COMMISSIONER OF INCOME TAX Vs. D P MALHOTRA

JUDGEMENT

(1.) BY this reference under s. 256 (1) of the IT Act, 1961, the Tribunal has referred the following question of law to this Court for opinion at the instance of the Revenue.

(2.) THE assessee is an individual. He was an employee of the Shipping Corporation of India Ltd. During the previous year relevant to the asst. yr. 1982-83, the assessee resigned from his service w. e. f. 29th July, 1981. In the assessment of his income under the IT Act, 1961 ("the Act") for the above assessment year, the assessee claimed deduction under s. 10 (10aa) of the Act of the amount received by him from his former employer by way of cash equivalent of unutilised earned leave. This claim of the assessee was rejected by the ITO as he was of the opinion that the assessee having resigned from the employment, the amount received by him by way of leave encashment was not exempt under s. 10 (10aa) of the Act. On appeal against the above order of the ITO, the CIT (A) accepted the claim of the assessee and directed the ITO to grant deduction of the amount received by the assessee by way of cash equivalent of the unutilised earned leave to the extent permissible under s. 10 (10aa) of the Act. The order of the CIT (A) was affirmed by the Tribunal. Hence, this reference at the instance of the Revenue.

(3.) WE have heard the learned counsel for the Revenue who submits that the benefit of s. 10 (10aa) of the Act is available only in cases where the amount is received by the assessee at the time of his retirement which, according to him, does not include retirement on resignation.