Case Law Details
Pravinkumar Ramjibhai Patel Vs ITO (ITAT Ahmedabad)
Ahmedabad ITAT Allows Full Exemption U/s 10(10B) on BSNL VRS Compensation, Rejects ‘Workman’ Restriction
Summary: 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
The captioned three appeals have been filed by two different assessees against the separate orders of the Ld. Commissioner of Income Tax (Appeals)-2, Delhi (hereinafter referred to as “CIT(A)”), dated 03.02.2026 and Ld. Commissioner of Income Tax (Appeals)-2, Aurangabad (hereinafter referred to as “CIT(A)”), both dated 29.03.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2020-21 in case of Pravinkumar Ramjibhai Patel and A.Y. 2020-21 & 2021-22 in case of Manasvi Adwait Mehta. Since, the facts and issues involved in all three appeals are identical, hence, the captioned appeals were heard together and are being disposed of by this common order.
2. Assessee’s appeal in ITA No. 1273/Ahd/2026 for AY 202021 in case of Pravinkumar Ramjibhai Patel is taken as a lead case for the purpose of narration of facts.
ITA No.1273/Ahd/2026
3. The assessee has taken following grounds in this appeal:
“1. The Appellant respectfully submits that the Ld. CIT(A) has erred in law and on facts in denying exemption under section 10(10B) of the Income-tax Act, 1961 in respect of compensation received under the BSNL VRS-2019 scheme by wrongly holding that the Appellant is not a “workman” under the Industrial Disputes Act, 1947, without appreciating that the benefit of section 10(10B) is not restricted only to employees strictly falling within the definition of “workman”, and therefore the impugned finding being contrary to settled law and passed without proper appreciation of facts is liable to be set aside and the exemption claimed by the Appellant deserves to be allowed.
2. The Appellant further submits that the Ld. CIT(A) has erred in law in not appreciating that the BSNL VRS-2019 scheme has been consistently held by various Hon’ble ITAT Benches, including Ahmedabad, Chandigarh and Pune Benches, to be in the nature of a retrenchment scheme and that the compensation received thereunder is in the nature of retrenchment compensation/capital receipt fully exempt under section 10(10B), and in failing to follow binding judicial precedents including Jayeshkumar Tulsidas Sutaria v. ITO, Suman Nandlal Raval v. ITO, Harish Kumar v. ITO, and the consolidated decisions of the Hon’ble ITAT Pune Bench, thereby rendering the impugned order bad in law and liable to be set aside.”
4. The assessee was a salaried employee working with BSNL. The Government introduced a Voluntary Retirement Scheme (VRS), which the assessee opted for and was duly accepted by BSNL. It is submitted that the amount received under the scheme has been disclosed in the return of income, and due tax has been paid, despite the fact that the same was exempt from tax. It is further submitted that the VRS was meant for the retrenchment of senior/old-age employees who were unable to adapt to new technology. Accordingly, the assessee contended that the entire amount of Rs.13,72,181/- received under the scheme was fully exempt from tax under the relevant provisions. The compensation amount received under the scheme was offered to tax in the return of income due to lack of awareness regarding the exemption available under section 10(10B) of the Income-tax Act, 1961. The employer had also deducted tax at source on the said amount. No exemption was claimed in the original or revised return of income. The CPC, Bengaluru issued an intimation under section 143(1) for the said year without granting any exemption, and no rectification or appeal was initiated at that time. It was only upon learning about the recent judgment of the Hon’ble ITAT Chandigarh Bench in the case of Harish Kumar vs. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025, dated 30.05.2025) that the assessee became aware that the compensation received under the BSNL VRS-2019 scheme is eligible for exemption under section 10(10B), subject to compliance with Rule 2BA.
5. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld.CIT(A), who dismissed the appeal of the assessee.
6. Aggrieved by the order of the Ld.CIT(A), the assessee is in further appeal before this Tribunal.
7. The Ld. Counsel for the assessee submitted that the amount received by the assessee represented retrenchment compensation received from the Central Government under a scheme approved by the Government. It was submitted that the said amount is fully exempt from tax under section 10(10B) of the Income-tax Act, 1961, and, therefore, the assessee is entitled to full tax exemption. The Ld. Counsel for the assessee further relied upon the following decisions of Coordinate Benches of the ITAT in support of the claim of exemption.
