Pravinkumar Ramjibhai Patel Vs ITO (ITAT Ahmedabad)
CIT(A)’s Rectification Reversing BSNL VRS Exemption Fails: Ahmedabad ITAT Allows Full Section 10(10B) Relief
Summary: The Ahmedabad Bench of the Income Tax Appellate Tribunal allowed the assessee’s appeal for Assessment Year 2021-22 and held that the compensation received under the BSNL VRS-2019 scheme was eligible for exemption under Section 10(10B) of the Income-tax Act, 1961. The appeal arose from the order dated 20.05.2026 passed by the CIT(A), NFAC, Delhi under Section 154 read with Section 250 of the Act.
The assessee was a salaried employee of Bharat Sanchar Nigam Limited (BSNL) who opted for the Government-approved VRS-2019. He received Rs.41,09,229/- under the scheme. The amount was disclosed in the return and tax was paid, and the employer had deducted tax at source. No exemption under Section 10(10B) was claimed in the original or revised return. The assessee subsequently became aware of the Tribunal’s decision in Harish Kumar vs. ITO Ward 5(5), Chandigarh, ITA No.42/CHD/2025 dated 30.05.2025, and sought exemption of the VRS compensation under Section 10(10B), subject to Rule 2BA compliance.
The source records that the CPC, Bengaluru had issued an intimation under Section 143(1) without granting the exemption and that no rectification or appeal had initially been pursued. The assessee later claimed the exemption before the CIT(A). The grounds also challenged the subsequent rectification proceedings under Section 154 read with Section 250 and contended that the issue involved examination of facts, statutory interpretation and judicial precedents and therefore could not be treated as a mistake apparent from the record. The assessee further relied on Tribunal decisions from Ahmedabad, Chandigarh, Mumbai and Pune and on the Madras High Court decisions in Hindustan Photo Film Workers Welfare Centre.
Before the Tribunal, the assessee submitted that the amount represented retrenchment compensation received from the Central Government under a Government-approved scheme and was fully exempt under Section 10(10B). Reliance was placed particularly on Harish Kumar vs. ITO, Jayeshkumar Tulsidas Sutaria and Suman Nandlal Raval. The Tribunal noted that the issue was squarely covered by coordinate Bench decisions. It reproduced the relevant reasoning from ITA Nos.2387 & 2388/Ahd/2025 in Jayeshkumar Tulsidas Sutaria, where the Tribunal had treated the BSNL VRS compensation as retrenchment compensation and allowed the exemption.
The reproduced coordinate Bench reasoning records that the compensation was offered to tax because the assessee was unaware of the Section 10(10B) exemption; that a later appellate claim could be considered; and that the assessee was eligible for refund of TDS where the income was not taxable. The Ahmedabad Tribunal also noted the reliance placed in the earlier litigation on the Madras High Court’s decision in Hindustan Photo Film Workers Welfare Centre, including the proposition that the Section 10(10B) benefit was applicable to all employees covered by the relevant scheme and was not confined to persons falling strictly within the definition of “workman”.
Finding no change in the legal proposition or factual matrix, the Tribunal respectfully followed the coordinate Bench decisions. It held that the assessee was entitled to exemption under Section 10(10B) in respect of the amount in question and allowed the appeal.
Cases Discussed
- Harish Kumar Vs. ITO, ITA No.42/CHD/2025, dated 30.05.2025.
- Jayeshkumar Tulsidas Sutaria Vs. ITO, ITA Nos.2387 & 2388/Ahd/2025, dated 17.02.2026.
- Suman Nandlal Raval Vs. ITO, ITA Nos.2389 & 2390/Ahd/2025, dated 18.02.2026.
- Hindustan Photo Film Workers Welfare Centre (CITU) Vs. Government of India, Madras High Court.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”), dated 20.05.2026 passed under Section 154 r.w.s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2021-22.
