Lakshminarayana Peravali Vs ITO (ITAT Nagpur)
VRS by Name, Retrenchment in Substance — BSNL Revival Exit Compensation Held Fully Exempt u/s 10(10B)
The Nagpur Bench of the ITAT has held that compensation received by an employee under the BSNL Voluntary Retirement Scheme, 2019 was, in substance, retrenchment compensation arising from a forced workforce-reduction exercise. It was therefore a capital receipt eligible for exemption u/s 10(10B), and not merely a voluntary-retirement payment entitled to the restricted exemption of ₹5 lakh u/s 10(10C).
The assessee, Lakshminarayana Peravali, filed appeals for AYs 2020-21 and 2021-22. The common question was whether the amount received upon retirement under BSNL VRS-2019 should be regarded as retrenchment compensation u/s 10(10B) or as an ordinary VRS payment covered only by section 10(10C).
The assessee contended that the controversy was already settled by a series of Tribunal decisions concerning similarly placed BSNL employees. Particular reliance was placed upon the Nagpur Tribunal’s earlier decision in Prathibha Jagdish Unawane v. ITO, ITA No. 1117/Pun/2026 and connected matters, dated 29.04.2026.
The Department strongly opposed the claim. It argued that the payment was expressly made under a “Voluntary Retirement Scheme” and must therefore be governed by section 10(10C). According to the Revenue, the employee voluntarily exercised an option to retire, and the payment could not be converted into retrenchment compensation merely because BSNL was experiencing financial difficulties.
