Smt.Rama Devi Kotamraju Vs ITO (ITAT Hyderabad)
BSNL VRS-2019 Compensation Eligible for Full Exemption U/s 10(10B); Hyderabad ITAT Condones 1,404-Day Delay
In Smt. Rama Devi Kotamraju v. ITO (ITA No.1282/Hyd/2026, AY 2021-22), the Hyderabad ITAT considered the taxability of ex-gratia compensation received by a BSNL employee under VRS-2019. The assessee had originally offered the compensation to tax after claiming only the ₹5 lakh exemption under Section 10(10C). Subsequently, on becoming aware that the compensation was claimed to be fully exempt as retrenchment compensation under Section 10(10B), she filed an appeal, but with a delay of 1,404 days, which the Addl/JCIT(A) refused to condone.
The ITAT noted that in Nizamuddin Gooty & Others, delays ranging from 1,114 to 1,826 days in similar BSNL cases had already been condoned. It also relied upon the Telangana High Court ruling in Sri Vissamsetty Ramakrishna v. PCIT, which held that genuine hardship in identical BSNL-retiree cases should be considered with a pragmatic and liberal approach. Accordingly, the Tribunal condoned the 1,404-day delay.
On merits, the Tribunal followed the consistent view of Coordinate Benches that compensation received under BSNL VRS-2019 is eligible for exemption under Section 10(10B). It noted that the scheme arose from the Government-approved BSNL revival package and had been treated in earlier decisions as being in substance a retrenchment scheme rather than an ordinary VRS.
However, the exemption was not granted unconditionally. The ITAT restored the matter to the AO to verify whether the assessee satisfies the statutory conditions of Section 10(10B), particularly whether she qualifies as a “workman” contemplated by the provision. Upon satisfaction of those conditions, the AO was directed to grant the exemption. The appeal was accordingly allowed for statistical purposes.
Cases Discussed:
- Sri Vissamsetty Ramakrishna Vs. PCIT & Others (Telangana High Court), Writ Petition No.19498 of 2026 dated 15.07.2026
- Nizamuddin Gooty & others Vs. Addl/JCIT (ITAT Hyderabad), ITA No.903, 904, 907 to 914, 921 to 924 /Hyd/2026 for A.Ys. 2020-21 & 2021-22
- Basappa Balarama and Murthy Rangappa vs. ITO (ITAT Bengaluru), ITA Nos.1342 & 1427/Bang/2026 dated 29.05.2026
- Shri Sekar Gnanaprakasam Vs. DCIT (ITAT Chennai), ITA Nos.1608 & 1609/CHNY/2026, dated 21.05.2026
- Bajirao Shankar Jagdale v. ITO (ITAT Mumbai), ITA No. 1389/Mum/2026 dated 10.04.2026
- Jayeshkumar Tulsidas Sutaria v. ITO (ITAT Ahmedabad), ITA Nos. 2387 it 2388/ Ahd/2025 dated 17.02.2026
- Harish Kumar vs. ITO (ITAT Chandigarh), ITA No. 42/CHD/2025 dated 30.05.2025
- CIT vs. Pruthvi Brokers ,tr Shareholders Pvt. Ltd. (Bombay High Court), (2012) 349 ITR 336 (Born.)
- Vijay Vishin Meghani vs. DCIT (Bombay High Court), [2017] 398 ITR 250 (Bombay)
- Goetze India Ltd vs CIT (SC), (2006) 284 ITR 323
- NTPC Ltd vs CIT (SC), (1998) 229 ITR 383
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by Smt. Rama Devi Kotamraju (“the assessee”), feeling aggrieved by the order passed by the Learned Addl/JCIT(A)-1 Nashik (“Learned Addl/JCIT(A)”) dated 24.02.2026 for the A.Y. 2021-22.
