Case Number: ITA 1537/DEL/2020
Appellant: Sant Lal Mehta, Hisar
Respondent: ITO WARD – 4, Hisar
Assessment Year: 2010-11
Result: 2010-11
Case Filed On: 2020-09-02
Order Type: Final Tribunal Order
Date of Order: 2022-07-20
Pronounced On: 2022-07-20
The case of Sant Lal Mehta vs ITO Ward-4, Hisar revolves around the issues of gratuity and leave encashment exemptions for the assessment year (AY) 2010-11. This appeal, filed by the assessee, Sant Lal Mehta, was heard by the Income Tax Appellate Tribunal (ITAT) Delhi ‘SMC’ Bench, led by Judicial Member Shri Kul Bharat. The primary contention was the addition of gratuity and leave encashment to the taxable income of the appellant.
Sant Lal Mehta filed his return of income declaring an income of Rs. 8,63,800/- on 31.07.2010. The case was reopened by the Assessing Officer (AO) on the grounds that the assessee had received gratuity and other retirement benefits. According to the AO, the assessee received gratuity amounting to Rs. 10,00,000/-, out of which only Rs. 3,50,000/- was exempt, leading to an addition of Rs. 6,50,000/- to the taxable income. Additionally, Rs. 81,610/- was added on account of leave encashment. The total assessed income thus amounted to Rs. 15,95,410/-. The assessee contested this assessment before the Commissioner of Income-tax (Appeals), Hisar, who upheld the AO’s decision, leading to the present appeal before the Tribunal.
The assessee raised the following grounds of appeal:
The Tribunal examined the facts and arguments presented by both parties. The appellant’s counsel highlighted that similarly situated employees/assessees had their appeals decided favorably by the Tribunal. Specifically, the case of Dev Raj Sood vs ITO (ITA No. 905/Del/2017) was cited, wherein the Tribunal had deleted the additions made on account of gratuity and leave encashment.
The Tribunal referred to the case of Dharam Jeet Dahiya vs ITO (ITA No. 3713/Del/2016), which dealt with a similar issue. It was noted that under Section 10(10)(i) of the Income Tax Act, any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or similar schemes applicable to employees of local authorities or the State Government is fully exempt. The Tribunal found that the assessee, being an employee of a State University established by an Act of Parliament and funded by the State Government, was eligible for this exemption. Therefore, the addition of Rs. 6,50,000/- on account of gratuity was deleted.
Regarding the leave encashment, the Tribunal observed that similar principles applied. Under Section 10(10AA)(i) of the Income Tax Act, leave encashment received by an employee on retirement is exempt. Following the rationale applied in the case of gratuity, the Tribunal directed the AO to delete the addition of Rs. 81,610/- on account of leave encashment.
The Tribunal concluded that the additions made by the AO and sustained by the CIT(A) on account of gratuity and leave encashment were not justified. Therefore, the Tribunal set aside the impugned order and directed the AO to delete the additions of Rs. 6,50,000/- and Rs. 81,610/-.
Order:
In the result, the appeal of the assessee is allowed.
Pronounced: Order pronounced in open court on 20th July, 2022.
Sd/-
(KUL BHARAT)
JUDICIAL MEMBER
Date: 20.07.2022
*MP*
Copy forwarded to:
ASSISTANT REGISTRAR
ITAT, NEW DELHI
Gratuity and Leave Encashment Issues: Sant Lal Mehta vs ITO Ward-4, Hisar for AY 2010-11
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