
Whether the enhancement of the leave encashment exemption ceiling from Rs. 3.00 lakh to Rs. 25.00 lakh via CBDT Notification No. 31/2023 is a curative, rationalizing measure that should be applied liberally to previous assessment years (specifically AY 2020-21) for non-government/PSU employees.

Facts

The assessee, an individual who retired from the Oil and Natural Gas Corporation (ONGC, a Public Sector Undertaking), received approximately Rs. 19.06 lakh as leave encashment on superannuation during the financial year relevant to the Assessment Year 2020-21.
The assessee claimed a full tax exemption on this entire amount under Section 10(10AA)(ii) of the Income-tax Act.
The Central Processing Centre (CPC), while processing the return under Section 143(1), capped the exemption at the then-prevailing statutory limit of Rs. 3.00 lakh and taxed the remaining balance, a decision later upheld by the Commissioner (Appeals).
The assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT) with a substantial delay of 1165 days.
The assessee explained that the delay was not intentional but occurred because they were awaiting critical subsequent judicial developments and the landmark CBDT Notification No. 31/2023 (issued on May 24, 2023), which raised the exemption ceiling to Rs. 25.00 lakh.
The assessee argued that this notification was curative and beneficial in nature, designed to eliminate historical disparities between government and non-government employees, and should therefore cover their retirement payout.

Decision

Delay Condoned: The Tribunal held that there was no evidence on record to show that the 1165-day delay was willful, deliberate, or driven by bad faith. The emergence of subsequent legal developments and the beneficial CBDT notification constituted “sufficient cause” for the delay, and the delay was condoned.
Notification Held to be Curative: The upward revision of the exemption cap from Rs. 3.00 lakh to Rs. 25.00 lakh after nearly twenty years was recognized as a rationalization step to reflect modern economic realities rather than the introduction of an entirely new exemption.
Retrospective/Liberal Application Allowed: Because the notification corrected a long-standing disparity between government and non-government employees, the Tribunal ruled that it must be interpreted liberally.
Full Exemption Granted: The enhanced limit of Rs. 25.00 lakh was held applicable to the assessee for AY 2020-21. Since the assessee’s total receipt of Rs. 19.06 lakh fell comfortably within this new limit, the entire sum was declared fully exempt from tax.

Key Takeaways

Condonation of Delay for Legal Developments: A massive delay in filing an appeal can be legally excused if an assessee is waiting for a curative clarification or beneficial notification from the CBDT that fundamentally reshapes the merits of their case.
Liberal Interpretation of Financial Relief: Upward revisions of statutory limits aimed at correcting historical inequities (like matching PSU/private employees with government employees) are viewed as remedial measures. Courts will lean toward a liberal, retrospective application to pass the economic benefit to the taxpayer.
Exemption Cap Parity: Non-government and PSU retirees can claim the higher threshold of Rs. 25.00 lakh for leave encashment disputes of prior years if their cases are pending, preventing old, outdated caps from unfairly eating into their retirement benefits.

IN THE ITAT CHENNAI BENCH ‘A’

Balasubramanian Venkatachalaperumal

Deputy Commissioner of Income-tax^*

Manu Kumar Giri, Judicial Member
and S. R. RAGHUNATHA, Accountant Member

IT APPEAL No. 96 (CHNY) OF 2026
[Assessment year 2020-21]

MAY 4, 2026

N. Chandrasekaran, CA for the Appellant. R. Raghupathy, Addl. CIT for the Respondent.

ORDER

S. R. Raghunatha, Accountant Member.- This appeal by the assessee is arising out of the order dated 08.08.2022, passed by the Learned Commissioner of Income Tax (Appeal), NFAC, Delhi (in short “ld.CIT(A)”) for the assessment year (A.Y) 2020-21 against the order of u/s.154 r.w.s 143(1) of the Income Tax Act, 1961 (hereinafter the ‘Act’) passed by the CPC, Bangaluru (AO), dated 29.10.2021.

2. At the threshold, we observe that there is a delay of 1,165 days in the filing of the present appeal by the assessee. The assessee has furnished an affidavit explaining that the assessee is a retired employee of ONGC, aged about 66 years, had claimed the exemption of leave encashment received in the F.Y.2019-20, which was denied by the CPC and on appeal dismissed by the ld.CIT(A). Based on the statutory provisions and judicial position prevailing at the relevant time, that no effective relief was available on the issue involved, impugned order was not questioned in the statutory time limit fixed. Now, based on the Notification NO.31/2023 dated 24.05.2023 of the CBDT and subsequent decisions of the Tribunal, the assessee filed the present appeal with a delay in filing the appeal and prayed for condoning the same.

