BSNL VRS-2019 Compensation Exempt u/s 10(10B) as Retrenchment Compensation: ITAT Pune

Kulkarni Jagadish Vs ITO (ITAT Pune)

BSNL Retirement Compensation: ₹5 Lakh Ceiling Gives Way to Full Exemption

The Pune ITAT, in Kulkarni Jagadish v. ITO, held that compensation received under the BSNL Voluntary Retirement Scheme, 2019 was exempt under Section 10(10B), following earlier Tribunal decisions treating the payment as retrenchment compensation. The Tribunal also held that the assessee’s explanation justified condonation of the delay in filing appeals and directed the Assessing Officer to verify revised computations and grant the consequential refund, if any.

The Dispute: Voluntary Retirement or Retrenchment Compensation?

The assessee, a former employee of Bharat Sanchar Nigam Limited, filed appeals concerning Assessment Years 2020-21 and 2021-22. The dispute arose from compensation received under the BSNL Voluntary Retirement Scheme, 2019, introduced as part of the Government’s revival package for BSNL and MTNL.

The Union Cabinet approved the revival plan on 23 October 2019, followed by the Department of Telecommunications’ Office Memorandum dated 29 October 2019. Reduction of the workforce through a retirement scheme for employees aged 50 years and above formed part of that package. Employees opting for retirement received ex gratia compensation.

In his returns, the assessee had claimed exemptions under Sections 10(10C) and 10(10AA). During processing under Section 143(1), the CPC restricted the claim under Section 10(10AA). Before the first appellate authority, the assessee raised a further claim that the entire retirement compensation constituted an exempt capital receipt under Section 10(10B).

However, the Additional/Joint Commissioner (Appeals) dismissed the appeals on account of delay, without examining this substantive claim.

Delay Cannot Defeat a Deserving Claim

The Tribunal found that the assessee had furnished an elaborate explanation and demonstrated sufficient cause for the delay. It therefore held that the first appellate authority should have condoned the delay and considered the dispute on its merits.

Emphasising the importance of substantial justice, the Tribunal referred to the Bombay High Court’s decision in Vijay Vishin Meghani v. DCIT [2017] 398 ITR 250, where a delay of 2,984 days, attributable to professional advice received from a Chartered Accountant, had been condoned.

The decision does not mean that every delayed appeal must automatically be admitted. Its significance is that, where sufficient cause exists, the appellate authority should examine the explanation fairly rather than allow procedural delay to prevent adjudication of a legitimate tax claim.

Revenue’s Objection: Exemption Limited to ₹5 Lakh

The Revenue argued that the assessee had not claimed the disputed exemption in the original returns and had himself paid tax. According to the Department, such a claim should have been made through a revised return.

On the substantive issue, the Revenue maintained that the payment arose under a Voluntary Retirement Scheme and consequently attracted Section 10(10C), which provides an exemption restricted to ₹5 lakh.

The assessee, through written submissions, relied on several decisions supporting exemption under Section 10(10B), including Harish Kumar v. ITO, Suresh Pal Chauhan v. ITO, and the decisions concerning Hindustan Photo Film Workers Welfare Centre.

Earlier Decisions Settled the Tribunal’s Approach

The Pune Bench noted that identical issues involving BSNL employees had already been decided in favour of the assessees by earlier Pune Tribunal orders. Those orders had followed the Ahmedabad Tribunal’s decision in Jayeshkumar Tulsidas Sutaria v. ITO, which, in turn, relied on the Chandigarh Tribunal’s decision in Harish Kumar v. ITO.

The reasoning reproduced in the present order treated the compensation as arising from a forced retirement arrangement forming part of the Government’s revival plan. On that basis, the payment was characterised as retrenchment compensation falling under Section 10(10B), rather than voluntary retirement compensation governed by Section 10(10C).

The earlier reasoning also rejected the Revenue’s objection concerning eligibility being confined to a “workman”, relying on the Madras High Court’s decision in Hindustan Photo Film Workers Welfare Centre v. Government of India.

Following these coordinate Bench decisions, the Tribunal held that the disputed compensation was exempt.

Identical Cases Deserve Consistent Treatment

The Tribunal also noticed that, in certain other BSNL employees’ cases involving identical facts, first appellate authorities had condoned the delay and allowed the exemption. It recorded that the Department was understood not to have appealed those decisions.

Against that background, the Tribunal criticised the differing approaches adopted by appellate authorities on identical issues and stressed the importance of consistency in judicial decisions.

The Revenue had not brought any contrary decision of the jurisdictional High Court to the Tribunal’s attention. The Bench therefore followed the existing Pune Tribunal decisions.