2. The assessee has raised the following grounds of appeal:
The Appellant craves leave to prefer this appeal on the following grounds, without prejudice to one another:
GROUND 1: Erroneous dismissal of appeal on ground of limitation – Failure to condone delay
The learned Commissioner of Income Tax (Appeals) erred in law and on facts in dismissing the appeal as not maintainable solely on the ground of delay of 1404 days without appreciating that sufficient cause existed for condoning the delay under Section 249(3) of the Income Tax Act, 1961 read with Section 5 of the Limitation Act. The learned CIT(A) failed to appreciate that the delay occurred, due to bona fide reasons, namely lack of awareness and incorrect professional advice at the time of filing the return of income, reliance on Form 16 issued by the employer BSNL which erroneously treated ex-gratia as taxable salary, subsequent awareness of the correct legal position only upon discovery of favourable judicial precedents, and absence of any deliberate inaction, dilatory tactics, or mala fide intention. The teamed CIT(A) failed to appreciate that the Hon’ble ITAT Mumbai Bench in the case of Bajirao Shankar Jagdale v. 1T0 (ETA No. 1389/N1nm/2026 dated 10.04.2026) has condoned a delay of 1394 days in a similar BSNL VRS-2019 case by observing that ‘substantial justice is more important than the procedural delay’ and following the decision of the Hon’ble Bombay High Court in Vijay Vishin Meghani vs. DCIT [2017] 398 ITR 250 (Bombay) which condoned a delay of 2984 days on account of professional advice of a Chartered Accountant. The learned CIT(A) further failed to appreciate that various Coordinate Benches of the ITAT including Fune, Ahmedabad, Chandigarh, and other Benches have consistently condoned delays ranging from several hundred to over thousand days in similar BSNL VRS-2019 cases, recognizing that the issue involves a substantive claim of exemption and the delay is attributable to bona fide reasons. The present delay of 1404 days is even less than the 1543 days delay in the co-related AY 2020-21 appeal filed simultaneously, and is substantially less than the 2984 days condoned by the Hon’ble Bombay High Court.
The learned CIT(A) erred in holding that condonation of such delay would make the term ‘sufficient cause’ in Section 249(3) hollow and meaningless, when settled law mandates that substantial justice should prevail over technical considerations of limitation, particularly when the delay is not on account of dilatory tactics or negligence. The learned CIT(A) ought to have condoned the delay and decided the appeal on merits in the interest of substantial justice.
GROUND 2: Non-adjudication of appeal on merits is contrary to law and principles of natural justice
The learned CIT(A) erred in law and on facts in dismissing the appeal without adjudicating the substantive grounds on merits, thereby violating the principles of natural justice and denying the appellant the statutory right to have her case decided on merits.
The learned CIT(A) failed to appreciate that once an appeal is filed and admitted for hearing, the appellate authority is duty-bound to decide the appeal on merits and cannot decline jurisdiction merely on technical grounds of limitation, particularly when the delay is explained and sufficient cause is shown.
The learned CIT(A) ought to have appreciated that the impugned order u/s 143(1) dated 14.01.2022 suffered from patent illegality in denying statutory exemptions available under law, and such fundamental errors cannot be perpetuated by refusing to examine the merits on hyper-technical grounds.
GROUND 3: Ex-gratia under BSNL VRS-2019 is retrenchment compensation exempt under Section 10(10B) Second Proviso
The learned CPC and Assessing Officer erred in not allowing full exemption under the Second Proviso to Section 10(10B) of the Income-tax Act, 1961 in respect of the ex-gratia compensation of Rs. 36,95,765/- received during FY 2020-21 (AY 2021-22) under BSNL VRS-2019. The Appellant respectfully submits that the compensation received under BSNL VRS-2019 is fully exempt under Section 10(10B) of the Income Tax Act as the same, in substance and effect, constitutes retrenchment compensation paid pursuant to a Central Government approved scheme.
The Office Memorandum dated 29.10.2019 issued by the Department of Telecommunications pursuant to Union Cabinet approval dated 23.10.2019 clearly records that the scheme formed part of the comprehensive ‘Revival of BSNL and MTNL’ package and was specifically introduced for ‘reduction in employee cost by immediately offering VRS’. Thus, the object of the scheme was structural downsizing and financial restructuring of a loss-making PSU„ and not a routine voluntary retirement incentive introduced in the ordinary course of business. The ex-gratia payment was funded through budgetary support of the Government of India and was computed with reference to the remaining period of service, thereby compensating employees for premature termination of employment and loss of future earning capacity. The payment was neither linked to services rendered during the year nor in the nature of salary, bonus or perquisite; rather, it was compensation for surrender of the right to continue in service.