3. Per contra the ld.DR submitted that there is no sufficient cause to condone the huge delay in filing the appeal before the Tribunal and hence opposed to admit the appeal of the assessee.

4. We have heard the rival submission on the issue of condonation of delay. Firstly, it is a settled principle of law that the expression “sufficient cause” occurring in section 249(3) of the Act should receive a liberal and justice-oriented interpretation. The Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC) ) has emphatically held that a liberal approach must be adopted while considering applications for condonation of delay and that substantial justice should prevail over technical considerations. Their Lordships observed that when substantial justice and technical considerations are in conflict, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay.

5. In N.Balakrishnan v. M. Krishnamurthy [1998] 7 SCC 123 , the Hon’ble Apex Court further clarified that the length of delay is not decisive; what is material is the acceptability and bona fides of the explanation. It was held that if the explanation does not smack of mala fides or is not intended as a dilatory tactic, the Court should ordinarily condone the delay so as to advance substantial justice.

6. Again, in Improvement Trust v. Ujagar Singh [2010] 6 SCC 786 ), the Hon’ble Supreme Court reiterated that a pragmatic and justice-oriented approach must guide the adjudication 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 trite that quasi-judicial authorities are expected to adopt a justice-oriented approach. Denial of adjudication on merits in fiscal matters, which carry civil consequences, should be confined to cases of gross negligence or deliberate inaction. In the case on hand, the explanation tendered by the assessee, viewed in the totality of facts and surrounding circumstances, cannot be said to be either mala fide or lacking in bona fides. On the contrary, it constitutes sufficient cause warranting condonation.

11. Respectfully following the ratio laid down by the Hon’ble Supreme Court and the Hon’ble Jurisdictional High Court, as referred to above, we hold that the delay of 1165 in filing the present deserves to be condoned as the assessee has demonstrated sufficient and reasonable cause for not presenting the appeal within the statutory period prescribed under law and the appeal is admitted for adjudication on merits.

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.25.00 lakhs in par with the government employees, instead of Rs.3.00 lakhs for the impugned A.Y.2020-21.

13. Brief facts of the case emanating from the records are that the assessee is an individual, retired from M/s.ONGC, during the financial year 2019-20. Upon superannuation, the assessee received leave encashment of Rs.19,05,997/- in the A.Y. 2020-21. The assessee filed his return of income declaring a total income of Rs.31,62,309/- after claiming exemption of entire amount of leave encashment of Rs.19,05,997/- u/s.10(10AA)(ii) of the Act. The return of income was processed by the CPC, Bengaluru, u/s.143(1) of the Act dated 29.10.2021 by restricting the exemption claimed u/s.10(10AA)(ii) of the Act to Rs.3,00,000/- and the balance was brought to tax by a arriving a total income of Rs.47,68,310/-.

14. Aggrieved by the order of the CPC, Bengaluru, the assessee preferred an appeal before the ld.CIT(A) on 26.11.2021.

15. Before the ld.CIT(A), the assessee submitted that in the absence of further notification issued by the Central Government having regard to the wordings of Notification No.123/2022 (F.No.200/23/98-ITA-I) the PSU employees are entitled to parity with the Central Government employees in respect of benefits u/s.10(10AA) of the Act. Accordingly, the assessee argued that the maximum amount of exemption u/s.10(10AA)(ii) of the Act of Rs.3.00 lakhs fixed in 2002 shall be enhanced or equated with the Government employees i.e. Rs.25.00 Lakhs. The assessee in support of his claim, relied on the decision of the Hon’ble High Court of Delhi in the case of Kamal Kumar Kalia v. Union of India (Delhi). On perusal of the submission of the assessee, the ld.CIT(A), dismissed the appeal filed by the assessee by confirming the order of the CPC, Bengaluru by passing an order dated 05.08.2022 by holding as under:

“6.21 In view of the above, respectfully following the decisions of the various High Courts, including the decision of the jurisdictional High Court of Madras and the Hon’ble Supreme Court (supra), I am of the considered opinion that the assessee, being an employee of PSU cannot be considered as an employee of the Central & State Government. Accordingly, in respect of encashment of earned leave on superannuation, the assessee is entitled to claim exemption u/s. 10(10AA)(ii) of the Act rw 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 24.05.2023, enhancing the leave encashment on retirement for non-government employees also from Rs.3.00 Lakhs to Rs.25.00 Lakhs, is squarely applicable to the assessee’s case and hence the action of the ld.CIT(A) needs to be reversed in the interest of justice. Further, the ld.AR submitted that though the notification is effective from 01.04.2023, it is beneficial and curative in nature and the explanatory memorandum thereto expressly clarifies that no person is adversely affected, thereby warranting its application to the assessee case also.

