Renuka Narasimha Prabhu Vs ITO (ITAT Bangalore)
The appeals concern employees of the Department of Telecommunications and BSNL who received compensation under the BSNL VRS Scheme, 2019. In the case of Renuka Narasimha Prabhu, the assessee received ex gratia compensation of Rs.13,49,010 and had initially claimed exemption of Rs.5 lakhs. The CIT(A) dismissed the appeal as unadmitted after noting a delay of 1,048 days. The assessee subsequently claimed full exemption under Section 10(10B) of the Income-tax Act, 1961 and exemption for accumulated leave encashment of Rs.11,13,585, against which Rs.3 lakhs had been allowed.
In the connected appeal of Jayakumar, the assessee received Rs.10,82,505 as compensation under the BSNL VRS Scheme, 2019. The assessee had originally claimed Rs.5 lakhs exemption under Section 10(10C). The CIT(A) accepted that the scheme was actually a retrenchment scheme but rejected Section 10(10B) exemption on the ground that the assessee was not a workman. The Tribunal considered the decision in Shraddha Pralhad Arote & Ors. v. ITO and other decisions relied upon by the assessee.
The Tribunal noted that Jayakumar had been retrenched under the BSNL VRS Scheme, 2019, which formed part of the revival and restructuring plan for BSNL approved by the Union Cabinet on 23.10.2019. The scheme was operated through the Department of Telecommunications Office Memorandum and funded by the Central Government.
After considering the judicial precedents cited, including decisions of ITAT Ahmedabad, Indore and Mumbai, the Tribunal held that the assessee was eligible for full exemption under Section 10(10B) for compensation received under the BSNL VRS Scheme, 2019. The Assessing Officer was directed to grant the full exemption.
For Renuka Narasimha Prabhu, the Tribunal also considered the delayed appeal. Referring to cases where delays ranging from 900 to 2,000 days had been condoned for similarly placed BSNL employees, the Tribunal reversed the CIT(A)’s order for not condoning the delay.
The Tribunal further considered the claim of Rs.11,13,585 towards accumulated leave encashment. It referred to the Kerala High Court decision concerning BSNL VRS retirees and decisions of the Jaipur and Indore Benches regarding the enhanced Rs.25 lakh exemption limit under Section 10(10AA).
The Tribunal held that Renuka Narasimha Prabhu should be granted exemption of Rs.11,13,585 under Section 10(10AA). The Assessing Officer was directed to grant exemption of Rs.13,49,010 towards retrenchment compensation and Rs.11,13,585 towards accumulated leave encashment.
The same reasoning was applied to the connected appeals of Dattatreya Krishnaji Patel, Siddaiah Jayanth, Ramu Madhu Kanthanayaka, Basappa Balarama and Murthy Rangappa. The Tribunal directed exemption of the respective BSNL VRS retrenchment compensation and, where claimed, accumulated leave encashment.
The Tribunal ultimately held that all the assessee’s appeals were allowed. The order was pronounced in the open court on 29th May, 2026.
Cases Discussed
- Sanchar Nigam Pensioners Welfare Association v. UOI (Kerala High Court), W.P. No. 16360/2023 dated 6.2.2026.
- Shraddha Pralhad Arote & Ors. v. ITO (ITAT Pune), ITA No.262 & 261/Pun/2026 dated 24.3.2026.
- Harish Kumar (ITAT Chandigarh), ITA No.42/Chd/2025.
- Patna High Court Civil Jurisdiction Appeal No.12326/2017, dated 26.2.2024.
- ITAT Jaipur, ITA No.1139/JPR/2025, dated 7.10.2025.
- ITAT Indore, ITA No.233/IND/2025, dated 27.2.2026.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
ITA No.1005/BANG/2026 is filed by the Assessee, JAYAKUMAR, against the order of ld. CIT(Appeals) dated 16-Jan-2026 for the Assessment Year 2020-21 wherein the full exemption of Rs.10,82,505 u/s. 10(10B) of the Income Tax Act, 1961 [the Act] was not allowed to the assessee in respect of retrenchment compensation received as per the BSNL VRS Scheme, 2019, but restricted to exemption of only Rs.5 lakhs.
