Bhimji Bhikhabhai Tukadiya Vs ITO (ITAT Rajkot)
BSNL Retirement Scheme Cannot Be Ignored: ITAT Restores Ten Employees’ Exemption Appeals
Exemption Claims Required Examination of the Scheme
The Rajkot Bench of the Income Tax Appellate Tribunal restored ten appeals concerning BSNL retirement payments to the CIT(A), finding that the appellate authority had rejected the employees’ claims without examining the relevant retirement scheme.
The employees claimed exemption under section 10(10B) for compensation received under the BSNL Voluntary Retirement Scheme, 2019. They relied particularly on the scheme’s Central Government approval and the second proviso to that provision.
The Tribunal held that the scheme had to be considered before deciding the claims. It set aside the appellate orders and directed fresh consideration, permitting the employees to produce supporting evidence.
The Tribunal did not finally declare the retirement compensation fully exempt. All ten appeals were allowed for statistical purposes.
Employees Claimed Protection Under Section 10(10B)
The consolidated order covered appeals by Bhimji Bhikhabhai Tukadiya, Ramesh Mohanbhai Vara, Ajitkumar Navalshankar Pandya, Rasiklal Arjanbhai Kobia, Mukesh Chhaganbhai Gohil and Raghav K. Savaliya.
Their disputes related to AYs 2020-21 and 2021-22 and involved payments received in connection with retirement from BSNL.
The employees described the receipts as retrenchment compensation under a scheme approved by the Central Government. They contended that the severance package was a special protection arrangement announced by the Department of Telecommunications with an approved budgetary allocation.
On that basis, they invoked the second proviso to section 10(10B) and claimed that the compensation was fully exempt.
The Assessing Officers rejected their contentions and made additions. The employees’ first appeals were also unsuccessful, leading to the consolidated proceedings before the Tribunal.
The Central Objection Was Failure to Examine the Scheme
Before the Tribunal, the employees’ representatives argued that the CIT(A) had not examined the Central Government scheme governing the BSNL retirement payments.
They requested restoration of the matters so that the scheme could be considered and the exemption claims adjudicated in accordance with law.
They also submitted that favourable case law cited by the employees had not been considered.
The Revenue’s representative did not object to remand for examination of the scheme and fresh adjudication.
The dispute before the Tribunal consequently centred on the adequacy of the appellate examination, rather than a final determination of the exemption available for each payment.
Capital-Receipt and Leave-Encashment Arguments Also Raised
The employees’ counsel additionally contended that compensation for loss of employment was a capital receipt and therefore not taxable.
A separate argument concerned leave encashment under section 10(10AA). Counsel referred to the revised ₹25 lakh limit and CBDT Notification No. 31/2023 dated 24 May 2023.
These were submissions advanced on behalf of the employees. The Tribunal did not separately determine that the compensation was outside taxation as a capital receipt, nor did it decide the applicability of the revised leave-encashment limit to the assessment years before it.
Accordingly, the order should not be reported as having accepted either proposition conclusively. The relevant issues were returned for fresh consideration.
CIT(A)’s Decision Was Incomplete Without the Scheme
The Tribunal found that the CIT(A) had dismissed the appeals without considering the BSNL retirement scheme approved by the Central Government.
It regarded that omission as material to the decision and recorded that adjudication without examining the scheme in its proper perspective violated the principles of natural justice.
The Tribunal also noted the employees’ complaint that the favourable authorities cited by them had not been considered.
It therefore concluded that another opportunity should be granted to the employees to present their cases before the CIT(A).
The terms of the scheme were central to the exemption claim and could not be left out of the adjudication.
All Ten Appeals Restored for Fresh Consideration
The Tribunal set aside the CIT(A)’s orders and remanded the various issues raised in the grounds of appeal for fresh consideration.
The employees were given liberty to establish their claims by producing sufficient evidence and material to the satisfaction of the CIT(A).
All ten appeals were allowed for statistical purposes. The entitlement to exemption and its extent remain to be decided in the restored proceedings.
Author’s Comments
The judgment is useful for the proposition that a scheme-based exemption claim requires examination of the actual scheme and approval documents. Rejection without that examination leaves the essential factual and legal foundation unaddressed.
However, Central Government approval of a retirement scheme should not be treated, through this order alone, as conclusive satisfaction of every requirement of the second proviso to section 10(10B). That question remains for adjudication.
The employees should also distinguish compensation, leave encashment and other retirement receipts, identifying the provision and evidence supporting each claim.
Particular care is needed with the reference to the later ₹25 lakh leave-encashment limit: the Tribunal did not rule that it applied to AYs 2020-21 or 2021-22.
The employees secured a fresh hearing, not a final exemption ruling. Their success on remand will depend on the scheme’s terms, the statutory conditions and the supporting record.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned ten appeals filed by the different assessees, pertaining to Assessment Years 2020-21 to 2021-22, are directed against the separate orders passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals), which in turn arise out of separate orders passed by the Assessing Officer u/s 143(3) read with section 144B of the Income-tax Act.