18. In support of the above claim the ld.AR relied on the following Tribunal decisions:

–

Chandra Prakash Vashista v. ITO [IT Appeal 1139/JPR/2025, dated 07-10-2025] for the A.Y. 2021-22

–

Govardhan Deepchand Bhambhani v. ITO (Ahmedabad – Trib.)/ITA 289/Ahd/2025 dated 28.07.2025 for A.Y. 2020-21

–

Vijay Kumar Jain v. ITO [IT Appeal nos. 175 and 187 (Agra) of 2022, dated 18-6-2025]

–

Devi Dutt Agarwal v. Assessment Unit [ITA 1375/JPR/2024, dated 13-03-2025] for the A.Y.2020-21

–

Ram Charan Gupta v. ITO [ITA 408/JPR/2022, dated 27-06-2023] for the A.Y. 2020-21.

–

Ram Dev Daiya v. ITO [ITA 1280/JPR/2025, dated 01-01-2026] (Jaipur Tribunal) for the A.Y. 2020-21.

19. In view of the above arguments the ld.AR prayed for setting aside the order of the ld.CIT(A) by allowing the claim of the exemption claimed by the assessee u/s.10(10AA)(ii) of the Act to the tune of Rs.19,05,997/-

20. Per contra, the ld.DR submitted that the assessee’s claim for the A.Y.2020-21 cannot be considered as the notification for enhancement of deduction u/s.10(10AA)(ii) of the Act from Rs.3.00 lakhs to Rs.25.00 Lakhs for non-governmental employees has been increased only from 01.04.2023 and hence there is no error in the order of the ld.CIT(A) and hence, prayed for confirming the order of the ld.CIT(A) by dismissing the appeal of the assessee.

21. We have carefully considered the rival submissions perused the material available on record, including the orders of the lower authorities along with the judicial precedents relied on. The solitary issue that arises for our consideration in the present appeal is whether the assessee is entitled to exemption u/s.10(10AA)(ii) of the Act, in respect of leave encashment received on retirement, to the extent 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 mitigate hardship, and therefore deserves to be applied to pending matters. Reliance has also been placed on certain decisions of coordinate benches of the Tribunal wherein a liberal interpretation has been adopted in favour of the assessee.

24. Upon careful consideration of the statutory framework, we find that Section 10(10AA)(ii) provides exemption to non-government employees in respect of leave encashment, subject to a monetary ceiling as notified by the Central Government. The enhancement of such ceiling from Rs.3,00,000/- to Rs.25,00,000/- vide Notification No.31/2023 is a significant upward revision after nearly two decades and is clearly aimed at aligning the benefit available to non-government employees with that available to government employees, thereby removing an evident disparity.

25. In our considered view, the said enhancement is not in the nature of introducing a new exemption but is a measure to rationalize and update an existing provision to reflect present economic realities. The object of the amendment, as discernible from the notification and surrounding circumstances, is to mitigate hardship and ensure parity. It is a settled principle that provisions which are beneficial in nature and intended to remove hardship are to be construed liberally and, in appropriate cases, applied retrospectively, particularly where no vested right of the Revenue is adversely affected.

26. We further note that the explanatory intent behind such enhancement makes it clear that the amendment is remedial in nature. The absence of an express retrospective clause, in such circumstances, cannot be determinative, especially when the amendment merely enlarges the scope of an existing benefit. The Hon’ble Courts have consistently held that beneficial and curative amendments deserve to be applied to pending proceedings so as to advance the cause of justice.

27. We also find considerable force in the contention of the assessee that denial of enhanced exemption results in an unjust and artificial distinction between similarly placed employees retiring before and after the date of notification, which would defeat the very purpose of the amendment. Such an interpretation, in our view, would be contrary to the principles of equity and fairness embedded in tax jurisprudence.

28. Further, the coordinate benches of the Tribunal in various 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 ot her 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 Act, 1961.”

22. As noted above, the issue related to denial of exemption under Section 10(10AA) amounting to Rs.13,12,806/-. The assessee is a salaried individual who had returned leave encashment salary received on retirement amounting to Rs.13,12,806/- and claimed exemption of the same u/s 10(10AA) of the Act. The same was however restricted to Rs.3 lacs while processing the return of income of the assessee by the CPC in terms of the provisions of Section 10(10AA) of the Act.

