BSNL VRS Compensation Exempt u/s 10(10B) as Retrenchment Compensation: ITAT Delhi

Seetharamulu Aitipamula Vs ITO (ITAT Delhi)

BSNL VRS Compensation: Delhi ITAT Allows Section 10(10B) Claim for Two Years

Summary: The Delhi Bench of the Income Tax Appellate Tribunal allowed twin appeals of a retired Bharat Sanchar Nigam Limited (BSNL) employee for AYs 2020-21 and 2021-22 and accepted his claim that ex-gratia compensation received under the BSNL Voluntary Retirement Scheme, 2019 was exempt under Section 10(10B) of the Income-tax Act. The lower authorities had rejected exemption in respect of ex-gratia compensation of Rs.13,18,139 and Rs.24,75,190 for the two assessment years respectively. The assessee relied upon the Pune ITAT decision in Prathibha Jagadish v. ITO concerning the same BSNL VRS-2019 scheme.

The Pune Bench had treated compensation under BSNL VRS-2019 as retrenchment compensation falling within Section 10(10B), rather than merely the VRS exemption governed by Section 10(10C). Its reasoning drew support from a series of decisions concerning BSNL employees, including Jayeshkumar Tulsidas Sutaria v. ITO and Harish Kumar v. ITO. The extracted order also considered the Revenue’s contention that BSNL VRS-2019 formed part of a revival package rather than closure of the undertaking and that voluntary retirement was expressly excluded from the statutory definition of retrenchment.

The precedent followed by the Delhi ITAT further held that substantial justice should prevail over procedural delay, relying upon Vijay Vishin Meghani v. DCIT [2017] 398 ITR 250 (Bombay). It ultimately concluded that compensation received under BSNL VRS-2019 was in the nature of retrenchment compensation covered by Section 10(10B), constituted a capital receipt exempt from tax, and directed the assessees to submit revised computations to the jurisdictional Assessing Officers for computation of consequential refund after verification.