Ashokkumar Chandulal Patel Vs ITO (ITAT Ahmedabad)
BSNL VRS Compensation Fully Exempt: ITAT Allows Claim Even Though Omitted from Original Returns
An Exemption Overlooked While Filing the Returns
The Ahmedabad Tribunal allowed full exemption under Section 10(10B) for compensation received under BSNL Voluntary Retirement Scheme, 2019, even though the assessee had not claimed that exemption in his original returns. The Tribunal directed the Assessing Officer to allow the claim for both assessment years and allowed both appeals. This was substantive relief, rather than a remand for reconsideration.
The assessee, a former employee of Bharat Sanchar Nigam Limited, opted for BSNL VRS-2019. He received the first instalment of ₹8,29,920 in March 2020, relevant to Assessment Year 2020-21. While filing his return, he claimed exemption of ₹5 lakh under Section 10(10C) and offered the remaining compensation to tax.
He received a further ₹18,21,583 during Financial Year 2020-21, relevant to Assessment Year 2021-22. This amount was offered entirely to tax without claiming exemption under Section 10(10B). The return was processed under Section 143(1).
Thus, compensation aggregating to ₹26,51,503 was received across the two years, but the original returns reflected only the limited exemption claimed in the first year.
Subsequent Tribunal Decisions Prompted the Claim
The assessee subsequently became aware of Tribunal decisions holding that compensation received under BSNL VRS-2019 qualified for full exemption under Section 10(10B). He approached the first appellate authority seeking exemption for the entire compensation received in both years.
The claim therefore involved a change from the treatment adopted in the original returns. The assessee had initially proceeded under Section 10(10C), whereas the appellate claim sought relief under Section 10(10B).
Before the Tribunal, the assessee relied on decisions of several Benches, including Ahmedabad decisions in Jayesh Tulsidas Sutaria v. ITO, Suman Nandlal Raval v. ITO, and Jayendra Bipinchandra Patel v. ITO. He also referred to the Chandigarh Tribunal’s decision in Harish Kumar v. ITO, concerning compensation under the same scheme.
Why the First Appellate Authority Rejected Relief
The first appellate authority rejected the claim on the reasoning that a voluntary retirement scheme is contractual in nature and distinct from retrenchment under labour laws.
Although the assessee cited favourable Tribunal decisions, the appellate authority considered them inconsistent with the judgments in Chandra Ranganathan v. CIT and CIT v. Koodathil Kallyatan Ambujakshan.
The dispute consequently required the Tribunal to consider whether those higher-court decisions actually addressed the provision under which the assessee sought exemption.
Tribunal Followed the Consistent View on BSNL VRS-2019
The Tribunal found that the cited coordinate Bench decisions involved the same material issue: the exemption had not been claimed in the original return.
It noted that different Benches had consistently recognised that employees had offered the compensation to tax because of lack of awareness of the legal provision. Those decisions had allowed exemption under Section 10(10B) for the entire compensation received under BSNL VRS-2019.
The Tribunal specifically reproduced the relevant findings from Jayesh Tulsidas Sutaria, where the assessee had inadvertently offered the compensation to tax and subsequently claimed exemption before the first appellate authority. That decision allowed the appeals and recognised entitlement to refund of TDS on the exempt income.
Following this consistent approach, the Tribunal accepted the present assessee’s claim despite its omission from the original returns.
Section 10(10C) Judgments Did Not Decide Section 10(10B)
The Tribunal examined the authorities relied upon to deny relief and identified a significant distinction.
It corrected the citation of Chandra Ranganathan v. CIT to [2010] 326 ITR 49 (SC) and identified the Bombay High Court decision as CIT v. Koodathil Kallyatan Ambujakshan [2009] 309 ITR 113 (Bom.).
Those cases concerned compensation under the Reserve Bank of India’s Optional Early Retirement Scheme, 2003. The issue was eligibility for exemption under Section 10(10C) in the context of Rule 2BA. The Bombay High Court upheld the exemption, and the Supreme Court affirmed that judgment.
The Tribunal expressly observed that neither court had occasion to deal with Section 10(10B). Accordingly, those decisions did not establish the supposed conflict with the Tribunal precedents governing the assessee’s claim.
Entire Compensation Exempted for Both Years
Respectfully following the coordinate Bench decisions, the Tribunal directed the Assessing Officer to allow exemption for the entire compensation received under BSNL VRS-2019 in the previous years relevant to Assessment Years 2020-21 and 2021-22.
The findings in the lead appeal were applied to the second appeal because the facts and issues were identical. Both appeals were allowed.