“1. ITA No. 42/Chd/2025 AY 2021-22 in the case of Harish Kumar V/s. ITO Chandigarh dated 30.05.2025.
2. ITA Nos.2387 & 2388/Ahd/2025 in the case Jayeshkumar Tulsidas Sutaria dated 17.02.2026
3. ITA No.2389 & 2390/Ahd/2014 in the case of Suman Nandlal Raval dated 18.02.2026
8. I note that the issue under consideration is squarely covered by the above referred decisions of the Co-ordinate benches of this Tribunal. The Co-ordinate Bench of this Tribunal in ITA Nos. 2387 & 2388/Ahd/2025 for AYs 2020-21 & 2021- 22 vide order dated 17.02.2026, has held as under:
“4. Aggrieved by the orders of the Assessing Officer, the assessee carried the matter in appeal before the Ld.CIT(A), who dismissed the appeal of the assessee by observing as follows:
“… The Appellant was employed with Bharat Sanchar Nigam Limited (BSNL), a Government of India enterprise. BSNL had notified the Voluntary Retirement Scheme (VRS) 2019 on 04.11.2019, which was duly approved and implemented by the employer. The Appellant opted for this scheme and accordingly received compensation under the VRS, as per the terms laid out by BSNL. The compensation amount received under the scheme was offered to tax by the appellant in the return of income due to lack of awareness about the availability of exemption under Section 10(108) of the Income Tax Act. 1961. The employer had also deducted TDS on the said amount. No exemption was claimed in the original or revised return for the year by the appellant. The CPC, Bengaluru issued an intimation u/s 143(1) for the said year without granting any exemption, and no rectification or appeal was initiated at that time. The issue on this appeal pertains to exemption u/s 10(10B) of the Income Tax Act
The appellant in his written submission has stated that it was only upon learning about the recent judgment of the Hon’ble ITAT Chandigarh, in the case of Harish Kumar vs. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025, dated 30.05.2025), that the Appellant came to know that the compensation received under the BSNL VRS 2019 scheme is eligible for full exemption u/s. 10(10B), subject to Rule 2BA compliance.
The grievance raised in the grounds of appeal does not emanate from the order appealed against. It is not a case where the appellant claimed exemption u/s.10(10B) and it was denied by the Assessing Officer. The appellant having omitted to claim relief in the return of income can claim the relief by filing the revised return. In cases where the time limit for filing the revised return has expired, the appellant may seek condonation of delay from the jurisdiction PCIT and then proceed with filing the revised return. The issue raised in grounds of appeal does not emanate from the order of intimation u/s.143(1), Hence, the appeal is dismissed…”
5. Aggrieved by the orders of the Ld. CIT(A, the assessee is in further appeal before us.
6. The Ld. Counsel for the assessee submitted that due to lack of awareness of the legal provisions at the time of filing the return of income, the assessee inadvertently offered the compensation received under BSNL VRS-2019 to tax. Subsequently, based on the decision of the Hon’ble ITAT Chandigarh Bench in Harish Kumar vs. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025 dated 30.05.2025), wherein compensation under the same BSNL VRS-2019 scheme was held to be exempt under section 10(10B), the assessee now seeks exemption of such compensation. We find that the assessee filed the claim before the Ld. CIT(A) and since the income of the assessee is not taxable, the assessee is eligible for the refund of the TDS.
7. In the result, both the appeals of the assessee are allowed.”
9. Since, there is no change in the legal proposition and the factual matrix of the case, respectfully following the decision of the Co-ordinate Bench, the issue raised by the assessee in the present appeal is decided in favour of the assessee. It is held that the assessee is entitled to exemption u/s 10(10B) of the Act upon entire amount of retrenchment compensation (though named as VRS Compensation) and leave encashment, if any. The AO is directed to accordingly give the relief to the assessee.
10. In the result, the appeal preferred by the assessee is allowed.
ITA Nos. 1276 & 1277/Ahd/2026 in case of Manasvi Adwait Mehta
11. Since the facts and issues involved in above captioned appeal is identical, hence, my finding given above will mutatis mutandis apply to both these appeals. Accordingly, both the appeals of the assessee is also allowed.
12. In the combined result, all three appeals of the assessee stand allowed.
This Order pronounced on 09/07/2026
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