Seshagiri Gadad Vs ITO (ITAT Bangalore)
Bangalore ITAT Allows Full Exemption for BSNL VRS Compensation under Section 10(10B)
The assessee, a retired BSNL employee, received ex gratia compensation of ₹8.60 lakh for AY 2020-21 and ₹18.89 lakh for AY 2021-22 under the BSNL Voluntary Retirement Scheme, 2019. In the returns, he mistakenly claimed exemption of only ₹5 lakh under section 10(10C). Subsequently, he claimed before the CIT(A) that the entire compensation was exempt as retrenchment compensation under section 10(10B). However, the CIT(A) dismissed the appeals on the ground of delay without examining the claim on merits.
The Bangalore ITAT observed that several coordinate benches, including the Bangalore, Chandigarh, Ahmedabad, Pune, Mumbai and Chennai Benches, had consistently held that compensation received under the BSNL VRS, 2019 qualifies for exemption under section 10(10B).
Following these judicial precedents, the Tribunal directed the Assessing Officer to allow exemption under section 10(10B) for the compensation received under the BSNL VRS, subject to verification of the necessary details. Accordingly, both appeals of the assessee were allowed.
List of Cases Discussed / Relied Upon
- Harish Kumar vs ITO Ward 5(5) Chandigarh — ITAT Chandigarh, ITA NO. 42/CHD/2025 dated 30 -05-2025.
- Suman Nandlal Rava; vs ITO WARD 1 Gandhinagar — ITAT Ahmedabad, ITA Nos 2389 & 2393 /Ahd/2025, order dated 18-02-2026.
- Hayeshkumar Tulsidas Sutaria vs ITO WARD 7(2)(1) Ahmadabad — ITAT Ahmedabad, ITA Nos.2387 & 2388/Ahd/2025, dated 17 -02- 2026.
- Shraddha Prahlad Arote and OTHERS vs ITO WARD 2, Ahmednagar — ITAT Pune, Nos 262 and 261/PUN/2026 dated 24 -03-2026.
- Meghmala Sudhir Pathak and OTHERSvs ITO WARD 2(1), Nashik — ITAT Pune, Nos 290 and 293/PUN/2026, dated 24 -03-2026.
- Rajendra Himmatrao Pati and OTHERSvs ITO WARD 1(4) Jalagon — ITAT Pune, Nos 302 and 303/PUN?2026, date of order 27 -03-2026.
- Bajirao Shankar Jagadale vs ITO WARD 42(2)(1), Mumbai — ITAT Mumbai, ITA 1389/Mum/2026, date of order 10 -04-2026.
- Prathibha Jagadish Unawane and OTHERS vs ITO Kolhapur etc. — ITAT Pune, ITA 1117/PUN/2026, date of order 29 -04-2026.
- Sri Sekar Gnanaprakasham v. The Deputy Commissioner of Income TAX — ITAT Chennai, ITA No. 1608&1609/CHNY/2026, order dated 21.05.2026.
- Renuka Narasimha Prabhu & Others v. ITO — ITAT Bangalore SMC Bench, ITA No. 992,1005,1284,1285,1320,1342&1427/BANG/2026, order dated 29.05.2026.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The assessee has filed the present appeals against the separate impugned orders of even date 30.03.2026, passed under section 250 of the Income Tax Act, 1961 (“ the Act”) by the learned Additional/Joint Commissioner of Income Tax (Appeals) -1, Chandigarh, [“learned Addl./Joint CIT(A)”], for the assessment years 2020-21 and 2021-22.
2. In its appeal for the assessment year 2020 -21, the assessee has raised the following grounds: –
1. The order of the learned CIT(A) confirming the order of the assessing officer (AO) is bad in law, opposed to the facts of the case, against the principles of natural justice, and deserves to be quashed.
2. The learned CIT(A) erred in not condoning the delay in filing the appeal.
3. The ex gratia sum received by the Appellant could not have been brought to tax to the extent of Rs. 3,60,743 and ought to have been entirely exempt or, in the alternative, treated as a capital receipt.
4. The Appellant craves leave to add to, alter, amend, vary and or withdraw any or all of the above grounds of appeal. All grounds are without prejudice to each other.
3. While in its appeal for the assessment year 2021-22, the assessee has raised the following grounds: –
1. The order of the learned CIT(A) confirming the order of the assessing officer (AO) is bad in law, opposed to the facts of the case, against the principles of natural justice, and deserves to be quashed.
2. The learned CIT(A) erred in not condoning the delay in filing the appeal.
3. The ex gratia sum received by the Appellant could not have been brought to tax to the extent of Rs. 18,89,235 and ought to have been entirely exempt or, in the alternative, treated as a capital receipt.
