My client retired from a nationalised bank in April 2018 and CPC capped his leave encashment exemption at Rs 3,00,000. The Rs 25,00,000 limit came only in May 2023. Can he still get it for AY 2019-20?
This Tribunal said yes. It held that the enhanced ceiling of Rs 25,00,000 notified under s.10(10AA)(ii) is a remedial and beneficial measure and directed the Assessing Officer to allow exemption up to Rs 25,00,000 or the actual amount received, whichever is lower, even though the assessee had retired on 30 April 2018, nearly five years before the notification.
Decided by the ITAT (Shri Sudhanshu Srivastava, Judicial Member (SMC Bench, Lucknow)) on 2026-05-15, reported as ITA No.915/LKW/2025; Assessment Year 2019-20. It bears on section 10(10AA), section 10(10AA)(i), section 10(10AA)(ii), section 143(1), section 154 of the Income Tax Act 1961, in Salary & Perquisites, Capital Gains Exemptions and Assessment & Scrutiny matters.
This is now the single most common salaried-assessee dispute in the Tribunal: CPC restricts s.10(10AA)(ii) to Rs 3,00,000 in a s.143(1) intimation or a s.154 rectification, and the retired bank or PSU employee is left with a demand on the balance. The point to hold on to is that the notification's own words fix its commencement at 1 April 2023 — the first day of previous year 2023-24, so that on the text the enhanced ceiling reaches receipts assessable in assessment year 2024-25 and later — and the Departmental Representative argued exactly that here, so the taxpayer is not winning on the text: he is winning on a purposive reading that a very large number of coordinate benches have adopted. Nothing above Tribunal level was located either way. Practitioners should therefore treat this as a strong but unconsolidated line, plead it fully rather than assuming it is settled, and be ready for the Department to take the contrary reading to a High Court. Note also that the ceiling was not raised for the first time in 2023 in the sense the order suggests; the earlier limit of Rs 3,00,000 was itself fixed by a notification and had stood unrevised for roughly two decades.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee retired from the service of Union Bank of India, Mumbai on 30 April 2018 and received Rs 12,46,798 as leave encashment. He filed his return for AY 2019-20 on 31 August 2019 claiming Rs 3,00,000 as exempt under s.10(10AA), and CPC processed the return under s.143(1) on 8 December 2020 allowing that claim. He then applied under s.154 claiming exemption for the whole of Rs 12,46,798, which CPC allowed by an order recorded as dated 22 December 2021; by a rectification order under s.154 recorded as dated 29 October 2021 CPC restricted the exemption to Rs 3,00,000 and disallowed Rs 9,46,800. The Addl/JCIT(A)-3, Delhi dismissed his appeal by order dated 15 October 2025, holding that employees other than Central and State Government employees are eligible only up to Rs 3,00,000 and that Notification No. 31/2023 dated 24 May 2023 operates with effect from 1 April 2023 and cannot help a person who retired on 30 April 2018. The assessee appealed to the Tribunal.
The appeal was allowed. The Assessing Officer was directed to re-compute the tax liability by allowing exemption under s.10(10AA)(ii) up to the enhanced limit of Rs 25,00,000 or the actual amount received, whichever is lower (paras 5.4 and 6.0).
The Tribunal set out the CBDT notification issued under sub-clause (ii) of clause (10AA) of s.10 raising the ceiling from Rs 3,00,000 to Rs 25,00,000 and reproduced its operative part (para 5.1). It relied on the Explanatory Memorandum, which certifies that no taxpayer is adversely affected by the notification, to characterise the enhancement as remedial and beneficial, correcting a long-standing stagnation of the ceiling (para 5.2). It then applied the canon that beneficial provisions and notifications issued to alleviate the tax burden on retiring employees must be given a liberal and purposive interpretation, and held that where an assessment or appellate proceeding is pending the enhanced cap cannot be denied by rigid adherence to a superseded limit, noting that coordinate benches had consistently so held (para 5.3). The Departmental Representative's argument that the notification takes effect only from 1 April 2023 and cannot apply to an employee who retired on 30 April 2018 was recorded (para 4.0) but not separately answered.