Relief Granted and Author’s Comments

Both appeals were allowed. The assessee was directed to submit revised computations before the jurisdictional Assessing Officer, claiming exemption under Section 10(10B). The Revenue authorities were directed to recompute the liability and grant the refund, if any, after verification.

The decision provides substantial support to BSNL retirees who originally restricted their exemption to ₹5 lakh or offered the balance compensation to tax. It also supports consideration of an additional exemption claim at the appellate stage, despite its absence from the original return.

However, the ruling should be understood within its factual setting. Every VRS payment does not automatically qualify for full exemption under Section 10(10B). The Tribunal’s conclusion rests on the particular BSNL revival scheme and the precedents it followed. Leave encashment and other retirement receipts require separate examination under their respective provisions.

Case: Kulkarni Jagadish v. ITO, ITA Nos. 1642 & 1643/PUN/2026, Pune ITAT; order dated 30 September 2026.

Cases Discussed

• Harish Kumar Vs. ITO (2025) 175 taxmann.com 379 (Chandigarh-Trib.); ITA No. 42/CHD/2025, order dated 30.05.2025 — Relied upon in the coordinate Bench reasoning for holding compensation received under BSNL VRS-2019 eligible for exemption under section 10(10B).
• Dayal Singh Vs. ITO – ITA 519/cHD/2024 — Cited by the assessee among decisions supporting the section 10(10B) claim.
• Suresh Pal Chauhan vs. ITO (2023) 154 taxmann.com 529 (Chandigarh-Trib.) — Cited in support of the claim for exemption under section 10(10B).
• Hindustan Photo Film Workers Welfare Centre Vs. Govt. of India (2017) 79 taxmann.com 298 / (2018) 400 ITR 299 (Madras) — Relied upon in the reproduced reasoning for rejecting the Revenue’s contention that section 10(10B) benefit was confined only to a “workman”.
• CIT (TDS) Vs. Hindustan Photo Film Workers Welfare Centre (2021) 129 taxmann.com 356 (Madras) — Cited among the authorities relied upon by the assessee; no exact TaxGuru case page verified.
• Union of India Vs. M/s. Hindustan Photo Film Workers Welfare Centre and others – Special Leave Petition (Civil) Diary No.37247/2017 — Cited in connection with the Hindustan Photo Film Workers Welfare Centre litigation.
• Shree Rajeshwar Sharma Vs. ITO – ITA No.870/CHD/2018 — Cited among the authorities relied upon by the assessee.
• CIT Vs. Mahalakshmi Textile Mills Ltd. (1967) 66 ITR 710 (SC) — Cited among the authorities relied upon by the assessee.
• PCIT Vs. Karnataka State Cooperative Federation Ltd. (2021) 128 taxmann.com 1 (Karnataka) — Cited among the authorities relied upon by the assessee; no exact TaxGuru case page verified.
• CIT Vs. Pruthvi Brokers & Shareholders (2012) 23 taxmann.com 23 (Bombay) — Cited among the authorities concerning claims raised before appellate authorities.
• Vijay Vishin Meghani Vs. DCIT [2017] 398 ITR 250 (Bombay) — Relied upon by the Tribunal while holding that the delay should have been condoned; the High Court had condoned a delay of 2,984 days attributable to professional advice.
• Jayeshkumar Tulsidas Sutaria Vs. ITO (2026) 183 taxmann.com 587 (Ahmedabad-Trib.) — Followed in the earlier Pune Tribunal decisions reproduced and applied in the present order for treating BSNL VRS-2019 compensation as retrenchment compensation under section 10(10B).
• Shraddha Pralhad Arote Vs. ITO – ITA Nos. 262 & 261/PUN/2026 (ITAT Pune) — Identical BSNL VRS issue decided in favour of the assessee.
• Meghmala Sudhir Pathak Vs. ITO – ITA Nos. 290 & 293/PUN/2026 (ITAT Pune) — Identical BSNL VRS issue decided in favour of the assessee.
• Rajendra Himmatrao Patil Vs. ITO – ITA Nos. 302 & 303/PUN/2026 (ITAT Pune) — Identical BSNL VRS issue referred to in the line of coordinate-Bench decisions; no exact TaxGuru case page verified.
• Bajirao Shankar Jagdale Vs. ITO (2026) 185 taxmann.com 451 (Mumbai-Trib.) — Held BSNL VRS-2019 compensation to be retrenchment compensation exempt under section 10(10B).
• Prathibha Jgadish Unawane Vs. ITO, Ward 1(1), Kolhapur – ITA Nos. 1117 & 1118/PUN/2026 (ITAT Pune) — Identical BSNL VRS issue decided in favour of the assessee.
• Sameer Yadram Sharma Vs. ITO – ITA Nos. 864 & 865/PUN/2026 (ITAT Pune) — Identical BSNL VRS issue decided in favour of the assessee.
• Renuka Narasimha Prabhu Vs. ITO – ITA No. 992/BANG/2026 (ITAT Bangalore) — BSNL VRS compensation held eligible for section 10(10B) exemption.
• Sekar Gnanaprakasam Vs. DCIT – ITA Nos. 1608 & 1609/CHNY/2026 (ITAT Chennai) — Delay was condoned and section 10(10B) exemption on BSNL VRS compensation was allowed.
• Shivnandan Narendra Sanvordekar Vs. ITO – ITA Nos. 141 & 142/PAN/2026 (ITAT Panaji) — BSNL VRS-2019 compensation held eligible for section 10(10B) exemption.
• Ramesh Bhimshankar Budwatrao Vs. ITO – ITA No. 1890/PUN/2026 (ITAT Pune) — Pune ITAT condoned delay and allowed section 10(10B) exemption for BSNL VRS compensation.
• Kanauj Kanti Chaudhuri Vs. ITO, Ward-1, Assam – ITA No. 258/GTY/2026 (ITAT Guwahati) — Identical BSNL VRS issue; no exact TaxGuru case page verified.
• Nizamuddin Gooty Vs. ITO – ITA Nos. 903 & 904/Hyd/2026 (ITAT Hyderabad) — BSNL VRS compensation held eligible for section 10(10B) exemption.