4. The Appellant craves leave to add to, alter, amend, vary and or withdraw any or all of the above grounds of appeal. All grounds are without prejudice to each other.
4. The sole issue that arises for consideration, in both appeals, pertains to the claim of exemption under section 10(10B) of the Act in respect of the compensation received on retrenchment under the BSNL Voluntary Retirement Scheme, 2019 (“BSNL VRS, 2019”).
5. The brief facts of the case are that the assessee was an employee with BSNL, which is under the administrative control of the Department of Telecommunications, Government of India. In order to revive BSNL, the Union Cabinet, in its meeting, approved the revival plan of BSNL and MTNL vide office memorandum dated 29.10.2019 issued by the Department of Telecommunications. As part of the revival package, the Government decided to reduce the workforce through the BSNL VRS, 2019, of the employees aged 50 years and above. It was further decided that on such voluntary retirement, ex gratia compensation shall be paid. Accordingly, the assessee received ex gratia compensation of Rs. 8,60,743/- for the assessment year 2020-21 and Rs. 18,89,235/- for the assessment year 2021-22 computed in accordance with the BSNL VRS, 2019. The assessee, not being properly advised, claimed exemption of Rs. 5 Lakhs under section 10(10C) of the Act. The assessee’s returns were processed vide intimation issued under section 143(1) of the Act, accepting the return of income. Admittedly, in the present case, the claim that the entire amount of the retrenchment compensation received from the BSNL is not taxable as per the provisions of section 10(10B) of the Act was made for the first time before the learned CIT(A). However, the learned Addl./Joint CIT(A) dismissed the appeal on account of the delay without entertaining the fresh claim made by the assessee.
6. During the hearing, the learned Authorised Representative (“learned AR”) submitted that the issue of claiming the benefit of exemption under section 10(10B) of the Act in respect of the retrenchment compensation received from BSNL is no longer res integra and has been decided consistently in favour of the taxpayers by various benches of the Tribunal. In this regard, learned AR placed reliance upon the following decisions: –
- Order of ITAT Chandigarh ITA NO. 42/CHD/2025 dated 30 -05-2025, in the case of Harish Kumar vs ITO Ward 5(5) Chandigarh.
- Order of ITAT Ahmedabad ITA Nos 2389 & 2393 /Ahd/2025 date of order 18-02-2026 Suman Nandlal Rava; vs ITO WARD 1 Gandhinagar.
- Order of ITAT Ahmedabad ITA Nos.2387 & 2388/Ahd/2025 dated 17 -02- 2026, Hayeshkumar Tulsidas Sutaria vs ITO WARD 7(2)(1) Ahmadabad.
- Order of ITAT Pune Nos 262 and 261/PUN/2026 dated 24 -03-2026 in the case of Shraddha Prahlad Arote and OTHERS vs ITO WARD 2, Ahmednagar
- Order of ITAT Pune Nos 290 and 293/PUN/2026 Dated 24 -03-2026 in the case of Meghmala Sudhir Pathak and OTHERSvs ITO WARD 2(1), Nashik
- Order of ITAT Pune Nos 302 and 303/PUN?2026 date of order 27 -03-2026 in the case of Rajendra Himmatrao Pati and OTHERSvs ITO WARD 1(4) Jalagon.
- Order of ITAT MUMBAI ITA 1389/Mum/2026 date of order 10 -04-2026 in the case of Bajirao Shankar Jagadale vs ITO WARD 42(2)(1), Mumbai
- Order of ITAT Pune ITA 1117/PUN/2026 date of order 29 -04-2026 in the case of Prathibha Jagadish Unawane and OTHERS vs ITO Kolhapur etc.
- Order of Hon’ble ITAT Chennai, in Sri Sekar Gnanaprakasham v. The Deputy Commissioner of Income TAX (ITA No. 1608&1609/CHNY/2026, order dated 21.05.2026)
- Order of Hon’ble ITAT Bangalore SMC Bench, in Renuka Narasimha Prabhu & Others v. ITO (ITA No. 992,1005,1284,1285,1320,1342&1427/BANG/2026, order dat ed 29.05.2026)
7. Having carefully perused the aforesaid decisions, we find that in similar circumstances the Coordinate Benches of the Tribunal held that the retrenchment compensation received from the BSNL is allowable as an exemption under section 10(10B) of the Act. Accordingly, respectfully following the judicial precedents in favour of the assessee, the AO is directed to allow exemption under section 10(10B) of the Act to the assessee in respect of compensation received under the BSNL VRS – 2019 Scheme, subject to verification of the necessary details. Accordingly, grounds raised by the assessee on this issue are allowed.
8. In the result, both appeals filed by the assessee are allowed.
Order pronounced in the open court on 19-Aug-2026.