the benefit of the enhanced statutory cap of Rs.25,00,000 cannot be denied to an eligible assessee by rigid adherence to a superseded limit
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Handle my notice → Ask a CA on WhatsAppThis Tribunal said yes. It held that the enhanced ceiling of Rs 25,00,000 notified under s.10(10AA)(ii) is a remedial and beneficial measure and directed the Assessing Officer to allow exemption up to Rs 25,00,000 or the actual amount received, whichever is lower, even though the assessee had retired on 30 April 2018, nearly five years before the notification. This was decided by the ITAT (Shri Sudhanshu Srivastava, Judicial Member (SMC Bench, Lucknow)) and bears on section 10(10AA), section 10(10AA)(i), section 10(10AA)(ii), section 143(1), section 154 of the Income Tax Act 1961. It is reported as ITA No.915/LKW/2025; Assessment Year 2019-20. This is now the single most common salaried-assessee dispute in the Tribunal: CPC restricts s.10(10AA)(ii) to Rs 3,00,000 in a s.143(1) intimation or a s.154 rectification, and the retired bank or PSU employee is left with a demand on the balance. The point to hold on to is that the notification's own words fix its commencement at 1 April 2023 — the first day of previous year 2023-24, so that on the text the enhanced ceiling reaches receipts assessable in assessment year 2024-25 and later — and the Departmental Representative argued exactly that here, so the taxpayer is not winning on the text: he is winning on a purposive reading that a very large number of coordinate benches have adopted. Nothing above Tribunal level was located either way. Practitioners should therefore treat this as a strong but unconsolidated line, plead it fully rather than assuming it is settled, and be ready for the Department to take the contrary reading to a High Court. Note also that the ceiling was not raised for the first time in 2023 in the sense the order suggests; the earlier limit of Rs 3,00,000 was itself fixed by a notification and had stood unrevised for roughly two decades. If it applies to you, the first step is this: Get the notification itself on record: Notification No. 31/2023 [F. No. 200/3/2023-ITA-I] dated 24 May 2023, S.O. 2276(E), which specifies Rs 25,00,000 as the limit under sub-clause (ii) of clause (10AA) of s.10 and states that it shall be deemed to have come into force with effect from 1 April 2023. Read that commencement date correctly before arguing either side of it: 1 April 2023 is the first day of previous year 2023-24, so on the notification's own terms the enhanced ceiling reaches leave encashment received in previous year 2023-24 and later — that is assessment year 2024-25 onwards, not assessment year 2023-24. The operative clause itself contains no retirement-date restriction; the whole of the Department's case is the commencement clause.
The assessee retired from the service of Union Bank of India, Mumbai on 30 April 2018 and received Rs 12,46,798 as leave encashment. He filed his return for AY 2019-20 on 31 August 2019 claiming Rs 3,00,000 as exempt under s.10(10AA), and CPC processed the return under s.143(1) on 8 December 2020 allowing that claim. He then applied under s.154 claiming exemption for the whole of Rs 12,46,798, which CPC allowed by an order recorded as dated 22 December 2021; by a rectification order under s.154 recorded as dated 29 October 2021 CPC restricted the exemption to Rs 3,00,000 and disallowed Rs 9,46,800. The Addl/JCIT(A)-3, Delhi dismissed his appeal by order dated 15 October 2025, holding that employees other than Central and State Government employees are eligible only up to Rs 3,00,000 and that Notification No. 31/2023 dated 24 May 2023 operates with effect from 1 April 2023 and cannot help a person who retired on 30 April 2018. The assessee appealed to the Tribunal. The matter was decided on 2026-05-15 by the ITAT (Shri Sudhanshu Srivastava, Judicial Member (SMC Bench, Lucknow)). On those facts the ITAT held as follows. The appeal was allowed. The Assessing Officer was directed to re-compute the tax liability by allowing exemption under s.10(10AA)(ii) up to the enhanced limit of Rs 25,00,000 or the actual amount received, whichever is lower (paras 5.4 and 6.0).