Author’s Comments
The decision reinforces the importance of examining the precise statutory provision and issue decided by a precedent. A judgment concerning Section 10(10C) and Rule 2BA cannot, merely because it concerns retirement compensation, be treated as deciding entitlement under Section 10(10B).
For practitioners handling BSNL VRS-2019 cases, the order also provides direct support where compensation was offered to tax through lack of awareness and exemption was subsequently claimed in appeal.
However, its conclusion concerns the specific BSNL VRS-2019 scheme and the consistent Tribunal decisions addressing it. It should not be extended automatically to every voluntary retirement payment. The practical lesson is to identify the applicable scheme, examine the correct exemption provision, and support the appellate claim with decisions dealing with the same facts.
Cases Discussed
- Jayeshkumar Tulsidas Sutaria Vs ITO (ITAT Ahmedabad); ITA Nos. 2387 & 2388/Ahd/2025; order dated 17.02.2026 — followed regarding exemption under Section 10(10B) where the claim had not been made in the original return.
- Suman Nandlal Raval Vs ITO (ITAT Ahmedabad); ITA Nos. 2389 & 2390/Ahd/2025; order dated 18.02.2026 — cited as an Ahmedabad Bench decision concerning BSNL VRS-2019 compensation and Section 10(10B).
- Jayendra Bipinchandra Patel Vs ITO (ITAT Ahmedabad); ITA Nos. 189-190/Ahd/2025 — cited as a coordinate Bench decision on the same issue.
- Harish Kumar Vs ITO (ITAT Chandigarh); ITA No. 42/CHD/2025; order dated 30.05.2025 — relied upon concerning exemption of BSNL VRS-2019 compensation under Section 10(10B).
- Chandra Ranganathan Vs CIT (Supreme Court); [2010] 326 ITR 49 (SC) — distinguished because the decision concerned Section 10(10C) and not Section 10(10B).
- CIT Vs Koodathil Kallyatan Ambujakshan (Bombay High Court); [2009] 309 ITR 113 (Bom.) — distinguished because the case concerned exemption under Section 10(10C) in relation to the RBI Optional Early Retirement Scheme, 2003.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeals relate to the same assessee and are against separate orders passed by the Ld. Addl/Joint Commissioner of Income Tax (Appeals)-9, Mumbai, (hereinafter referred to as “CIT(A)”), both dated 21.02.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) relating to Assessment Years (A.Ys.) 2020-21 & 2021-22 respectively. Since common issue is involved in both these appeals for the sake of convenience the same are disposed of by this common order.
2. ITA No. 2602/Ahd/2026 is taken as the lead case. The assessee has raised the following Grounds of Appeal:
1. The Ld. CIT(A) has failed to appreciate that the appellant received compensation under the duly approved “BSNL VRS-2019” scheme, which fully satisfies the conditions prescribed under Rule 2BA and is eligible for exemption u/s 10(108). The CIT(A) ignored relevant judicial precedents, including the recent decision of the Hon’ble ITAT Chandigarh in Harish Kumar vs ITO (ITA No. 42/CHD/2025, dated 30.05.2025), wherein identical BSNI. VRS-2019 benefits were held eligible for exemption. The order is therefore contrary to law and merits reversal.
2. The Ld. CIT(A) has erred in refusing to allow fresh claim of exemption under Section 10(10B) without appreciating that the Appellants case is factually identical to Harish Kumar vs. ITO (ITA No. 42/CHD/2025) as well as various decisions hon. Ahmedabad Bench, where compensation received under the same BSNL VRS-2019 was held fully exempt under Section 10(10B).
3. Brief facts of the case are that the assessee was an employee of Bharat Sanchar Nigam Limited. During the year he opted for BSNL Voluntary Retirement Scheme-2019, (BSNL VRS-2019) and received compensation of Rs.8,29,920/- as first installment in March 2020. This was offered to tax after claiming exemption of Rs. 5,00,000/- u/s 10(10C) of the Act. The assessee, taking into account the compensation remaining after the exemption, amount filed his return. The balance amount of compensation aggregating to Rs. 18,21,583/- was received by the assessee in Financial Year 2020-21 relevant to Assessment Year 2021-22 and the assessee offered the entire amount without claiming any exemption u/s 10(10B) of the Act and this was also accepted in the assessment u/s 143(1) of the Act.
4. Subsequently, the assessee came to know about various decisions of different Benches of ITAT wherein it was held that the entire amount of compensation received under the BSNL VRS-2019 qualified be exempt u/s 10(10B) of the Act. On learning about this position of law as upheld by the ITAT, the assessee filed appeal before the Ld. CIT(A) seeking relief of the entire amount received as compensation.
