Renuka Narasimha Prabhu Vs ITO (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT), Bangalore, decided seven appeals filed by former BSNL employees for Assessment Year 2020-21 concerning exemption of retrenchment compensation received under the BSNL VRS Scheme, 2019 and exemption of leave encashment. The lead appeals were filed by Jayakumar and Renuka Narasimha Prabhu.
In Jayakumar’s case, the assessee, formerly employed with the Department of Telecommunications (DOT) and later transferred to BSNL, received retrenchment compensation of ₹10,82,505 under the BSNL VRS Scheme, 2019. While filing the return, the assessee claimed exemption of ₹5 lakh under Section 10(10C) based on Form 16 issued by the employer. Subsequently, relying on judicial precedents involving similarly placed BSNL employees, the assessee claimed that the compensation constituted retrenchment compensation eligible for full exemption under Section 10(10B). The Assessing Officer denied the claim while processing the return under Section 143(1), and the CIT(A) rejected the appeal despite accepting that the BSNL VRS Scheme amounted to retrenchment, holding that the assessee was not a “workman.”
Before the Tribunal, the assessee relied primarily on the Pune Bench decision in Shraddha Pralhad Arote & Ors. v. ITO, wherein the argument regarding the assessee not being a workman had been considered and rejected. After examining the rival submissions and various judicial precedents, the Tribunal noted that the BSNL VRS Scheme, 2019 formed part of the Government-approved revival and restructuring plan for BSNL, operated through a Department of Telecommunications Office Memorandum and funded by the Central Government. It observed that several Coordinate Benches had consistently held that compensation received under the Scheme qualified for exemption under Section 10(10B). Following those decisions, the Tribunal held that the assessee was entitled to full exemption of ₹10,82,505 under Section 10(10B) and directed the Assessing Officer to grant the exemption.
In Renuka Narasimha Prabhu’s appeal, the assessee received retrenchment compensation of ₹13,49,010 and initially claimed exemption of only ₹5 lakh. The CIT(A) dismissed the appeal as unadmitted due to a delay of 1,048 days. The assessee also sought exemption of ₹11,13,585 towards accumulated leave encashment, whereas only ₹3 lakh had been allowed by the Revenue authorities. The assessee relied upon the Kerala High Court decision in Sanchar Nigam Pensioners Welfare Association v. UOI to contend that BSNL VRS retirees were entitled to leave encashment exemption as they were treated as Central Government employees.
The Tribunal observed that several CIT(A)s had condoned delays ranging from 900 to 2,000 days in similar cases involving BSNL employees and that Coordinate Benches had also condoned delays in numerous appeals on identical facts. Applying the principle of parity, it reversed the CIT(A)’s refusal to condone the delay. On the merits, it followed its findings in Jayakumar’s case and directed grant of full exemption of ₹13,49,010 under Section 10(10B). Regarding leave encashment, the Tribunal followed the Kerala High Court decision and the Coordinate Bench decisions relied upon by the assessee, holding that the assessee was entitled to exemption of ₹11,13,585 under Section 10(10AA). The Tribunal distinguished the Patna High Court decision relied upon by the Revenue, observing that it dealt with parity between State Bank of India employees and Government employees and not with BSNL employees transferred from the Department of Telecommunications.
The Tribunal applied the same reasoning to the remaining appeals filed by Dattatreya Krishnaji Patel, Siddaiah Jayanth, Ramu Madhu Kanthanayaka, Basappa Balarama and Murthy Rangappa. It condoned the delay wherever applicable, directed the Assessing Officer to grant full exemption of retrenchment compensation under Section 10(10B), and, in cases involving leave encashment, directed grant of full exemption under Section 10(10AA). Consequently, all seven appeals were allowed.
Cases Discussed