Such compensation, in settled legal principles, is capital in nature, being consideration for loss of employment and sterilization of the source of income, though brought within the charging provision by Section 17(3). The scheme was employer-driven, policy-mandated, time-bound and implemented as part of a government-approved revival package with the dominant objective of workforce reduction, thereby satisfying the essential attributes of retrenchment in substance notwithstanding the nomenclature of ‘VRS’. The Second Proviso to Section 10(10B) clearly states: Provided further that where the compensation is received in accordance with any scheme of voluntary separation approved by the Central Government, the entire amount of such compensation shall be exempt.’ BSNL Voluntary Retirement Scheme 2019 being a
Central Government approved and Government funded scheme satisfies the conditions of the said proviso, and therefore the entire ex-gratia compensation is exempt from tax without any monetary ceiling.
The Hon’ble ITAT Chandigarh Bench in the case of Harish Kumar vs. ITO (ITA No. 42/CHD/2025 dated 30.05.2025) held that BSNL VRS-2019 compensation is fully exempt under Section 10(10B), observing that although the nomenclature was VRS, in fact it was a retrenchment scheme as BSNL had incurred losses, salaries were not paid, and the scheme was launched to shed extra employees. The ITAT noted in para 48 that the matter had been examined by the Honble Madras High Court and thereafter has attained finality in view of dismissal of the SLP by Hon’ble Supreme Court, and the Tribunal specifically stated that ‘such matters need not be litigated any further’. This establishes that VRS retrenchment compensation issues have achieved finality at the Supreme Court level and should not be contested further.
Subsequently, the Hon’ble ITAT Ahmedabad Bench in the case of Jayeshkumar Tulsidas Sutaria v. ITO (ITA Nos. 2387 it 2388/ Ahd/2025 dated 17.02.2026) allowed the appeal of the assessee who received compensation under BSNL VRS-2019, holding that the assessee inadvertently offered compensation to tax due to lack of awareness, and based on ITAT Chandigarh decision, compensation under BSNL VRS-2019 is exempt under Section 10(10B), and both appeals were allowed for AY 2020-21 and AY 2021-22. Most recently, the Hon’ble ITAT Mumbai Bench in the case of Bajirao Shankar Jagdale v. ITO (ITA No. 1389/Mum/2026 dated 10.04.2026) has condoned the delay and allowed the appeal on merits, holding that the alleged sum received under BSNL Voluntary Retirement 2019 Scheme is in the nature of Retrenchment Compensation and falls under the provisions of section 10(10B) of the Act and is in the nature of Capital receipt exempt from tax.
GROUND 4: Application of second proviso to Section 10(10B) – Entire amount exempt
The learned authority failed to appreciate that the second proviso to Section 10(10B) clearly states that where compensation is paid under a scheme approved by the Central Government, the entire amount shall be exempt without any limit. The so-called VRS under BSNL VRS-2019 was introduced as part of a government-approved revival package with the primary object of reduction of employee cost and structural downsizing of the organization. The ex-gratia paid thereunder is not in the nature of salary or incentive but is compensation for loss of employment and surrender of the right to continue in service. Such compensation is intrinsically capital in nature, representing compensation for the sterilization of future earning capacity. The scheme was employer-driven, financially compelled, and funded through budgetary allocation of the Government of India. Therefore, in substance and effect, the compensation partakes the character of retrenchment compensation within the meaning of Section 10(10B), and the entire amount is exempt under the second proviso thereto without any monetary ceiling.
GROUND 5: Relief allowable even if exemption not claimed in original return – Fresh claims permissible in appellate proceedings
The learned CPC and Asc.Kging Officer erred in not granting the full exemption under Section 10(10B) merely on the ground that the full claim was not made in the original return of income.
It is a settled position of law that an assessee is entitled to. determination of the correct lawful tax liability in appellate proceedings. The Hon’ble Supreme Court in Goetze India Ltd vs CIT (2006) 284 ITR 323 held that if a claim is legally permissible and factually verifiable from record, it should be allowed even if not claimed in original return. The Hon’ble Supreme Court in NTPC Ltd vs CIT (1998) 229 ITR 383 held that appellate authority can examine and allow claims not made in original assessment if facts are on record.