23. I have noted above the contention of the Ld. Counsel for the assessee before me of various Co-ordinate Bench decisions of the ITAT, in as much as 22 cases, holding that the limit of exemption of leave encashment as per Section 10(10AA) of the Act applicable for the impugned year would be Rs.25 lacs. The Ld. Counsel for the assessee submitted the list of the said decisions vide submission dated 25-11-2025 as under:-

Sr No.	Name of the Appellant and ITA No.	Name of the Employer	Asst. Year	ITAT Bench	Date of order
1.	Mr.Ram Charan Gupta ITA No.408/JPR/2022	Bank employee	2020-21	Jaipur	27.06.2023
2.	Mr.Satish Kumar Thakur ITA No.211/CHD/2023	Electricity Board Himachal Pradesh	2018-19	Chandigarh	12.09.2023
3.	Mr.Mangala Ram Nimbark ITA No.542/JPR/2023	BSNL	2018-19	Jaipur	04.10.2023
4.	Mr.Govind Chatwani ITA No.385/JPR/2023	Electricity Board Rajasthan	2020-21	Jaipur	31.10.2023
5.	Mr.Devendra Kumar gupta MA No.49/JPR/2023 (Arising out of ITA NO.17/JPR/2023)	Ajmer Vidyut Vitaran Nigam Ltd. Rajasthan	2020-21	Jaipur	18.02.2025
6.	Mr.Dashrath Kumar Sen ITA No.1258/JPR/2024	BSNL	2020-21	Jaipur	05.03.2025
7.	Mr.Devi Dutt Agrawal ITA No.1375/JPR/2024	State Bank of India	2020-21	Jaipur	13.03.2025
8.	Mr.Suman Kumar Jha ITA No.1179/AHD/2024	Oil and Natural Gas commission Ltd.	2020-21	Ahmedabad	18.03.2025
9.	Mr.Dinesh Kumar Mittal ITA No.1570/ JPR/2024	Medical Department Rajasthan	2021-22	Jaipur	07.04.2025
10.	Mr.Sham Sunder Sahani ITA No.129/ DEL/2025	Canara Bank	2021-22	Delhi	21.04.2025
11.	Mrs.Neelam Gupta ITA No.081/Del/25	Bank of Baroda	2020-21	Delhi	21.04.2025
12.	Mr.Sharad Shukla ITA No. 108/AGR/24		2020-21	Agra	22.04.2025
13.	Mr. 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 me. He was unable to bring to my notice any contrary decision of the ITAT in this regard, nor was he able to bring to my notice any decision of a higher judicial authority holding to the contrary. In 14 ITA No. 1280/JPR/2025 Ram Dev Daiya view of the above I hold that the disallowance of exemption claimed by the assessee of leave encashment received under Section 10(10AA) of the Act amounting to Rs. 13,12,806/- be deleted.

29. Similarly in the case of Govardhan Deepchand Bhambhani(supra) for A.Y. 2020-21, the Tribunal has held as under:

“4. Aggrieved against the appellate order, the assessee is in appeal before us raising the following Grounds of Appeal:

1. That assessee retired from service of Punjab National Bank during the year and received leave encashment of Rs.765404/-claimed exemption of such leave encashment amount of Rs.765404 u/sec. 10 (10AA) of Income Tax Act, 1961. Thus the Ld CIT(A) has wrongly disallowed the same.

2. That in view of CBDT notification number 31/2023 dated 24/05/2023 even non-government employees are entitled u/sec. 10(10AA)(ii) of Income Tax Act, 1961 exemption upto Rs.25.00 Lakhs maximum (Retrospectively).

3. Any other matter with prior permission of the chair.

5. None appeared on behalf of the assessee whereas the assessee filed written submission as follows:

(1) Assessee retired from services of M/s Punjab National Bank in F.Y. 2019-20.

(2) Received Rs.7,65,404/- as “Leave Encashment” benefit in terms of sec 10(10AA) of Act.

(3)Return of Income was filed on 25.12.20 claiming whole of such amount of Leave Encashment of Rs.7,65,404/-u/sec 10(10AA) of Act.

(4) While processing the return u/sec 143(1)(a) of Act dated 08.12.2021 the amount of such leave encashment of Rs.7,65,404/-was restricted to Rs. 3,00,000/- U/sec 10(10AA) & has Disallowed/Added A sum of Rs.4,65,404 (Rs. 7,65,404/- Amount Actual Received – Rs.3,00,000/-Maximum Amount Allowed u/sec 10(10AA) considering not in category of Central State Govt. Employee U/sec 10(10AA) (i) of Act.

(5) No care for Board notification No. 31/2023/ F. No. 200/-/2023-ITA-1 dated 24.05.2023

(Effective retrospectively) made where limit for Non-Govt. Employees (others than Central/State) have been raised to Ras.25,00,000/-(Maximum) 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-ciause (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.

