Ashokchandra Chandulal Gheewala Vs ITO (ITAT Surat)
Surat ITAT Holds BSNL VRS-2019 Ex-gratia Eligible for Full Exemption as Retrenchment Compensation under Section 10(10B)
The Surat Bench of the ITAT held that ex-gratia compensation received by BSNL employees under the BSNL Voluntary Retirement Scheme (VRS), 2019 is in the nature of retrenchment compensation and is eligible for exemption under section 10(10B) of the Income-tax Act, rather than the limited exemption available under section 10(10C).
The assessee, a retired BSNL employee, had initially offered the VRS compensation to tax after claiming only the ₹5 lakh exemption under section 10(10C). Subsequently, after becoming aware of favourable Tribunal decisions holding that BSNL VRS compensation qualifies as retrenchment compensation under section 10(10B), he filed appeals claiming full exemption. Though the CIT(A) dismissed the appeals on account of substantial delay, the Tribunal condoned the delay, observing that the assessee had acted promptly upon learning the correct legal position and that substantial justice should prevail over technical considerations.
On merits, the Tribunal followed a consistent line of decisions of the Chandigarh, Ahmedabad, Pune, Mumbai and Bangalore Benches, which had held that the BSNL VRS-2019 scheme was essentially a retrenchment measure introduced to reduce surplus manpower and revive BSNL, notwithstanding its nomenclature as a voluntary retirement scheme. Therefore, the compensation received thereunder was held to be eligible for exemption under section 10(10B).
Accordingly, the Tribunal directed the Assessing Officer to grant exemption under section 10(10B), subject to verification of the computation and other necessary particulars. Since the compensation had been received over two assessment years (AYs 2020-21 and 2021-22), the AO was also directed to pass orders for both years simultaneously to ensure proper computation of the exemption and grant consequential relief, including refund, wherever due. The appeals were allowed for statistical purposes.
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