INCOMES WHICH DO NOT

FORM PART OF
TOTAL INCOME (SECTION 10)
DR. P.SREE SUDHA, ASSOCIATE PROFESSOR, DSNLU
Incomes which do not Form Part of
Total Income

 Chapter III of the Income-tax Act, 1961 deals

with the Incomes which do not form part of total
income.


This Chapter covers sections 10 to 13A
Section 10
 contains numerous clauses subject to amendments,
exempting various kinds of income from inclusion for
purposes of tax.
 These exemptions have been inserted from social, economic,
political, international and other considerations and the
contents and scope of the exemptions change from time to
time.
 Any income of any persons falling within any of the
clauses of section 10 shall not be included in the total
income.
 EXEMPTION VS DEDUCTION
Section-10(1)

 Agricultural Income is exempt from tax if it comes

within the definition of “agricultural income” as
given in Section 2(1A)
Section 10(2)
Any Sum Received from HUF

 Subject to the provisions of 64(2), any sum

received by an individual as a member of a HUF,
where such sum has been paid out of the income of
the family, or, in the case of any impartible estate,
where such sum has been paid out of the income of
the estate belonging to the family.
Section 10(2A)
Share of Profit from the Partnership Firm
 In the case of a person being a partner of a firm
which is separately assessed as such, his share in
the total income of the firm.
Section 10(10D)
Amount paid on Life Insurance Policies
 Any sum received on life insurance policies (including
bonus) is exempt.
 Exclusions :
a. any sum received u/s. 80DD(3)
b. any sum received under a Keyman Insurance Policy
c. any sum received under an insurance policy (issued
after 31.03.2003) in respect of which the premium paid
in any year during the term of policy, exceeds 20% of
the actual sum assured
However, sum received under such policy on the death of a
person shall continue to be exempt
Actual sum assured does not include any premiums
agreed to be returned or any benefits by way of bonus
Gratuity Section 10(10)
 In case of a Government Employee: if he receives it under
revised pension rules of the central govt., central civil services
pension rules 1972, is wholly exempted under section 10(10) (i)
 Ram Knawar Rana vs.ITO [2016 71Delhi Tri] – A professor or a
teacher of a University established under a Act of
Parliament/State Legislature will be treated as a Government
employee for this purpose.
 Manish Chhabra v.CIT [2011]46 SOT 189 (Mum.)- it is
available even in case of resignation
 Employees of statutory organizations are not covered by this
category.
SPECIAL ALLOWANCE [SECTION 10(14)]