2. The Assessee is concerned about grant of full exemption of Rs.10,82,505 being compensation received from BSNL.
3. Briefly stated the facts show that the appellant was earlier employed with Department of Telecommunication [DOT] and thereafter with BSNL, was out of service because of the BSNL VRS Scheme, 2019. The assessee received Rs.10,82,505 as part of the compensation. At the time of filing of return of income, the assessee claimed exemption u/s. 10(10C) of Rs.5 lakhs as per Form 16 issued by the employer. The assessee having little knowledge, therefore did not agitate the same. But subsequently a decision of Chandigarh Bench in the case of Harish Kumar and several orders of the CIT(Appeals) in the case similarly placed employees of BSNL came to the knowledge of the assessee and also communicated through the employer held that it is a retrenchment compensation and therefore assessee is entitled to exemption u/s. 10(10B) of the Act of the complete amount.
4. This was denied by the ld. AO while processing the return filed by the assessee u/s. 143(1) of the Act. The assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) in fact agreed with the argument of the assessee that BSNL VRS Scheme, 2019 is actually a retrenchment as per the decision of the Coordinate Bench in the case of Harish Kumar in ITA No.42/Chd/2025, however, as the assessee is not a workman, it was held that assessee is not eligible for exemption u/s. 10(10B) of the Act. Thus, the claim of the assessee was rejected. Aggrieved with the same, the assessee is in appeal before us.
5. The ld. AR, Shri Shambhu Sharma, CA, has submitted a paperbook containing 36 pages. He also submitted a case law paperbook containing 10 judicial precedents. His main reliance was of the decision of the Pune Bench in ITA No.262 & 261/Pun/2026 dated 24.3.2026 in the case of Shraddha Pralhad Arote & Ors. v. ITO. He submits that para 16 of that decision wherein specifically the argument of the ld. DR with respect to whether the assessee is a workman or not, has been considered and rejected. Thus, the issue squarely covers in favour of the assessee.
6. The ld. DR, Shri Ganesh R Ghale, vehemently supported the order of the ld. lower authorities.
7. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities as well as various judicial precedents cited before us. The assessee is a retired employee who initially served with the DOT and subsequently with BSNL. During the year 2020-21 the assessee was retrenched from the services in terms of BSNL VRS Scheme, 2019 which is integral part of reviving and restructuring plan for BSNL approved by the Union Cabinet on 23.10.2019. The Scheme was operated through DOT Office Memorandum and was funded by the Central Govt. According to that Scheme, the assessee received a compensation of Rs.10,82,505. The issue involved is whether the assessee is entitled for exemption u/s. 10(10B) of the Act and thus the whole of the compensation received by the assessee can be claimed as exempt under that section. The Coordinate Benches of ITAT Ahmedabad, Indore & Mumbai have categorially held this issue in favour of the assessee. Further the issue whether assessee is a workman or not, has also been dealt with by the Coordinate Bench in the case of Shraddha Pralhad Arote (supra). In view of the above facts, the assessee has relied upon 144 decisions of various Coordinate Benches dealing with this issue. In view of the above facts, we hold that assessee is eligible for full exemption u/s. 10(10B) of the Act of the compensation received under the BSNL VRS Scheme, 2019 Scheme. The ld. AO is directed to grant full exemption to the assessee u/s. 10(10B) of the Act.
