Kesarkar Vittal Sathya Naryana Rao Vs ITO (ITAT Bangalore)
BSNL VRS Compensation and Entire Leave Encashment Held Exempt: Bangalore ITAT
In a batch of four appeals involving former BSNL employees, the assessees had initially claimed only ₹5 lakh exemption under section 10(10C) on VRS compensation and restricted the leave-encashment exemption to ₹3 lakh, following Form 16 and the legal understanding then prevailing. After learning of subsequent judicial decisions, they claimed complete exemption for the VRS compensation under section 10(10B) and the entire leave encashment under section 10(10AA)(i). The CIT(A) dismissed the appeals on limitation, including one involving a delay of 1,614 days.
The Bangalore ITAT held that the delay resulted from a bona fide misunderstanding of the applicable legal provisions and was neither wilful nor attributable to gross negligence. It distinguished the Supreme Court decisions relied upon by the Revenue, observing that those cases involved unexplained delay, lack of diligence or absence of bona fides. A long delay cannot automatically be rejected where sufficient cause is established.
On merits, the Tribunal held that ex-gratia or retrenchment compensation received under the BSNL VRS-2019 is fully exempt under section 10(10B). It further held that BSNL employees absorbed from the Department of Telecommunications are deemed to be Central Government employees for the purpose of leave-encashment exemption and are therefore entitled to exemption of the entire amount under section 10(10AA)(i).
The Tribunal reiterated that legitimate statutory relief cannot be denied merely because the assessee originally claimed exemption under an incorrect provision, failed to file a revised return or approached the appellate authority belatedly. The CIT(A)’s orders were accordingly set aside and the AO was directed to grant both exemptions.