 Any special allowance in cash or the value of any benefit granted by

the employer to an employee with the specific object of enabling the
employee to meet expenses ‘wholly’, ‘necessarily’ and ‘exclusively’
incurred by him in the performance of the duties of his office or
employment of profit, is exempt from tax to the extent to which such
expenses are actually incurred for that purpose.
 This allowance may include travelling allowance to agents,
conveyance allowance, transfer allowance, etc., but it does not
include entertainment allowance, perquisites and the allowance to
meet personal expenses (i.e. City Compensatory Allowance) at the
place where the duties of office are performed by him or at the place
where he ordinarily resides [Addl. C.I.T. v. A.K. Mishra 117 ITR 342
(All.)].
CIT v. Tejaji Farasram Kharawalla Ltd. (1968)
67 ITR 95 (SC)
 It must be noted that to be eligible for exemption
the amount must have been actually spended.
Where a surplus remains in the hands of the
assessee out of a lump sum paid to him by the
employer for the purpose, the surplus would be
taxable in the hands of the assessee as income.
 This is irrespective of the fact that the employer
does not demand refund of the amount not
expended
Interest from certain Investments
[Section 10(15)]
(i) Income by way of interest, premium on redemption or other payments on notified bonds,
securities, or
certificates issued by the Government and interest on notified deposits.
The notified securities/bonds, etc., are: 12 year National Savings Annuity Certificates;
National Defence Gold Bonds, 1980; Special Bearer Bonds, 1991; Treasury Savings
Deposits Certificates (10 years);
Post Office Cash Certificates (5 years); National Plan Certificates (10 years); National Plan
Savings Certificates (12 years); Post Office National Savings Certificates (12 years/7
years); Post Office Savings Banks Accounts; Public Account of Post Office Savings
Account Rules (interest up to ` 5,000); Post Office CTD; Fixed Deposit [Government
Savings Certificates (Fixed Deposit) Rules, 1968 or Post Office
(Fixed Deposit) Rules, 1968]; and Special Deposit Scheme, 1981.
(ii) Interest on 7 per cent Capital Investment Bonds in the case of individual and Hindu
undivided families specified up to 31-5-2002 only.
(iii) Interest on 9 per cent Relief Bonds, with effect from 1.1.99 (Prior to that it was 10%
relief bond), in the case of an individual and Hindu undivided family.
DEDUCTION IN RESPECT OF MAINTENANCE OF A DEPENDENT WHO IS A PERSON WITH
DISABILITY: SECTION 80DD
 Deduction is available to an Individual or HUF who is resident in India.
 Individual can be a resident or a non resident or a foreign national.
 Deduction is available for any amount paid for the medical treatment (including nursing),
training and rehabilitation of a handicapped dependent.
 Deduction is also available for any amount deposited in a scheme with LIC or any other
insurer or UTI in this regard for the maintenance of a person who is dependent and disabled.
This scheme should provide for the payment of money in lump sum for the benefit of
dependent in the event of death of a person making such deposit.
 Deduction is available for expenditure done on the treatment of dependent that is a person
with a disability.
 The person should be atleast 40% disabled. If individual is less than 40% disabled then no
deduction is allowed.
 Deduction allowed is Rs.50000 in case of a dependent being a disabled and has a disability of
atleast 40% but less or equal to 80% or Rs.75000 in case a person is dependent and severely
disable i.e. disability of more than 80% of one or more disabilities
 The amount of deduction is not dependent on the amount of actual expenditure incurred by the
assessee.
 Dependent means in case of Individual spouse, children, parents, brothers and sisters and in
case of HUF any member of HUF.
 Such person should be wholly and mainly dependent for support and
maintenance on such individual or HUF.

Dependent himself should not claim deduction under section 80U in computing his own
total income.
 If the person being a person with a disability in whose name the sum has been deposited with
LIC or any other insurer or UTI, dies before the assessee then the amount equal to the amount
which has been deposited shall be deemed to be the income of the assessee in the previous
year in which such sum has been received from insurer and shall be chargeable to tax in the
year of receipt.
 For claiming the deduction the assessee has to furnish a certificate from
the medical authorities and has to file it along with ITR under section
139(1).