2. Since, the issues involved in all these appeals of different assessees are common and identical, therefore, these appeals have been heard together and are being disposed off by this consolidated order.
3. Common and similar facts, contain in these appeals, are as follows. The amount was received by the respective employees of BSNL on account of Retrenchment Compensation Received From Central Government Under the Scheme Approved By Central Government which is fully exempted from Income Tax Under Section 10(10B) of Income Tax Act, 1961. The compensation amount receipts in the hands of assessee as an employee of the BSNL, pursuant to the severance package, titled as BSNL Voluntary Retirement Scheme-2019 announced by the Department of Telecommunications(DoT), Central Government of India under total budgetary allocation approved by the Government is a special privilege/protection package granted to the employees of the BSNL and therefore, the Second Proviso of the Section 10(10B) of the Income Tax Act, 1961 are attracted and accordingly, the same shall not fall within the definition of income, while computing the total income of an assessee and income tax not to be deducted from the severance package paid as an employee of DOT and BSNL Combined Service. However, the assessing officer rejected the above contention of these assessees/ employees and made the addition in the hands of the respective employees.
4. Being aggrieved by the said order of the Assessing Officer, these assessees filed appeal before the Ld.CIT(A), but remained unsuccessful. Therefore, these assessees are left with no other alternative but to knock on the doors of the Tribunal with this appeal praying for justice.
5. Learned Counsel for the assessee submitted that in these cases the compensation received by an assessee is towards loss of employment for the reason of employer so it would amount to Capital Receipt and hence, no income tax is payable. The amount received is fully exempted u/s.10(10AA) of the Income Tax Act, 1961. In respect of leave encashment received by an Applicant. This is as per Revised Limit of Leave Encashment Rs.25,00,000/- as per CBDT, Notification No.31/2023/F.No.200/3/2023-ITA-1, Dated: 24/05/2023.The Ld. CIT(A) has misdirected himself in law, facts and circumstances of the case, that Ld. CIT(A) has dismissed the Appeal rejecting the claim of Assessee for exemption u/s 10(10B) of the Act. The Ld. CIT(A) did not examine the scheme framed by the Central Government for BSNL employees, therefore matter may be restored back to the file of the Ld. CIT(A), with the direction to examine the scheme of the central government, and then adjudicate the issue in accordance with law.
6. On the other hand, Ld. DR for the revenue did not raise any objection if these matters are remitted back to the file of the Ld. CIT(A) for examination of the scheme of BSNL employees framed by the Central Government and then adjudicate the issue in accordance with law.
7. I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. I note that these appeals relate to Retrenchment Compensation/ retirement scheme of BSNL employees and Ld. CIT(A) did not consider the BSNL Scheme of retirement and without considering the scheme of BSNL employees’ the ld.CIT(A), dismissed these appeals of different assessees. The BSNL Scheme was approved by the Central Government and therefore Ld. CIT(A) should have considered the scheme approved by the Central Government for BSNL employees, however, the Ld. CIT(A) did not consider, at all, the BSNL Scheme for employees, as approved by the Central Government, therefore the decision rendered by the Ld. CIT(A) is factually incorrect and hence another opportunity to plead these cases before the Ld. CIT(A) should be granted to these all assessees. The Ld. Counsel for the assessee also submitted that the Ld. CIT(A) has also not considered the case law cited by the assessees which are in favour of employees/assessees. I note that Ld. CIT(A) did not go through the scheme of the BSNL for its employees framed by the Central Government and adjudicated the issue without going through the scheme of BSNL, in right perspective, hence, it is violation of principle of natural justice. Therefore, these assessees pray before the Bench that the matter may be restored back to the file of the Ld. CIT(A) to consider the scheme of the BSNL employees and to consider the case law in favour of these employees. Therefore, considering these facts, I am of the view that one more opportunity should be granted to these assessees to plead their cases before the learned CIT(A).
8. Hence, I accept the prayer of these assessees and set aside the order of Ld. CIT(A) and remand the various issues raised by the assessees in the grounds of appeal before CIT(A) for fresh consideration by the ld.CIT(A), with a liberty to these assessees to prove their cases by producing sufficient evidences/material to the satisfaction of the Ld. CIT(A). For statistical purposes these all different assessees’ appeals are allowed.
9. In the result, all these appeals (ITA No.1030/Rjt/2026, ITA No.1031/Rjt/2026, ITA No.1038/Rjt/2026, ITA No.1041/Rjt/2026, ITA No.1072/Rjt/2026, ITA No.1114/Rjt/2026, ITA No.1115/Rjt/2026, ITA No.1116/Rjt/2026, ITA No.1118/Rjt/2026, ITA No.1119/Rjt/2026), filed by the different assessees, are allowed for statistical purposes.
Order is pronounced in the open Court on 01/10/2026.