FULL TEXT OF THE ORDER OF ITAT PUNE

These two appeals filed by the assessee against the order of the Learned Additional/Joint Commissioner of Income Tax (Appeals)-1, Nashik [Ld. Addl./JCIT(A)], passed u/s. 250 of the Income Tax Act, 1961 (‘the Act’) for AYs 2020-21 and 2021-22 on 27.03.2026.

2. None appeared on behalf of the assessee. We have heard Ld. DR and perused the records. Since common issues have been raised in both the appeals, we proceed to adjudicate these appeals by way of this consolidated order for the sake of convenience, both these appeals were heard together.

3. The common issue raised in both the appeals is that whether the amount received from Bharat Sanchar Nigam Limited (BSNL) on account of the voluntary retirement through the BSNL Voluntary Retirement Scheme, 2019 is in the nature of Retrenchment Compensation and is a Capital receipt not liable to be tax.

4. Brief facts relating to the assessee in the instant appeals are that he was employed with BSNL which is under administrative control of Department of Telecommunications, Govt. of India. In order to revive BSNL, the Union Cabinet in its meeting dated 23.10.2019 approved the revival plan of BSNL and Mahanagar Telephone Nigam Limited, Mumbai (MTNL) vide Office Memorandum dated 29.10.2019 issued by Department of Telecommunications. As part of the revival package the Government decided to reduce the work force through BSNL Voluntary Retirement Scheme, 2019 to the employees of aged 50 years and above and on such retirement Ex-gratia compensation has been paid. In this case in the Return of Income the Assessee claimed exemption u/s 10(10C) and 10(10AA) of the Act but the CPC u/s 143(1) restricted the claim of the assessee made u/s 10(10AA) of the Act. Admittedly, in both the appeals the claim that the entire amount of compensation received from BSNL being Capital receipt is not liable to tax as per the provisions of section 10(10B) of the Act has been made for the first time before Ld. Commissioner of Income Tax (appeal). It is also noticed that in these cases Ld. CIT(A) dismissed the appeals on account of delay in filing of the appeals without adjudicating the issue raised by the assessee that entire amount is not taxable. Aggrieved with the finding of Ld. Addl./Jt.CIT(A), the assessee is in appeal before this Tribunal.

5. Assessee filed written submission before this ITAT. Assessee relied on following decisions. Assessee in written submission, submitted that the issue is covered in favour of assessee by various Benches of ITAT.