Disability for this section would mean blindness, low vision, leprosy-cured---
meaning person who has been cured of leprosy but is suffering from loss
of sensation in feet or hands, hearing impairment, locomotors disability---
means disability of bones, joints or muscles leading to substantial
restriction of the movement of the limbs, mental retardation---means
incomplete development of mind, which is specially characterized by sub
normality of intelligence, mental illness.
 Section 10(32)
Income of Minor
 In case the income of an individual includes
the income of his minor child in terms of
section 64(1A), such an individual shall be
entitled to exemption of Rs. 1,500/- in respect
of each minor child if the income of such
minor is includible under section 64(1A)
exceeds that amount.
64(1a)
 Any income accruing or arising to a minor child is liable to be clubbed
with father or mother whose total income is greater before such
clubbing.
 Income derived by a minor child out of skill and talent or by way of
salary and wages shall not be clubbed. However, if such income is
invested and income is earned thereon, such income shall be clubbed.
 Clubbing ceases to operate when the minor becomes a major.
 There is no clubbing of income in the case of a minor child who is
eligible for deduction u/s. 80U.
 Similarly, where a minor child does not have parents, clubbing of
income does not arise. The minor child will be assessable in his own
case. Guardian will be representative assessee for assessment purposes.
 Income of minor child will be included in the total income of that parent whose total income is greater (before
including income of child).
 If marriage of parents does not subsist it shall be income of that parent who maintains the child in the previous year.
 Where any such income is once included in the total income of either parent any such income arising in any
succeeding year shall not included in the total income of the other parent unless AO is satisfied that it is necessary to
do so.
 Clubbing of incomes of minor accruing till the date of attaining majority shall be done and not thereafter. On and
from the date of attaining majority the incomes shall be taxed in the hands of child himself.
 Brought forward loss of an individual assessee can be set off against the business income of minor child which has
been so clubbed under this section.
 Under this section only net incomes shall be clubbed and that too under the same head of income.
 Deductions of section 80C to 80U shall be allowed till the aggregate of the income of minor child and that of parent.
 Minor shall not be allowed the deductions under sections 80C to 80U on account of the income, which have been
clubbed in the hands of parent.
In the following cases income of minor shall not be clubbed:
 Child is suffering from any disability of the nature specified in Section 80U like physically disability, totally blind
etc.
 Income of child on account of manual work or activity involving skill, talent or specialized knowledge etc.
 If income of child is so included, the parent shall be entitled to an exemption in respect of each minor child under
section 10(32) which shall be of the lower of:
 `1, 500 pa per child
 Income of minor so included in income of parent.
 Such exemption is available from the total income of the minor child that is included in the total income of the
assessee. Exemption to parent under section 10(32) for ` 1,500 shall be available if the clubbing of minor child’s
income is done as per section 64(1A). If income is added as per section 27 of deemed ownership then exemption of
section 10(32) shall not be allowed
 DEDUCTION ALLOWED TO PHYSICALLY HANDICAPPED PERSON: SECTION 80U

The assessee claiming the deduction should be an Individual (can be Indian or a foreign
national) being a resident and a person with a disability.

The disability should be 40% or more.
 Deduction shall be given only when he could satisfy the assessing officer that the disability has the effect
of reducing considerably his capacity to do normal work or engaging in gainful employment or
occupation.
 He is certified by a medical authority to be a person with the disability at any time during the PY and this
certificate has to be furnished along with the ROI. Further this certificate has to be furnished every year
in which this deduction is claimed.
 The amount of deduction shall be Rs.50000 in case of a person with a
disability and Rs.75000 in case of a person with a severe disability (having
disability of over 80%).
 Meaning of disability under this section is Blindness, Low vision, Leprosy-cured---meaning person who
has been cured of leprosy but is suffering from loss of sensation in feet or hands, Hearing impairment,
Locomotors disability---means disability of bones, joints or muscles leading to substantial restriction of
the movement of the limbs.
 Section 10(33)
Capital Gain on Transfer of US 64

 Any income arising from the transfer of a capital

asset being a unit of US 64and where the transfer
of such assets takes place on or after 1.04.2002,
shall be exempt from tax. This exemption is
applicable whether US 64 Unit is long term
capital asset or short term capital asset.
 Section 10(34)
Income from Dividends referred in Sec. 115-O

 Any income by way of dividends received from

Domestic Company.
As per Section 2(22A), Domestic Company
means an Indian Company, or any other
company which, in respect of its income liable
to tax under this Act, has made the prescribed
arrangements for the declaration and payment,
within India, of the dividends (including
dividends on preference shares) payable out of
such income.
 Section 10(35)
Income from Units

a) Income received in respect of units of Mutual Fund

specified under clause (23D); or
b) Income received in respect of units from the
Administrator of the specified undertaking; or
c) Income received in respect of units from the
specified company

It may please be noted that Transfer of the

abovementioned Units are not exempt under this
provision.
 Section 10(37)
Income from transfer of Agricultural Land