The Hon’ble Bombay High Court in CIT vs. Pruthvi Brokers ,tr Shareholders Pvt. Ltd. (2012) 349 ITR 336 (Born.) has categorically held that fresh claims can be made in appellate proceedings and the appellate authority is empowered to entertain such claims. CBDT Circular No. ’14 of 1955 clarifies that filing revised return is not mandatory for making new claim in appellate proceedings, and the appellate authority has plenary powers to examine and decide all issues arising from the assessment. Therefore, the claim for full exemption under Section 10(10B) Second Proviso, even though not made in the original return, is legally permissible and factually verifiable, and deserves to be allowed in appellate proceedings,
GROUND 6: Bona fide error- No. adverse inference should be drawn
The norrclaim of full exemption under Section 10(10B) in the original ITR was solely due to incorrect reporting by the employer in Form 16 and bona fide reliance placed thereon by the Appellant. All primary facts relating to the receipt of ex-gratia compensation were duly disclosed in the return of income and there was no concealment, misrepresentation or suppression of income. Form 16 issued by BSNL incorrectly treated the ex-gratia as Salary’ under Section 17(1) and deducted TDS accordingly. Being a layman without expert tax knowledge, the Appellant relied completely and in good faith on Form 16 prepared by the employer. All income was fully disclosed with no suppression. The issue involved is purely legal in nature regarding the correct classification and exemption of the compensation received. Therefore, the omission deserves to be condoned and the legitimate exemption be allowed as per law without drawing any adverse inference against the Appellant.
GROUND 7: General ground
The Appellant craves leave to add, alter, amend, modify, delete or withdraw any of the above grounds of appeal either before or at the time of hearing of the appeal as may be necessary in the interest of justice.
3. The brief facts emerging from the appeal of the assessee are that the assessee was employee of Bharat Sanchar Nigam Limited (“BSNL”), a Public Sector Undertaking under the administrative control of the Department of Telecommunications, Government of India. Pursuant to the decision of the Union Cabinet for revival of BSNL by, inter alia, reducing employee costs, administrative allotment of spectrum for 4G services and other restructuring measures, BSNL introduced the Voluntary Retirement Scheme, 2019 (“VRS-2019”) for its employees aged 50 years and above by offering ex-gratia compensation. The assessee in the present appeal opted for the said VRS-2019 and received ex-gratia compensation from BSNL during the relevant assessment year under consideration. While making the payment, BSNL deducted tax at source. The assessee, while filing its return of income for the assessment year 2021-22, offered the ex-gratia compensation to tax after claiming exemption of ₹5,00,000/-under section 10(10C) of the Income-tax Act, 1961 (“the Act”). Consequently, the amount received in excess of ₹5,00,000/-was offered to tax. The returns of income of the assessee was processed by the Department under section 143(1) of the Act accepting the returned income without raising any demand.
4. Subsequently, the assessee came to know that the ex-gratia compensation received under BSNL VRS-2019 was fully exempt under section 10(10B) of the Act. Accordingly, she preferred appeals before the Learned Addl/JCIT(A) against the intimations issued under section 143(1) of the Act. However, there was a substantial delay 1404 days in filing the appeal before the Learned Addl/JCIT(A). However, the Learned Addl/JCIT(A) declined to condone the delay and dismissed the appeal of the assessee in limine.
5. Aggrieved by the order of the Learned Addl/JCIT(A), the assessee is in appeal before this Tribunal. With regard to the delay in filing of the appeal before the Learned Addl/JCIT(A), the Learned Authorized Representative (“Ld. AR”) submitted that under identical facts and circumstances, this Tribunal, in a batch of 14 appeals in the case of Nizamuddin Gooty & others Vs. Addl/JCIT in ITA No.903, 904, 907 to 914, 921 to 924 /Hyd/2026 for A.Ys. 2020-21 & 2021-22, has condoned similar delays in filing the appeals before the Learned Addl/JCIT(A). The Ld. AR invited our attention to para nos. 10 and 11 of the said order wherein the Tribunal, relying upon the decisions of the Bangalore Bench of the Tribunal in the cases of Basappa Balarama and Murthy Rangappa vs. ITO in ITA Nos.1342 & 1427/Bang/2026 dated 29.05.2026, condoned delays ranging from 1,114 days to 1,826 days. The Ld. AR further placed reliance upon the judgment of the Hon’ble Telangana High Court in the case of Sri Vissamsetty Ramakrishna Vs. PCIT & Others in Writ Petition No.19498 of 2026 dated 15.07.2026, wherein under identical circumstances the Revenue had rejected the assessee’s application for condonation filed under section 119(2)(b) of the Act. The Hon’ble High Court, however, set aside the said order and held that the Revenue ought to adopt a pragmatic and liberal approach while considering applications for condonation of delay where genuine hardship is established. Accordingly, the Ld. AR prayed that the delay in filing the appeal before the Learned Addl/JCIT(A) be condoned.