1. Harish Kumar Vs. ITO (2025) 175 taxmann.com 379 (Chandigarh-Trib.)

2. Dayal Singh Vs. ITO – ITA 519/cHD/2024

3. Suresh Pal Chauhan vs. ITO (2023) 154 taxmann.com 529 (Chandigarh-Trib.)

4. Hindustan Photo Film Workers Welfare Centre Vs. Govt. of India (2017) 79 taxmann.com 298 (Madras)

5. CIT (TDS) Vs. Hindustan Photo Film Workers Welfare Centre (2021 129 taxmann.com 356 (Madras)

6. Union of India Vs. M/s. Hindustan Photo Film Workers Welfare Centre and others _ Special Leave Petition (Civil) Diary No.37247/2017

7. Shree Rajeshwar Sharma Vs. ITO – ITA No.870/CHD/2018

8. CIT Vs. Mahalakshmi Textile Mills Ltd.(1967) 66 ITR 710 (SC)

9. PCIT Vs. Karnataka State Cooperative Federation Ltd. (2021) 128 taxmann.com 1 (Karnataka)

10. CIT Vs. Pruthvi Brokers & Shareholders (2012) 23 taxmann.com 23 (Bombay)

6. In following cases identical issue has been decided in favour of the assessee.

The BSNL Cases are covered by following Decisions

7. On the other hand, Ld. DR supported the orders of Ld. CIT(A) and submitted that firstly the assessee has not made this claim in the regular returns of income and themselves paid due taxes and such claim ought to have been made through revised return. He also submitted that the sum received from BSNL is on account of Voluntary Retirement Scheme and for such amount received under the VRS, 2019, the assessee is only eligible for the exemption to the extent of Rs.5.00 lakh as provided u/s. 10(10C) of the Act.

8. We are of the considered opinion that Ld. CIT(A) should have condoned the delay as assessee had filed elaborate explanation regarding delay and there was sufficient cause for delay.

8.1 Substantial justice is more important than the procedural delay. The Hon’ble Bombay High Court in the case of Vijay Vishin Meghani vs DCIT [2017] 398 ITR 250 (Bombay) has condoned the delay of 2984 days, which was on account of professional advice of a CA. In these facts we are of the considered opinion that Ld. CIT(A) should have condoned the delay.

9. The identical issue of BSNL employee’s is decided by ITAT Pune in favour of assessee in ITA Nos.290 and 293/PUN/2026, ITA Nos.294 and 295/PUN/2026. ITAT Pune has relied on the decision of ITAT Ahmedabad in the case of Jayeskumar Sutaria vs. ITO, ITAT has extensively reproduced the decision and finally allowed the appeal of the assessee. The relevant paragraph of the said order is reproduced here under :

Quote, “15. Further, I find the Coordinate Bench, Ahmedabad in the case of Jayeshkumar Tulsidas Sutaria Vs. ITO (supra) following the decision of Coordinate Bench, Chandigarh in the case of Harish Kumar vs. ITO Ward- 5(5), Chandigarh -ITA No. 42/CHD/2025 order dated 30.05.2025 has decided the issue in favour of the assessee by observing as under :

“3. The assessee was employed with Bharat Sanchar Nigam Limited (BSNL), a Government of India enterprise. BSNL notified the Voluntary Retirement Scheme (VRS) 2019 on 04.11.2019, which was duly approved and implemented by the employer. The assessee opted for the scheme and accordingly received compensation under the VRS, as per the terms laid down by BSNL. It is submitted that the assessee had not been paid regular salary for several months prior to opting for the scheme and was under severe financial and professional uncertainty. In view of these circumstances, the assessee opted for the scheme as a measure of financial security. The compensation received by the assessee was in the nature of compensation under the BSNL VRS-2019 scheme. The compensation amount received under the scheme was offered to tax in the return of income due to lack of awareness regarding the exemption available under section 10(10B) of the Income-tax Act, 1961. The employer had also deducted tax at source on the said amount. No exemption was claimed in the original or revised return of income. The CPC, Bengaluru issued an intimation under section 143(1) for the said year without granting any exemption, and no rectification or appeal was initiated at that time. It was only upon learning about the recent judgment of the Hon‟ble ITAT Chandigarh Bench in the case of Harish Kumar vs. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025, dated 30.05.2025) that the assessee became aware that the compensation received under the BSNL VRS-2019 scheme is eligible for exemption under section 10(10B), subject to compliance with Rule 2BA.

4. Aggrieved by the orders of the Assessing Officer, the assessee carried the matter in appeal before the Ld.CIT(A), who dismissed the appeal of the assessee as non maintainable by observing as follows:

“…In the present case, the delay in filing of the appeal is almost four years which is an inordinate and huge delay. Moreover, as has been elaborately discussed above, the appellant has also failed to provide any reasonable ground that could assist the first appellate authority to draw sufficient cause for the inordinate delay of 1,396 days in filing of this appeal. The inordinate delay in the present case, if condoned, would make the term „‟Sufficient cause” in section 249(3) of the Income Tax Act, 1961 hollow and meaningless.