 Income from transfer of Agricultural Land is

exempt if following conditions are fulfilled :

a. such land is situate in any area referred to in item

(a) or item (b) of sub-clause (iii) of clause (14) of
Section 2
(land within Municipality, cantonment board having
more than 10000 population, within 8 kms from local
limits or municipality are not covered)
Section 10(37) : Contd….
 such land, during the period of two years
immediately preceding the date of transfer, was
being used for agricultural purposes by such
HUF or individual or a parent of his.
 such transfer is by way of compulsory acquisition
under any low or a transfer the consideration for
which is determined or approved by the Central
Government or the Reserve Bank of India.
 Such income has arisen form the compensation or
consideration for such transfer received by such
assessee on or after the 01.04.2004
 Section 10(38)
LTCG on transfer of equity shares/units chargeable to STT
 Long Term Capital Gains arising on transfer of
equity shares or units of equity oriented mutual
fund is not chargeable to tax from the assessment
year 2005-06 if such transaction is covered by
securities transaction tax.

Mutual Fund as defined u/s. 10(23D) i.e. Mutual

fund registered under the SEBI Act, 1992, Mutual
fund set up by Public Sector Bank, Public Financial
Institution or Authorised by the RBI and subject to
such conditions as the Central Govt. may by
notification in the Official Gazette, specify in this
behalf
Section 10(10C)
Amount received at the time of VRS
Amount received (Compensation) at the time of voluntary
retirement or separation is exempt from tax if the following
conditions are satisfied :
(a) Compensation is received at the time retirement or
termination.
(b) Compensation is received by an employee of the specified
undertakings.
(c) Compensation is received in accordance with the scheme of
voluntary retirement/separation which is framed in
accordance with prescribed guidelines.
(d) Maximum amount of exemption is Rs. 5,00,000/-.
 INTEREST ON SECURITIES: SECTION 10(15): Interest income exempt
from tax are given under section 10(15) some of which are:
 Interest on post office saving bank account.
 Interest on fixed deposits with government or with post office.

 Interest on capital investment bonds.

 Interest on relief bonds.

 10(16) Scholarships grant for education

 10(17) Daily allowances of MP

 10(17A) Award of Central or State Govt

 10(18) Pension income of winners of gallantry awards

 10(19) Family pension in case of death of members of armed forces

.
 SECTION 10(39): INCOME EARNED FROM THE NOTIFIED
INTERNATIONAL SPORTING EVENTS held in India are exempt
from tax if such events are approved by the international bodies and has
a participation of more than 2 countries.
  
 SECTION 10(43): REVERSE MORTGAGE: Any amount received
by an individual as a loan, either in lump sum or in installment, in a
transaction of reverse mortgage is exempt.
  
 SECTION 10(44): NEW PENSION TRUST: Any income received by
any person on behalf of the New Pension System Trust established on
27-2-2008 under the provision of the Indian Trust Act of 1882 shall be
exempt from income tax.
COMPENSATION ON DISASTER: SECTION 10(10BC)

