Assessee, a local authority, paid leave encashment to its employees and did not deduct TDS on same. Assessing Officer held that payments were in excess of Rs. 3 lakhs and since recipients were neither State Government nor Central Government employees, exemption limit could not exceed Rs. 3 lakhs and accordingly tax had to be deducted by assessee.  Commissioner (Appeals) confirmed addition on ground that employees of assessee were neither State Government nor Central Government employees. On appeal the Tribunal held that since exemption given on account of leave encashment varies according to category of employees and exemption of leave encashment is allowed to State and Central Government employees in full and exemption to other than State and Central Government employees is upto Rs. 3 lakhs as per provisions of section 10(10AA), assessee was liable to deduct tax on payments made against leave encashment to its employees. Accordingly the revenue Authorities are directed to  re-compute quantum of tax deductible taking into consideration exemption limit of Rs. 3 lakhs prescribed by Act. (AY. 2017-18, 2020-21, 2021-22, 2023-24)