6. On merits, the Ld. AR submitted that under identical facts this Tribunal, in the aforesaid batch of 14 appeals in the case of Nizamuddin Gooty & others Vs. Addl/JCIT (supra), has held that the compensation received by the employees of BSNL under VRS-2019 is eligible for exemption under section 10(10B) of the Act and directed the Learned Assessing Officer (“Ld. AO”) to grant the exemption after necessary verification. It was, therefore, prayed that similar relief be granted in the present appeal.
7. Per contra, the Learned Departmental Representative (“Ld. DR”) supported the orders of the lower authorities. Without prejudice thereto, the Ld. DR submitted that even if the Tribunal comes to the conclusion that the compensation received under BSNL VRS-2019 is eligible for exemption under section 10(10B) of the Act, it still requires verification whether each individual assessee satisfies the conditions prescribed therein, particularly whether the concerned employee is a workman as contemplated under section 10(10B) of the Act. Accordingly, it was prayed that appropriate directions may be issued to the Ld. AO to verify the eligibility of the assessee before granting the exemption.
8. We have heard the rival submissions and perused the material available on record including the case laws relied upon. Insofar as the issue regarding condonation of delay before the Learned Addl/JCIT(A) is concerned, we find that an identical issue has already been considered by this Tribunal in a batch of 14 appeals in the case of Nizamuddin Gooty & others Vs. Addl/JCIT (supra), wherein at para nos. 10 and 11 of the said order, the Tribunal has held as under:
10. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered a plethora of judicial precedents referred to by learned counsel for the assessees on this issue. Insofar as dismissal of the appeals filed by the assessees by the learned Addl/JCIT for the delay in filing the appeals, we find that, the very same issue has been considered by the Coordinate Bench of ITAT, Bengaluru in the case of Basappa Balarama and Murthy Rangappa (supra), and in para 15, the Tribunal has held as under:
“15. However, with respect to condonation of delay, the Id. AR submitted that the Id. CIT(A) should have condoned the delay as in the case of 72 cases before the Coordinate Benches across the country in the case of BSNL employees on identical facts and circumstances, delay has been condoned by the Id. CIT(A) itself ranging from 900 to 2000 days. The assessee has produced the list of 72 cases where the delay is condoned by the Id. CIT(A). Further in case of 144 appeals, the Coordinate Benches have condoned the delay in the case of BSNL employees on identical facts and circumstances. Thus on the parity itself, the appeal of the assessee should have been admitted by the Id. CIT(A). Accordingly, I reverse the order of the Id. CIT(A) in not condoning the delay.”
11. From the findings given by the Coordinate Bench of ITAT, Bengaluru, we find that, in an identical case of BSNL employees, the delay has been condoned by the learned Addl/JCIT himself in a number of cases, even though the delay was ranging between 900 days to 2000 days. The Tribunal further noted that, in more than 144 cases, the Coordinate Benches of the Tribunals have condoned the delay in the case of BSNL employees on identical facts and circumstances. Since the issue of condonation of delay in the case of BSNL employees has already been considered by various Benches of the Tribunal after examining the reasons given by them in the petitions filed for explaining the delay, in our considered view, by respectfully following the decision of the ITAT, Bengaluru Bench in the case of Basappa Balarama and Murthy Rangappa (supra), the delay in filing the present appeals before the learned Addl/JCIT ranging from 1,114 days to 1,826 days deserves to be condoned. Thus, we condone the delay in filing the appeals before the learned Addl/JCIT in all these cases.