5. In the appellate order of both the years, the Ld. CIT(A) held that the claim for exemption u/s 10(10B) of the Act could not be entertained because that Voluntary Retirement Schemes are contracted in nature and distinct from retrenchment in labour laws. The Ld. CIT(A) held that despite the persuasive nature of the ITAT decisions cited by the assessee, they were not binding precedents when contrary to the ratio laid down by the Hon’ble Supreme Court in Chandra Ranganathan vs. CIT [2003] 261 ITR 514 (SC) and the Bombay High Court in CIT vs. Koodathil Kallyatan Ambujakshan (citation not given).
6. Aggrieved by the appellate orders, the assessee has preferred the present two appeals in respect of Asst. Year 2020-21 and Asst. Year 2021-22.
7. Ld. Counsel appearing for the assessee has submitted that this issue is squarely covered by several decisions of the ITAT Benches at Chandigarh, Pune, Chennai, Mumbai, Bangalore and Ahmedabad. The decisions of the Ahmedabad Bench cited by the Ld. Counsel are listed below:
(i) Jayesh Tulsidas Sutaria v. ITO ITA Nos. 2387 & 2388/Ahd/2025 (ITAT Ahmedabad, order dated 18.02.2026)
(ii) Suman Nandlal Raval v. ITO ITA Nos. 2389 & 2390/Ahd/2025 (ITAT Ahmedabad, order dated 18.02.2026)
(iii) Jayendra Bipinchandra Patel v. ITO ITA No. 189-190/Ahd/2025
8. On examination of the facts of the case and the judicial precedents, we find that in all these cases, the issues involved are common, i.e., the claim has not been made in the original return.
9. The different Benches of the Tribunal have consistently taken a view that the failure to make a claim at the time of filing of return was due to lack of awareness of the legal provision and often the same lack of awareness also triggered the delay in filing of the first appeal, Co-ordinate Benches of the Tribunal in these decisions have consistently held that the assessees’ claims for relief u/s 10(10B) of the Act in respect of the entire amount of compensation received under BSNL VRS-2019 should be treated as exempt u/s 10(10B) of the Act.
10. The Co-ordinate Bench of this Tribunal in ITA Nos. 2387 & 2388/Ahd/2025 for AYs 2020-21 & 2021- 22 vide order dated 17.02.2026, has held as under:
“6. The Ld. Counsel for the assessee submitted that due to lack of awareness of the legal provisions at the time of filing the return of income, the assessee inadvertently offered the compensation received under BSNL VRS-2019 to tax. Subsequently, based on the decision of the Hon’ble ITAT Chandigarh Bench in Harish Kumar vs. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025 dated 30.05.2025), wherein compensation under the same BSNL VRS-2019 scheme was held to be exempt under section 10(10B), the assessee now seeks exemption of such compensation. We find that the assessee filed the claim before the Ld. CIT(A) and since the income of the assessee is not taxable, the assessee is eligible for the refund of the TDS.
7. In the result, both the appeals of the assessee are allowed.”
11. We have examined the cases cited by the Ld. Addl./JCIT(A), Gurugram in the impugned order. We note that the citation given for the decision of the Supreme Court in Chandra Ranganathan vs. CIT is not correct. The correct citation for this judgment is [2010] 326 ITR 49 (SC) and the citation for the judgment of the Bombay High Court is CIT vs. Koodathil Kallyatan Ambujakshan is [2009] 309 ITR 113 (Bom.). we note that in the case before the Hon’ble Bombay High Court, the compensation received under Optional Early Retirement Scheme (OERS), 2003 of the Reserve Bank of India was held by the A.O to be ineligible for exemption u/s 10(10C) of the Act, on the ground that this Scheme did not confirm to Rule 2BA of the Income Tax Rules, 1962. On these facts the Hon’ble High Court upheld the assessee’s plea and held the compensation to be eligible for exemption u/s 10(10C) of the Act. This judgment was affirmed by the Hon’ble Supreme Court in Chandra Ranganathan (supra). Neither the Bombay High Court nor the Supreme Court had an occasion to deal with section 10(10B) of the Act.
12. Therefore, respectfully following the decisions of the Co-ordinate Benches, we direct the Assessing Officer to allow the assessee’s claim for exemption of the entire amount received as compensation under the BSNL VRS-2019 in previous years relevant to A.Ys. 2020-21 and 2021-22.
13. In the result, the appeal filed by the Assessee is allowed.
ITA No. 2603/Ahd/2026
13.1 Since the facts and issues involved in above captioned appeal is identical, hence, our finding given in ITA No. 2602/Ahd/2026 will mutatis mutandis apply to this appeal. Accordingly, this appeal of the Assessee is also allowed.
14. In the combined result, both appeals filed by the Assessee are allowed.
This Order is pronounced on 28/09/2026