20. In light of the facts of the case, provisions of the Income Tax Act, 1961 and judicial decisions in the matter as discussed above, I am constrained to conclude that the appellant has failed to submit any reasonable ground for condoning the inordinate delay of 1,396 days i.e. almost four years in filing this appeal. Being bereft of any sufficient cause as envisaged in section 249(3) of the Act, the appeal cannot be admitted. Since the appeal is not maintainable, there is no need to adjudicate on the merits therein.

5. Aggrieved by the orders of the Ld.CIT(A, the assessee is in further appeal before us.

6. We have gone through the records and considering the merits of the case, we condoned the delay and proceed to adjudicate the issue.

7. 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.

8. In the result, both the appeals of the assessee are allowed.”

16. The contention of ld. DR that only a „workman‟ as defined under the Act is eligible for benefit u/s.10(10B) of the Act has no force as the Hon‟ble High Court of Madras in the case of Hindustan Photo Film Workers Welfare Centre vs. Govt. of India (2018) 400 ITR 299 (Madras) has held that benefit u/s.10(10B) would be applicable to all employees covered by the scheme.

17. In light of the above decisions which are squarely applicable on the facts of instant cases and the consistent view taken by the Coordinate Benches, I am of the considered view that the alleged sum is in the nature of Retrenchment Compensation received by the assessee(s) in appeal, under the forced retirement scheme as per the standing orders dated 29.10.2019 issued by the Union Cabinet for the revival plan of BSNL/MTNL and such compensation falls under the provisions of section 10(10B) of the Act and not u/s.10(10C) of the Act and therefore the alleged sum is in the nature of Capital receipt exempt from tax. In order to get relief as has been directed in this order, assessee(s) are directed to place revised computation of income before the respective Jurisdictional Assessing Officers claiming the exemption u/s.10(10B) of the Act as discussed (supra) and thereafter the Revenue authorities shall grant the refund (if any) entitled to the assessee(s) after due verification of such revised computation of income. Impugned findings of ld.CIT(A) are set aside. Common issue raised in the Grounds of appeal raised by respective assessee(s) stands allowed.”

9. Since the facts in the instant bunch of appeals are same, therefore, following the same parity of reasoning, I hold that the alleged sum received under BSNL Voluntary Retirement2019 Scheme is in the nature of Retrenchment Compensation received by the assessee(s) in appeal and such compensation falls under the provisions of section 10(10B) of the Act and not u/s.10(10C) of the Act and is in the nature of Capital receipt exempt from tax. Assessee(s) are directed to place revised computation of income before the respective Jurisdictional Assessing Officers claiming the exemption u/s.10(10B) of the Act of the alleged sum and thereafter the Revenue authorities shall compute the tax liability and grant the refund (if any) entitled to the assessee(s) after due verification of such revised computation of income. Impugned findings of ld. CIT(A) are set aside and the common issue raised in the Grounds of appeal by respective assessee(s) stands allowed.” Unquote.

10. We have noted that in some cases of BSNL employees, Ld. CIT(A) have condoned the delay in identical facts and allowed the appeal of the assessee who were BSNL employees.

11. In following cases the CIT(A) has condoned the delay and allowed those BSNL employee’s Appeal on identical facts. It is learnt that in these cases the Department has not filed any appeal. Thus, it is observed that CIT(A)’s have been taking different stand on identical issues. Consistency in judicial decisions is very important.

12. In these facts, if Revenue has accepted the decisions of CIT(A) in above cases, then it was mandatory for CIT(A) to follow the consistency, in other cases having identical issues.

13. We have perused the submission of the Ld. DR. Ld. DR has not brought to our notice any contrary decision of Hon’ble Jurisdictional High Court on this issue. The arguments of Ld. DR have been considered by ITAT Pune (supra) in its earlier decision. Therefore, we are bound by the decision of ITAT Pune on identical facts mentioned above. Respectfully following the decision of ITAT Pune (supra) we hold that the impugned amounts were exempt from tax. Assessee is directed to place revised computation of income before the respective Jurisdictional Assessing Officers claiming the exemption u/s.10(10B) of the Act of the alleged sum and thereafter the Revenue authorities shall compute the tax liability and grant the refund (if any) entitled to the assessee after due verification of such revised computation of income. Impugned findings of Ld. CIT(A) are set aside and the common issue raised in the Grounds of appeal by assessee stands allowed.

14. Accordingly, both the appeals of the assessee are allowed in above terms.

Order pronounced in the open Court on 30th September, 2026