9. On perusal of the above, we find that this Tribunal relying upon the decisions of the Bangalore Bench of the Tribunal in the cases of Basappa Balarama and Murthy Rangappa vs. ITO (supra) has condoned the delays ranging from 1,114 days to 1,826 days in filing the appeals before the Learned Addl/JCIT(A) . We have also carefully gone through the judgment of the Hon’ble Telangana High Court in the case of Sri Vissamsetty Ramakrishna Vs. PCIT & Others (supra), wherein at para nos.6 to 9 of the order the Hon’ble High Court has held as under:
6. When we look into the averments made in respect of identical claims being allowed by the Benches of Income Tax Appellate Tribunal at Chandigarh, Ahmedabad, Pune, Mumbai, Indore and Bangalore, in identically placed BSNL retirees, this Court is of the considered view that when similar fact was brought to the notice of the respondent- Department, the respondents ought to have appreciated the bona fides of the petitioner and the application filed by the petitioner under Section 119(2)(b) of the Act seeking condonation of delay to file revised ITRs for the Assessment Years 2020-21 and 2021-22, ought to have been considered by the respondent-Department with a more pragmatic and liberal approach, by appreciating the genuine hardship that the petitioner had been put to or would be put to, in case if the application seeking for condo-nation is not allowed.
7. A plain reading of the impugned order does not disclose whether respondent No.1 had considered and appreciated the orders passed by Benches of Income Tax Appellate Tribunal at Chandigarh, Ahmedabad, Pune, Mumbai, Indore and Bangalore, in identically placed BSNL retirees, and also by other Commissioner of Income Tax (Appeals) in its proper perspective, more particularly, when those orders have not been chal-lenged any further and they have attained finality.
8. To make things worse for the respondent-Department, learned counsel for the petitioner has produced before the Court another order passed by the Income Tax Appellate Tribunal, Hyderabad ‘SMC’ Bench, at Hyderabad, dated 03.07.2026, wherein in a batch of appeals the lead matter being I.T.A.Nos.903 and 904/HYD/2026, wherein similar view had been reiterated by the Bench. In the said judgment, it appears that similar view has also been followed earlier by the Income Tax Appellate Tribunal, Chennai Bench in the case of Shri Sekar Gnanaprakasam vs. DCIT1and also by the Income Tax Appellate Tribunal, Bengaluru Bench in the case of Basappa Balarama and Murthy Rangappa vs. Income Tax Officer, Ward 12, wherein the Coordinate Benches across the country have granted relief and condoned the delay.
9. For all the aforesaid said reasons and also taking into consideration the consistent view taken by various Benches of the Tribunal across the country, we are inclined to allow the instant writ petition. The impugned order passed by respondent No.1 under Section 119(2)(b) of the Income Tax Act, 1961 bearing DIN and Letter No.ITBA/COM/F/17/2026-27/1089643736(1), dated 12.06.2026, for the Assessment Years 2020-21 and 2021-22, stands quashed and set aside. The matter stands remitted to respondent No.1. The petitioner herein is permitted to file / submit revised Income Tax returns. Thereafter, the respondent No.1 is directed to consider the case of petitioner on merits.
10. On perusal of the above, we find that under substantially identical facts the Hon’ble High Court has held that the Revenue ought to have considered the condonation petition with a pragmatic and liberal approach, appreciating the genuine hardship suffered by the assessee if the delay were not condoned. Accordingly, the Hon’ble High Court condoned the delay. Respectfully following the aforesaid judgment of the Hon’ble Telangana High Court as well as the decision of this Tribunal, we condone the delay in filing the appeal before the Learned Addl/JCIT(A).
11. Coming to the merits of the issue, we find that the identical controversy has already been adjudicated by this Tribunal in the aforesaid batch of 14 appeals in the case of Nizamuddin Gooty & others Vs. Addl/JCIT (supra), wherein at para nos. 12 to 15 of the said order, the Tribunal has held as under:
12. Having said so, let us come back to the issue on hand. Admittedly, the assessees in the present bunch of appeals are employees of BSNL and opted for the Voluntary Retirement Scheme – 2019 and received compensation in two financial years relevant to the A.Ys. 2020-21 and 2021-22. It is also an admitted fact that the assessees in the present cases had filed their returns of income for A.Y. 2020-21 and offered the compensation received from BSNL to tax after claiming exemption of Rs.5,00,000/- u/s 10(10C) of the Act and the same has been accepted by the A.O. in the order passed u/s 143(1) of the Act. However, the assessees in the present cases have made a fresh claim of exemption towards 100% compensation received from BSNL under Voluntary Retirement Scheme – 2019, u/s 10(10B) of the Act, for the first time before the learned Addl/JCIT and the claims made by the assessees were rejected by the learned Addl/JCIT on technical grounds of not making the claim by filing revised returns in terms of the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. (supra). In other words, in all these cases, the claims made by the assessees have been rejected without examining the merits of the claims in light of the provisions of section 10(10B) of the Income-tax Act, 1961.