8. Accordingly, the orders of the ld. lower authorities are reversed and the appeal of the assessee is allowed.
9. ITA No.992/BANG/2026 is filed by the assessee, RENUKA NARASIMHA PRABHU, against the order of the ld. CIT(Appeals)-12, Mumbai dated 14.1.2026 for AY 2020-21 wherein the assessee also an employee worked with DOT and thereafter transferred to BSNL and retrenched from services in view of the BSNL VRS Scheme, 2019, got ex gratia compensation of Rs.13,49,010. She initially claimed exemption of only Rs.5 lakhs while filing return of income and subsequently claimed full exemption. The ld. CIT(A) noted that the order u/s. 143(1) of the Act was passed on 28.8.2021 and appeal is filed on 23.12.2025, thus there is a delay of 1048 days which was not explained by the assessee showing sufficient cause and hence the appeal of the assessee was dismissed as unadmitted.
10. Against this, the assessee is in appeal before us. The only claim of the assessee is that assessee should be allowed full exemption of Rs.13,49,010 u/s. 10(10B) of the Act and further relief leave encashment exemption received by the assessee of Rs.11,13,585 should also be allowed to the assessee in completeness, whereas the assessee was allowed only exemption of Rs.3 lakhs. The Hon’ble Kerala High Court in the case of Sanchar Nigam Pensioners Welfare Association v. UOI in W.P. No. 16360/2023 dated 6.2.2026 has already confirmed that VRS retirees from BSNL are entitled to leave encashment tax exemption as they are treated as Central Govt. employees. Thus the assessee must be granted exemption of leave encashment also to the full extent.
11. The ld. AR submitted that a paperbook containing 46 pages and also a judicial paperbook containing 249 pages covering 14 judicial precedents. We have heard the ld. AR.
12. The ld. DR vehemently supported the order of the ld. CIT(A). It was further his claim that assessee being a private employee, could not have been granted benefit of a Central Govt. employee as BSNL is a public sector undertaking, but not Central Govt. Even otherwise, he submitted that the decision of the Patna High Court Civil Jurisdiction Appeal No.12326/2017 dated 26.2.2024 has clearly held that leave encashment limit raised to Rs.25 lakhs is only effective from 1.4.2023, whereas the case of the assessee is pertaining to AY 2020-21.
13. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. With respect to the issue of exemption claimed by the assessee u/s. 10(10B) of the Act in respect of compensation received on retrenchment of Rs.13,49,010 received from BSNL VRS Scheme, 2019, for reasons given by me in ITA No.1005/BANG/2026 in the case of Mr. Jayakumar, I direct the ld. AO to grant the assessee complete exemption of Rs.13,49,010.
14. With respect to the claim of the assessee in respect of accumulated leave encashment of Rs.11,13,585 which is accepted by the revenue authorities only upto Rs.3 lakhs, assessee has relied upon several decisions.
15. However, with respect to condonation of delay, the ld. AR submitted that the ld. 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 ld. 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 ld. 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 ld. CIT(A). Accordingly, I reverse the order of the ld. CIT(A) in not condoning the delay.
16. With respect to leave encashment, the Hon’ble Kerala High Court has categorically held that all retirees from BSNL in terms of BSNL VRS Scheme, 2019 are entitled to leave encashment tax emption as they are deemed to be Central Govt. employees. The ld. AR has further relied upon the decision of the Coordinate Bench of Jaipur & Indore Benches wherein in ITA No.1139/JPR/2025 dated 7.10.2025 and in ITA No.233/IND/2025 dated 27.2.2026 the enhanced limit of exemption of Rs.25 lakhs introduced by the CBDT Notification dated 31/2023 u/s. 10(10AA) which is beneficial should be applied at the time of appellate adjudication. The case of the assessee before the Indore Bench was for AY 2020-21. We are also confronted with the same assessment year.
17. Decision relied by the ld. DR of the Patna high court deals with parity between employee of State bank of India and the Government employees for the purposes of monetary limit and number of days. It is not on the issue of whether the employees of BSNL can be considered as central Government employees when they have come from department of telecommunication.
