Pravinkumar Ramjibhai Patel Vs ITO (ITAT Ahmedabad)
Ahmedabad ITAT Allows Full Exemption U/s 10(10B) on BSNL VRS Compensation, Rejects ‘Workman’ Restriction
The Ahmedabad ITAT allowed three appeals relating to Assessment Years 2020-21 and 2021-22, holding that the assessees were entitled to exemption under Section 10(10B) of the Income-tax Act on the entire amount of retrenchment compensation received under the BSNL VRS-2019 scheme, though described as VRS compensation, along with leave encashment, if any. The assessees had offered the compensation to tax in their returns and did not claim the exemption due to lack of awareness, while the CPC issued intimation under Section 143(1) without granting the exemption and the CIT(A) dismissed the appeals. Before the Tribunal, the assessees relied on earlier coordinate bench decisions. The Tribunal noted that the issue was squarely covered by its earlier decisions and, finding no change in the factual matrix or legal proposition, followed those decisions. It held that the assessees were entitled to exemption under Section 10(10B) on the entire retrenchment compensation received under the BSNL VRS-2019 scheme and directed the Assessing Officer to grant the consequential relief. Accordingly, all three appeals were allowed.
The Ahmedabad ITAT allowed three appeals filed by former BSNL employees and held that the entire compensation received under the BSNL VRS-2019 Scheme is exempt u/s 10(10B) of the Income-tax Act. The assessees had initially offered the VRS compensation to tax due to a lack of awareness regarding the exemption, and no claim was made in the original or revised returns. The CIT(A) denied the exemption, inter alia, on the ground that the assessees were not “workmen” under the Industrial Disputes Act and that the claim could not be entertained at the appellate stage.
The Tribunal observed that the issue was no longer res integra and stood squarely covered by the decisions of the Chandigarh, Ahmedabad and Pune Benches of the ITAT, including Harish Kumar v. ITO, Jayeshkumar Tulsidas Sutaria v. ITO, and Suman Nandlal Raval v. ITO. It held that the compensation received under the BSNL VRS-2019 Scheme is in substance retrenchment compensation, though described as VRS compensation, and is therefore eligible for exemption u/s 10(10B).
Rejecting the reasoning adopted by the CIT(A), the Tribunal held that the assessees were entitled to claim the exemption despite not having claimed it in the return of income. Following the consistent view taken by the coordinate benches, it directed the AO to grant exemption u/s 10(10B) on the entire retrenchment compensation received under the BSNL VRS-2019 Scheme, along with exemption for leave encashment, if any, and to grant consequential relief, including refund of taxes deducted at source. Accordingly, all three appeals were allowed.
Cases Discussed:
- Jayeshkumar Tulsidas Sutaria, ITA Nos. 2387 & 2388/Ahd/2025, order dated 17.02.2026.
- Suman Nandlal Raval, ITA No. 2389 & 2390/Ahd/2014, order dated 18.02.2026.
- Harish Kumar vs. ITO Ward 5(5), Chandigarh, ITA No. 42/CHD/2025, dated 30.05.2025.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