[Notification No. 31/2023/F. No. 200/3/2023-ITA-I] SOURABH JAIN, Under Secy.

Explanatory Memorandum: It is hereby certified that no person is being adversely affected by giving retrospective effect to this notification.”

4. Thus in view of such notification section 10(10AA) sub section (i) & (ii) both are at par & since it is clear that as per explanatory memorandum that no person is being adversely affected by giving retrospective effect to this notification.

Thus sec 10(10AA) (i) & (ii) both are at par (with RETROSPECTIVE effect & even the private employee on retirement are entitled for such higher limit of Rs. 25,00,000/-or actual amount received whichever is less; to claim u/sec 10 (10AA) of Act.

It is requested to kindly consider & grant relief. Under similar circumstances number of decisions already granted by Jaipur Bench; details as below:-

(1) Govind Chatwani, Appeal No. ITA No. 385/JP/2023 dated 31.10.2023 copy as enclosed (Page 2108)

(2) Devendra kumar Gupta M.A. No. 49/JP/2023 dated 18.02.2025 copy as enclosed.”

6. Ld. Sr. D.R. appearing for the Revenue supported the order passed by the lower authorities and requested to confirm the disallowance.

7. We have given our thoughtful consideration and perused the This issue of deduction u/s. materials available on record. 10(10AA)(ii) is no more res-integra based on the decisions passed by Co-ordinate Bench of this Tribunal in the case of Govind Chhatwani v. CIT (Appeals) in ITA No. 385/JP/2023 dated 31-10- 2023 wherein it is held as follows:

“7. We have heard the rival contentions and perused the material placed on record. The bench noted that the apple of discord in this case that the assessee has received a sum of Rs.17,68,479/- as leave encashment which was claimed in the return of income filed as exempt u/s 10(10AA) of the Act. The CPC and Id. CIT(A) contended that in the light of this specific notification being not issued the leave encashment allowable up to Rs.3,00,000/- only whereas we note from the submission of the assessee that the assessee has relied upon the notification No. 31/2023/F.No. 200/3/2023-ITA-1 dated 24th May, 2023 and submitted that the revised limit of Rs.25,00,000/- increased on account of leave salary is applicable and to be considered in the light of fact that government has issued this notification 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. v. 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 increased manifold since time and notification issued under Clause (ii) of Section 10(10AA) was lastly issued, as taken note of hereinabove, on 31.05.2002. We therefore, issue notice to the respondents limited to this aspect.

9. Issue notice, learned counsel for the respondents accepts notice. Respondents should file counter affidavits be filed within six weeks. Rejoinder thereto, if any, be filed before the next date.

” 8.1 Recently the Central Board of Direct Taxes Suomotu revised the limit for deduction u/s 10(10AA) of the Act and the revised limit now stood at Rs.25,00,000 as specified vide notification no 31/2023 issued by the ministry of finance. Since the leave encashment amount as claimed by the assessee is amount to Rs.6,97,100/- which is below the revised limit of leave encashment exempt prescribed by the Board, the assessee is eligible to claim of deduction of said Rs.6,97,100/-. Based on these observations the Id. AO is directed to allow the claim of the assessee u/s. 10(10AA) of the act within the revised limit as prescribed. In terms of these observations the appeal of the assessee is allowed.”

On being consistent to the said finding, we held that the assessee is entitled to get the deduction as claimed in the return of income u/s 10(10AA) of the Act as the limit has been increased from 3 lac to 25 lacs.

8. Further this decision is followed in the case of Devendra Kumar Gupta v. CIT(Appeals) in M.A. No. 49/JP/2023 dated 18-02-2025. Thus respectfully following the above decisions, the restricting the deduction u/s. 10(10AA) of Rs. 4,65,404/ made by the lower authorities are not sustainable in law. Therefore the same is liable to be deleted.

9. In the result, the appeal filed by the Assessee is hereby allowed.”

30. In view of the foregoing discussion, we hold that the assessee is entitled to the benefit of enhanced exemption limit of Rs.25,00,000/-u/s.10(10AA)(ii) of the Act in respect of leave encashment received on retirement. Since the amount received by the assessee is within the said limit, the entire sum of Rs.19,05,997/- is eligible for exemption. Accordingly, the action of the CPC in restricting the exemption to Rs.3,00,000/- and the confirmation thereof by the ld.CIT(A) are set aside. The AO is directed to allow the exemption as claimed by the assessee.

31. In the result, appeal filed by the assessee is allowed.