Sanjay Mahadeorao Hakke Vs ITO (ITAT Nagpur)
BSNL VRS-2019 Compensation Is Retrenchment Compensation, Not Mere VRS Payment – Exempt u/s 10(10B): Nagpur ITAT
The Nagpur ITAT dealt with seven appeals involving the common question whether compensation received by BSNL employees under the BSNL Voluntary Retirement Scheme, 2019 was merely VRS compensation eligible for the limited exemption under Section 10(10C) or was retrenchment compensation constituting a capital receipt exempt under Section 10(10B).
The Revenue argued that the employees had voluntarily opted for the scheme and that BSNL was being revived rather than closed down. It therefore contended that voluntary retirement was specifically distinguishable from retrenchment and that the employees could claim only the exemption available under Section 10(10C).
The Tribunal, however, followed its recent decision in Prathibha Jagdish Unawane v. ITO, as well as the consistent view of the Pune, Ahmedabad and Chandigarh Benches. It emphasized the principle that substance rather than form is relevant in determining whether a payment constitutes retrenchment compensation. The earlier authorities had treated the BSNL VRS-2019 as, in substance, a forced/compelled retirement arising from BSNL’s financial circumstances and workforce-reduction programme.
Significantly, the Tribunal also noted that on identical facts some CIT(A)s had condoned delay and allowed exemption to BSNL employees, and the Department had not appealed against those orders. It observed that different CIT(A)s were taking different stands on the same issue and stressed that “Consistency in judicial decisions is very important.”
Following the binding/co-ordinate Bench precedents, the ITAT held that the amounts received by the employees under BSNL VRS-2019 are capital receipts in the nature of retrenchment compensation and are exempt under Section 10(10B). The findings of the CIT(A) were reversed and all the employees’ appeals were allowed.
The employees were permitted to furnish a revised computation before their jurisdictional AOs, who were directed to compute the tax liability and grant the consequential refund, including of tax already paid/TDS, after verification.
Cases Discussed:
- Prathibha Jagdish Unawane Vs. ITO, ITA No.1117/PUN/2026 and others order dated 29.04.2026
- Jayesh Kumar Tulsidas Sutaria Vs. ITO, (2026) 183 taxmann.com 587 (Ahmedabad-Trib.)
- Rajendra Himmatrao Patil vs. ITO, ITA Nos. 302/PUN/2026
- Meghmala Sudhir Pathak vs. ITO, ITA Nos. 290/PUN/2026
- Shraddha Pralhad Arote vs. ITO, ITA Nos. 262/PUN/2026
- Harish Kumar Vs. ITO, (2025) 175 taxmann.com 379 (Chandigarh-Trib.)
- Dayal Singh Vs. ITO, ITA 519/cHD/2024
- Suresh Pal Chauhan vs. ITO, (2023) 154 taxmann.com 529 (Chandigarh-Trib.)
- Vijay Vishin Meghani vs DCIT (Bombay High Court), [2017] 398 ITR 250 (Bombay)
- Hindustan Photo Film Workers Welfare Centre Vs. Govt. of India (Madras High Court), (2017) 79 taxmann.com 298 (Madras)
- Shree Rajeshwar Sharma Vs. ITO, ITA No.870/CHD/2018
- CIT (TDS) Vs. Hindustan Photo Film Workers Welfare Centre (Madras High Court), (2021 129 taxmann.com 356 (Madras)
- Union of India Vs. M/s. Hindustan Photo Film Workers Welfare Centre and others, Special Leave Petition (Civil) Diary No.37247/2017
- Hindustan Photo Film Workers Welfare Centre vs. Govt. of India (Madras High Court), (2018) 400 ITR 299 (Madras)
- Vishnu Mohan T Nair v. Income Tax Officer (Ahmedabad- Trib.), [2018] 61 ITR(T) 796 (Ahmedabad- Trib.)
- CIT Vs. Mahalakshmi Textile Mills Ltd.(SC), (1967) 66 ITR 710 (SC)
- PCIT Vs. Karnataka State Cooperative Federation Ltd. (Karnataka), (2021) 128 taxmann.com 1 (Karnataka)
- CIT Vs. Pruthvi Brokers & Shareholders (Bombay), (2012) 23 taxmann.com 23 (Bombay)
- Mahendra Singh Dhantwal v. Hindustan Motors Ltd. (Supreme Court), [1985] 20 Taxman 1/152 ITR68
FULL TEXT OF THE ORDER OF ITAT NAGPUR
The captioned 07 appeals at the instance of different assessee(s) pertaining to A.Yrs. 2020-21 and 2021-22 are directed against the separate orders framed by Addl/JCIT(A) (ld. NFAC) passed u/s 250 of the Income Tax Act 1961.