COMPENSATION RECEIVED OR RECEIVABLE BY AN

INDIVIDUAL OR HIS LEGAL HEIR ON ACCOUNT OF DISASTER
FROM CENTRAL GOVERNMENT, STATE GOVERNMENT OR
LOCAL AUTHORITY. HOWEVER IF THE LOSS DUE TO
DISASTER HAS BEEN CLAIMED AS DEDUCTION WHILE
CALCULATING PGBP INCOME THEN SUCH COMPENSATION
SHALL NOT BE EXEMPT
EXPLANATION. —FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSION "DISASTER" SHALL HAVE
THE MEANING ASSIGNED TO IT UNDER CLAUSE (D) OF SECTION 2 70 OF THE DISASTER
MANAGEMENT ACT, 2005 (53 OF 2005);]
 "disaster" means a catastrophe, mishap, calamity or grave
occurrence in any area, arising from natural or man made
causes, or by accident or negligence which results in
substantial loss of life or human suffering or damage to, and
destruction of, property, or damage to, or degradation of,
environment, and is of such a nature or magnitude as to be
beyond the coping capacity of the community of the
 affected area
SEZs – Section 10AA)
(i) hundred per cent of profits and gains derived from the export, of such
articles or things or from services for a period of five consecutive
assessment years beginning with the assessment year relevant to the
previous year in which the Unit begins to manufacture or produce such
articles or things or provide services, as the case may be, and fifty per cent
of such profits and gains for further five assessment years and thereafter;
(ii) for the next five consecutive assessment years, so much of the amount
not exceeding fifty per cent of the profit as is debited to the profit and loss
account of the previous year in respect of which the deduction is to be
allowed and credited to a reserve account (to be called the “Special
Economic Zone Re-investment Reserve Account”) to be created and
utilized for the purposes of the business of the assessee in the manner laid
down in sub-section (2).
Income not to be included in the Total Income

 According to Section 11(1), the following items of income

are not to be included in the total income of the previous
year of the assessee who is in receipt of the same:
 Income derived from property held under trust wholly for
charitable or religious purposes (15%)
 Income derived from property held under trust in part
only for charitable or religious purposes
 Income from property held under trust created on or after
1.4.1952
 Income in the form of voluntary contributions
Capital Gains [Section 11(1A)]
 Asset held wholly for religious purposes or charitable
purposes
 (i) Where the whole of the net consideration is utilised
for acquiring the new capital assets, so much of the
capital gains.
 (ii) Where only a part of the net consideration is
utilised for acquiring the new capital asset, so much of
the capital gain as is equal to the amount by which the
amount so utilised exceeds the cost of the transferred
asset.
Section 12
 Income from Voluntary Contributions - in case
where the voluntary contribution is received with a
specific direction that it shall form part of the
corpus of the trust
Conditions as to Registration of Trusts, etc.
(Section 12A)
 The person in receipt of the income has made an
application for registration of the trust or institution in the
prescribed form and manner with the Chief Commissioner
or Commissioner of Income-tax before 1st day of July,
1973 or before the expiry of a period of one year from the
date of creation of the trust or the establishment of the
institution whichever is later;
 However, as per a change in Section 12A done by Finance
Act, 1999 on and from 1st June 1999 an application for
registration of the trust or institution has to be made only
to the Commissioner.
TAX EXEMPTIONS TO POLITICAL
PARTIES (SECTION 13A)
 ‘Political party’ means an association or body of individual citizens of
India registered with the Election Commission of India as a political
party and includes a political party deemed to be registered with that
Election Commission of India.
(i) the party keeps and maintains such books of account and other
documents as would enable the Assessing Officer to properly deduce
the income;
(ii) in respect of each such voluntary contribution in excess of ` 20,000,
the party keeps and maintains a record of the contributions and names
and addresses of the persons who have made such contribution; and
(iii) the accounts of the party are audited by a Chartered Accountant or
other qualified accountant
Case-Law - Ram Knawar Rana vs.ITO [2016
71Delhi Tri]