18. Therefore, respectfully following the decision of the Coordinate Bench, we hold that assessee should also be granted the benefit of exemption of Rs.11,13,585 in respect of accumulated leave encashment u/s. 10(10AA) of the Act.
19. Accordingly the ld. AO is directed to grant exemption of Rs.13,49,010 u/s. 10(10) in respect of compensation received on retrenchment and further of Rs.11,13,585 in respect of accumulated leave encashment received by the assessee. Thus, the appeal of the assessee is allowed.
20. ITA No.1248/BANG/2026 for AY 2020-21 is filed by DATTATREYA KRISHNAJI PATEL wherein the assessee has claimed exemption of compensation received on retrenchment under BSNL VRS Scheme, 2019 of Rs.17,64,702. In this case also, the ld. CIT(A) did not condone the delay. Therefore for the reasons given by me that on the principle of parity, the delay has been condoned by several CIT(A) and Coordinate Benches, the ld. CIT(A) should have condoned the delay in the case of similarly placed employees of BSNL. Further with respect to compensation on retrenchment of Rs.17,64,702 as decided in the appeal ITA No.1005/BANG/2026 in the case of Mr. Jayakumar, for similar reasons, I direct the ld. AO to grant exemption of retrenchment compensation of Rs.17,64,702. Thus, the appeal of the assessee is allowed and the ld. AO is directed to accordingly grant exemption.
21. ITA No.1285/BANG/2026 for AY 2020-21 is filed by the assessee, SIDDAIAH JAYANTH, claiming exemption received on retrenchment of Rs.14,92,214 received under BSNL VRS Scheme, 2019 and further claimed exemption of Rs.4,37,900 in respect of accumulated leave encashment. I have allowed in ITA No.992/BANG/2026 for AY 2020-21 on both these issues on identical facts and circumstances and therefore for the same reasoning, I direct the ld. AO to allow exemption of compensation received on retrenchment of Rs.14,92,214 and also exemption in respect of accumulated leave encashment of Rs.4,37,900. Accordingly, this appeal is allowed.
22. ITA No.1320/BANG/2026 for AY 2020-21 is filed by RAMU MADHU KANTHANAYAKA (the assessee) claiming exemption of compensation received on retrenchment of Rs.11,49,073 and exemption of accumulated leave encashment of Rs.4,66,093.
23. Both these issues are covered by my decision in ITA No.992/BANG/2026 in the case of Renuka Narasimha Prabhu for AY 2020-21, therefore for the reasons given therein, I direct the ld. AO to allow exemption of retrenchment compensation of Rs.11,49,073 and exemption of accumulated leave encashment of Rs.4,69,093 in the case of this assessee also. The appeal of the assessee is allowed.
24. ITA No.1342/BANG/2026 for AY 2020-21 is filed by the assessee, BASAPPA BALARAMA, wherein the assessee has claimed compensation received on retrenchment of Rs.14,96,509 received from BSNL VRS Scheme, 2019. For the reasons given in ITA No.992/BANG/2026 and ITA No.1005/BANG/2026 for AY 2020-21, I direct the ld. AO to grant the exemption of compensation received on retrenchment amounting to Rs.14,96,509. Accordingly the appeal of the assessee is allowed.
25. ITA No.1427/BANG/2026 for AY 2020-21 is filed by MURTHY RANGAPPA wherein the claim of the assessee is the full exemption of Rs.11,49,073 u/s. 10(10B) of the Act as the assessee has received compensation on retrenchment under BSNL VRS Scheme, 2019. The assessee’s second claim is that he has received Rs.4,69,093 as leave encashment for which the whole of the amount should be the exempt income. I have already dealt with both the issues in ITA No.992/BANG/2026. Accordingly the ld. AO is directed to allow the exemption of the full sums received by the assessee in the instant case with respect to retrenchment compensation as well as the leave encashment. The appeal of the assessee is allowed.
26. In the result, all the assessee’s appeals are ALLOWED.
Order pronounced in the open court on 29th May, 2026.