The Tribunal set out the CBDT notification issued under sub-clause (ii) of clause (10AA) of s.10 raising the ceiling from Rs 3,00,000 to Rs 25,00,000 and reproduced its operative part (para 5.1). It relied on the Explanatory Memorandum, which certifies that no taxpayer is adversely affected by the notification, to characterise the enhancement as remedial and beneficial, correcting a long-standing stagnation of the ceiling (para 5.2). It then applied the canon that beneficial provisions and notifications issued to alleviate the tax burden on retiring employees must be given a liberal and purposive interpretation, and held that where an assessment or appellate proceeding is pending the enhanced cap cannot be denied by rigid adherence to a superseded limit, noting that coordinate benches had consistently so held (para 5.3). The Departmental Representative's argument that the notification takes effect only from 1 April 2023 and cannot apply to an employee who retired on 30 April 2018 was recorded (para 4.0) but not separately answered. In the words reproduced by the source cited on this page: "the benefit of the enhanced statutory cap of Rs.25,00,000 cannot be denied to an eligible assessee by rigid adherence to a superseded limit" The decision followed or applied Ram Charan Gupta v. ITO, ITAT Jaipur SMC, ITA No.408/JPR/2022, order dated 27.06.2023 — relied on; Govardhan Deepchand Bhambhani v. ITO, ITAT Ahmedabad 'A' Bench, ITA No.289/AHD/2025, order dated 28.07.2025 — relied on; Devi Dutt Agarwal v. Assessment Unit, ITAT Jaipur SMC, ITA No.1375/JPR/2024, order dated 13.03.2025 — relied on; Uma Dutt Sharma v. ITO, ITAT Lucknow SMC, ITA No.655/LKW/2025, order dated 14.11.2025 — relied on.
It was decided by the ITAT on 2026-05-15 and is reported as ITA No.915/LKW/2025; Assessment Year 2019-20. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 10(10AA), section 10(10AA)(i), section 10(10AA)(ii), section 143(1), section 154, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed. The Assessing Officer was directed to re-compute the tax liability by allowing exemption under s.10(10AA)(ii) up to the enhanced limit of Rs 25,00,000 or the actual amount received, whichever is lower (paras 5.4 and 6.0). It arises in Salary & Perquisites, Capital Gains Exemptions and Assessment & Scrutiny matters, on section 10(10AA), section 10(10AA)(i), section 10(10AA)(ii), section 143(1), section 154 of the Income Tax Act 1961, and was decided by Shri Sudhanshu Srivastava, Judicial Member (SMC Bench, Lucknow). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put the Explanatory Memorandum in the paper book — it certifies that no person is being adversely affected by giving retrospective effect to the notification, and that certificate is what carries the beneficial-construction argument. File a paper book of the coordinate-bench orders; the Tribunal has repeatedly accepted the point where a list of them is produced and the Departmental Representative can show no contrary Tribunal or higher authority. If the addition came through a s.143(1) intimation, take the separate and independent ground that no prior intimation under the first proviso to s.143(1)(a) was issued — that ground disposes of the whole intimation without touching the merits. Do not let the appeal go by default on limitation: benches have condoned very long delays in these cases because the notification and the judicial development came after the CIT(A) order. Where the employee is from a PSU, a nationalised bank or a statutory corporation, do not run the alternative argument that he is a Government employee within s.10(10AA)(i); that argument has been rejected and it distracts from the ceiling point.
Searched for later treatment; none was found. That is not the same as a source affirming it. A `citedby:` citator search on this order's Indian Kanoon id returns no later decision citing it. A second, differently worded probe - the assessee's name restricted to documents from 15 May 2026 onward, across all courts including the High Courts and the Supreme Court - turned up no judicial treatment either. In particular no appeal under section 260A, and so no High Court reversal, could be traced, and no later Bench was found taking the opposite view. This is a May 2026 order, so the silence reflects its age rather than any doubt about it: a practitioner may cite it as the only direct authority on the point but should not expect it to be treated as settled. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order's own recital of the procedural history does not hold together: para 2.0 says CPC allowed the full claim by a s.154 order dated 22.12.2021 and then says the rectification order restricting the exemption is dated 29.10.2021, which is earlier. The grounds of appeal speak of an addition of Rs 6,46,800 while the narrative gives the disallowance as Rs 9,46,800 (and once as Rs 9,46,800/- against leave encashment of Rs 12,46,798 less Rs 3,00,000, which is Rs 9,46,798). Para 5.2 says the ceiling 'had not been revised since the year 2002'; the Delhi High Court extract reproduced in a companion Chennai order records that the last notification under clause (ii) was issued on 31 May 2002, while the limit itself is generally described as having stood at Rs 3,00,000 since 1998 — the entry does not resolve that. The operative part of the notification reproduced at para 5.1 omits the commencement clause, which the Chennai order in Ramamoorthy Sundar reproduces in full. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed. The Assessing Officer was directed to re-compute the tax liability by allowing exemption under s.10(10AA)(ii) up to the enhanced limit of Rs 25,00,000 or the actual amount received, whichever is lower (paras 5.4 and 6.0).
TaxSphere, “Awadhesh Kumar Dixit v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/awadhesh-kumar-dixit-v-dcit-leave-encashment-25-lakh-retrospective/ (validity last checked 2026-09-08)
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