 the assessee was an employee of Chaudhary Charan Singh Haryana

Agricultural University, Hisar (hereinafter called CCSU) and retired
from service in April, 2008. Return for the previous year relevant to
the assessment year under consideration declaring total income of
Rs.2,50,410/- was filed, which was processed u/s 143(1) of the Act.
The AO initiated re-assessment proceedings on the premise that the
assessee had wrongly claimed exemption u/s 10(10) in respect of the
arrears of gratuity and arrears of leave encashment.
 He observed that gratuity and leave encashment were exempt up to
the limit of Rs.3,50,000/- and Rs.3 lac, respectively, in the case of
the assessee, which limit stood exhausted in the earlier year at the
time of their receipt.
Facts
 He further noticed that exemption limit was enhanced to Rs.10 lac
for the persons retiring from service on or after ITA
No.1307/Del/2016 24.5.2010. Since the assessee retired before this
cut-off date, the AO opined that the extended benefit of exemption
was not available to the assessee. He jettisoned the claim of the
assessee for exemption u/s 10(10) of the Act and held that the
correct sections applicable were 10(10)(iii) and section 10(10AA)
(ii). ). Since the assessee was an employee of CCSU, the AO held
that such employees could not be termed as Government employees
and, hence, the benefit u/s 10(10)(i) was not available to the
assessee. Resultantly, he made addition towards the amount of
arrears of gratuity received at Rs.6,50,000/- and the amount of
arrears of leave encashment received of Rs.1,88,720/-.
Facts
 CIT(A) echoed the view taken by the AO that the assessee was not a
`holder of civil post under the State Government' and hence not
eligible for exemption u/s 10(10)(i). Further, the assessee was held to
be not covered u/s 10(10)(ii) as he did not receive any gratuity under
the Payment of Gratuity Act, 1972.
 That is how, he held that the employees of the CCSU were covered u/s
10(10)(iii) of the Act, for which there is a limit on the exempt gratuity
amount, which stood exhausted by the assessee in earlier year. Since
the assessee was employed before ITA No.1307/Del/2016 24.5.2010,
the Notification issued by the CBDT enhancing the limit of Rs.10 lac
on gratuity u/s 10(10)(iii) was held to be not applicable. The assessee
is aggrieved against the confirmation of denial of exemption made by
the CIT(A).
Facts
 The first condition is that the employee should be holding a civil post.
The assessee was appointed as a Research Assistant in December, ITA
No.1307/Del/2016 1971, who eventually rose to the post of Head of
Department, Plant Breeding Department at the time of his retirement.
Page 32 of the paper book is copy of the assessee's Pension Payment
Order, which depicts the assessee's designation as Sr. Scientist,
Department of Plant Breeding. On the 'Pensioner's Portion' of this
document, there is a reference to Rule 10, 11 and note thereunder of
Civil Services Rules (CSR) V.II. As the assessee's pension has been
computed under Civil Services Rule, it goes to show that the assessee
was holding a 'civil post' at the time of his retirement. No other
contrary material has been placed on record by the DR to show that
the assessee was holding a post other than civil post.
Facts
 It is undisputed that the entire funding of the CCSU is done by the
State Government. Page 25 is a copy of Notification issued by the
Haryana Government increasing the maximum limit of death-cum-
retirement gratuity at Rs.10 lac, under which the assessee has
received the arrears of retirement gratuity under this scheme only.
The above facts amply demonstrate that CCSU is covered under the
expression 'State.'
 This is further corroborated from Article 12 of the Constitution of
India which states that: 'In this part, unless the context otherwise
requires, 'the State' includes the Government and Parliament of India
and the Government and the legislature of each of the States either
local or other authorities within the territory of India or under the
control of the Government of India.'
Judgment
 I have heard the rival submissions and perused the relevant material on
record. The AR submitted that there is not much difference in the language
of section 10(10)(i) and 10(10AA)(i) and the view taken in respect of
arrears of gratuity u/s 10(10) should be followed for arrears of leave
encashment u/s 10(10AA). The DR supported this proposition. As both the
sides are consensus ad idem on the position that the view taken in the
context of section 10(10) as applicable to leave gratuity be followed here
in the context of section 10(10AA) in the context of leave encashment, I
am desisting from independently examining the later provision. In view of
the fact that
 I have held the assessee to be entitled to exemption u/s 10(10)(i) in respect
of arrears of gratuity, following the same, I extend the benefit of ITA
No.1307/Del/2016 exemption u/s 10(10AA)(i) in respect of arrears of
leave encashment. This ground is allowed.
Manish Chhabra v.CIT [2011]46 SOT 189 (Mum.)