13. The learned counsel for the assessees has cited a plethora of judicial precedents, including the decisions of various Benches of the Tribunals and we find that, in a number of cases, the Coordinate Benches of the Tribunal across the country have taken a consistent view and held that, compensation received by the employees of BSNL under the Voluntary Retirement Scheme – 2019 is exempt u/s 10(10B) of the Act, and further directed the A.O. to allow exemption in respect of 100% of the compensation received from BSNL u/s 10(10B) of the Act, by accepting the revised statement of total income filed by the assessees and also directed the A.O. to determine the tax payable/refundable as per law.
14. We further note that, the Coordinate Bench of the ITAT, Chennai Bench in the case of Shri Sekar Gnanaprakasam Vs. DCIT in ITA Nos.1608 & 1609/CHNY/2026, dated 21.05.2026, under an identical set of facts, held as under:
“11. We have heard the rival submissions and perused the material available on record, including the written submissions filed by the assessee and the judicial precedents relied upon. The short issue involved in the present appeals is whether the ex-gratia compensation received by the assessee under the BSNL VRS-2019 scheme is eligible for exemption u/s.10(10B) of the Act. From the materials placed before us, it is evident that the BSNL VRS-2019 scheme was formulated pursuant to the revival package approved by the Government of India and the Union Cabinet on 23.10.2019. It is further borne out from the records that the compensation payable under the scheme was funded through Government budgetary support. During the course of hearing, the assessee present submitted that though the nomenclature is mentioned as VRS, it is in effect a retrenchment scheme, since BSNL could not pay salary to employees just before rolling out the scheme. Therefore, the scheme partakes the character of a Government-approved retrenchment compensation scheme and cannot be treated as an ordinary voluntary retirement scheme simpliciter.
12. We further find that identical issue had come up for consideration before the Chandigarh Bench of the Tribunal in the case of Harish Kumar vs. ITO, wherein the Tribunal held that the ex-gratia compensation received under BSNL VRS-2019 is eligible for exemption u/s.10(10B) of the Act. Similar view has also been consistently taken by various appellate authorities across the country in the cases relied upon by the assessee. The Revenue has not brought on record any contrary judicial precedent to take a different view in the matter.
13. Considering the facts and circumstances of the case and respectfully following the judicial precedents cited supra, we hold that the ex-gratia compensation received by the assessee under the BSNL VRS-2019 scheme is eligible for exemption u/s.10(10B) of the Act. Consequently, the additions made by taxing the ex-gratia compensation are directed to be deleted. The AO is also directed to grant consequential relief, in accordance with law, in respect of exemption claimed u/s.10(10AA) of the Act, if otherwise found eligible.”
15. In this view of the matter and considering the facts and circumstances of the case and also by respectfully following the decisions of the Coordinate Benches of the Tribunals referred to hereinabove, we are of the considered view that, compensation received by the assessees in the present cases from BSNL under the Voluntary Retirement Scheme – 2019, is exempt u/s 10(10B) of the Act. Therefore, we direct the A.O. to verify the claim of the assessees in light of our findings given hereinabove and allow exemption claimed by the assessees for both the assessment years u/s 10(10B) of the Act, and determine the tax payable/refundable, if any, to the assessees as per law.
12. On perusal of the above, we find that this Tribunal has held that the compensation received by the employees of BSNL under the VRS-2019 is eligible for exemption under section 10(10B) of the Act and directed the Ld. AO to verify the claim and grant the exemption in accordance with law. Respectfully following the aforesaid decision of the Tribunal, we hold that the compensation received by the assessee from BSNL under VRS-2019 is eligible for exemption under section 10(10B) of the Act. At the same time, we find merit in the submission of the Ld. DR that the eligibility of the assessee is required to be verified with reference to the statutory requirement of section 10(10B) of the Act, particularly whether the assessee falls within the category of a workman contemplated under the said provision. Accordingly, we restore the matter to the file of the Ld. AO with a direction to verify whether the assessee satisfy the conditions prescribed under section 10(10B) of the Act, including whether she qualify as workman, and thereafter grant the exemption in accordance with law after providing reasonable opportunity of being heard to the assessee.
13. In the result, the appeal of the assessee is allowed for statistical purposes in the terms of our above observation.
Order pronounced in the Open Court on 7th August, 2026.
