Section 10(10AA)(ii)

Section 10(10AA)(ii) — the law in short

What the courts have decided on section 10(10AA)(ii), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Ramamoorthy Sundar v ITO ITATHelps taxpayerValidity unconfirmed
  My client sat on an NFAC order restricting his leave encashment exemption for over a year, and only came to me after hearing that the limit is now Rs 25,00,000. Is the appeal dead on limitation?
  Not necessarily. The Tribunal condoned a delay of the order of five hundred days and then allowed the enhanced exemption of Rs 25,00,000 under s.10(10AA), treating the subsequent development on the judicial front and the CBDT notification as themselves part of the sufficient cause for the delay.
• Awadhesh Kumar Dixit v DCIT ITATHelps taxpayerValidity unconfirmed
  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.
• Statutory position — s.10(10AA): the four-limb leave encashment computation, the thirty-days-a-year cap in the Explanation, and the Rs. 25,00,000 limit notified by S.O. 2276(E) from 1 April 2023 CBDT Circulars & InstructionsCuts both ways
  My client is a private-sector retiree who was paid leave encashment. The Assessing Officer has restricted the exemption to three lakhs. What is the current limit, what instrument set it, and how is the exempt amount actually computed?
  The current limit for a non-government employee is Rs. 25,00,000, specified by Notification No. 31/2023, S.O. 2276(E), which is deemed to have come into force with effect from 1 April 2023, in relation to employees mentioned in s.10(10AA)(ii) who retire, whether on superannuation or otherwise. The exempt amount is the least of four figures — the amount actually received; the cash equivalent of the earned leave at credit, the entitlement to earned leave being capped by the Explanation at thirty days for every year of actual service rendered to the employer from whose service he has retired; ten months' average salary computed on the average salary drawn during the ten months immediately preceding retirement; and the notified limit — and the notified limit is an aggregate across employers in the same year and across earlier years.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.