 that the assessee an individual derives income from salary, house

property, business income as partner in t he firms, capital gain and
income from other sources. The return was filed declaring total
income of Rs.49,84,640/-. During the course of assessment
proceedings, the AO inter alia observed that the assessee in Form
No.16 attached with the return of income (Assessment Year: 2005-06)
from M/s Hygenic Research Institute claimed an exemption of
Rs.6,50,000/- under section 10 of the Income Tax Act, 1961 ( the
Act).
 The assessee was asked to explain as to how the exemption of
Rs.6,50,000/- has been claimed from the income salary. In response,
it was submitted by the assessee that the assessee has resigned as
CEO of M/s Hygeni Research Institute with effect from 31.12.2004.
In response, it was submitted by the assessee:

 that the assessee has resigned as CEO of M/s Hygenic Research

Institute with effect from 31.12.2004. Thereafter, the assessee was
admitted a partner in the same firm M/s Hygenic Research Institute
w.e.f. 1.1.2005 in the capacity as Karta of Kailash Chabra HUF vide
partnership deed dated 14.3.2005.
 The assessee on resignation has received gratuity and leave
encashment amounting to Rs.6,50,000/- i.e. Rs.3,00,000/- as leave
encashment and further Rs.3,50,000/- as gratuity, which was claimed
exem pted under section 10(10AA)(ii) and under section 10(10)(iii)
 of the Act , respectively. In the assessment the AO has observed that
as per the provisions of section 10(10AA)(ii) and section 10(10)(iii)
 the exemption is available only on retirement and not on resignation.
It was further observed that:
 as per the assessee's letter dated 23.10.2007 he has
resigned as CEO of M/s Hygenic Research Institute,
which cannot be termed as retirement. For this
proposition, the AO has relied on the order of the
Tribunal in the case of ITO V/s Capt. S.S.Dhillon
wherein (Assessment Year: 2005-06) it has been
observed that the term retirement when read with
superannuation has a clear meaning that a person retires
after completion a period of service which entitles him
to certain retirement benefits like pension, gratuity etc.
Ultimately, the AO has held that:
 the assessee himself has agreed that he has continued with the
same job profile in which he was working prior to his
resignation. Therefore, according to the AO, the entire
arrangement is merely a ploy to evade the tax. He has further
hel d that exemption under section 10(10) and 10(AA) are
available only in case of retirement or termination of 4
(Assessment Year: 2005-06) employment. Since the
assessee's job profile has not changed and he has continued
without any break in the same firm working under same
capacity the assessee is not eligible for exemption as claimed.
Accordingly, the exemption claimed was disallowed.
Cases cited
 On appeal, the learned Commissioner of Income
Tax (A) while agreeing with the views of the AO in
making the disallowance made b y him also relied
on the decision of the Hon'ble Supreme Court in the
case of McDowell and Co. Ltd. V/s CTO 154 ITR
148(SC) for the proposition that the entire
arrangement made by the appellant is only to reduce
his tax liability which is a colourable device and
hence, he confirmed the disallowance made by the
AO.
Cases cited
 High Court in the case of CIT V/s D.P.Malhotra (1998) 229 ITR 394
(Bom), wherein it has been held that the word "retire" under section
10(10AA) of the Act is of wide import and includes retirement by
resignation thus leave encashment on resignation is therefore eligible
for exemption under section 10(10AA). He, therefore, submits that the
facts of the assessee's case are similar to the case decided by the Hon.
jurisdictional High Court, therefore following the same the exemption
of Rs.6,50,000/- as claimed by the assessee be allowed in full.
 With regard to the decision in the case of McDowell and Co. Ltd.
(supra) relied on by the l earned Commissioner of Income Tax (A), he
submits that in view of the above decision (supra), the reliance placed
by the learned Commissioner of Income Tax (A) in the case of
McDowell and Co. Ltd. (supra) is not applicable.