2. The assessee has taken following grounds in this appeal:
1. “The Ld. CIT(A) has erred in law and on facts in passing the impugned order under section 154 r.w.s. 250 of the Income-tax Act, 1901 dated 20.05 2026 whereby the appellate order dated 31.12.2025 allowing exemption under section 10(10B) in respect of compensation received under BSNL VRS-2019 was sought to be reversed through suo motu rectification proceedings initiated on 30.01.2026. The learned appellate authority failed to appreciate that the issue involved required detailed examination of facts, interpretation of statutory provisions, and consideration of judicial precedents, and therefore did not constitute any mistake apparent from record within the meaning of section 154. The impugned rectification order amounts to an impermissible review/change of opinion and is therefore without jurisdiction, bad in law, and liable to be quashed.”
2. The Ld. CIT(A) has erred in law and on facts in denying exemption under section 10(10B) in respect of compensation received under the BSNL VRS-2019 scheme by wrongly holding that the Appellant is not a “workman” under the Industrial Disputes Act, 1947, without appreciating that various Hon’ble ITAT Benches including Ahmedabad, Chandigarh, Mumbai and Pune Benches have consistently held that compensation received under BSNL VRS-2019 is in the nature of retrenchment compensation/capital receipt and fully exempt under section 10(10B). The Ld. CIT(A) further failed to follow the judgments of the Hon’ble Madras High Court in Hindustan Photo Film Workers Welfare Centre v. Government of India and CIT (TDS) v. Hindustan Photo Film Workers Welfare Centre, wherein it was held that exemption under section 10(10B) in respect of compensation paid under Government-approved revival/separation schemes is available to all eligible employees and is not confined only to employees strictly falling within the definition of “workman” The SLP filed against the said judgments was also dismissed by the Hon’ble Supreme Court. Therefore, the impugned order being contrary to settled law and binding judicial precedents deserves to be set aside and the exemption claimed by the Appellant deserves to be allowed.”
3. The assessee was a salaried employee working with BSNL. The Government introduced a Voluntary Retirement Scheme (VRS), which the assessee opted for and was duly accepted by BSNL. It is submitted that the amount received under the scheme has been disclosed in the return of income, and due tax has been paid, despite the fact that the same was exempt from tax. It is further submitted that the VRS was meant for the retrenchment of senior/old-age employees who were unable to adapt to new technology. Accordingly, the assessee contended that the entire amount of Rs.41,09,229/- received under the scheme was fully exempt from tax under the relevant provisions. 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. The assessee, therefore, preferred appeal before the CIT(A) against the order of CPC and made the claim of exemption u/s 10(10B) for the first time. However, the Ld.CIT(A) dismissed the appeal of the assessee being barred by limitation and also refused to entertain new claim made for the first time before him.
4. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld.CIT(A), who dismissed the appeal of the assessee.
5. Aggrieved by the order of the Ld.CIT(A), the assessee is in further appeal before us.
6. The Ld. Counsel for the assessee submitted that the amount received by the assessee represented retrenchment compensation received from the Central Government under a scheme approved by the Government. It was submitted that the said amount is fully exempt from tax under section 10(10B) of the Income-tax Act, 1961, and, therefore, the assessee is entitled to full tax exemption. The Ld. Counsel for the assessee further relied upon the following decisions of Coordinate Benches of the ITAT in support of the claim of exemption.
“1. ITA No. 42/Chd/2025 AY 2021-22 in the case of Harish Kumar V/s. ITO Chandigarh dated 30.05.2025.
2. ITA Nos.2387 & 2388/Ahd/2025 in the case Jayeshkumar Tulsidas Sutaria dated 17.02.2026
3. ITA No.2389 & 2390/Ahd/2025 in the case of Suman Nandlal Raval dated 18.02.2026
7. We note that the issue under consideration is squarely covered by the above referred decisions of the Co-ordinate benches of this Tribunal. The Co-ordinate Bench of this Tribunal in ITA Nos. 2387 & 2388/Ahd/2025 for AYs 2020-21 & 2021- 22 vide order dated 17.02.2026, has held as under:
“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 by observing as follows:
“… The Appellant was employed with Bharat Sanchar Nigam Limited (BSNL), a Government of India enterprise. BSNL had notified the Voluntary Retirement Scheme (VRS) 2019 on 04.11.2019, which was duly approved and implemented by the employer. The Appellant opted for this scheme and accordingly received compensation under the VRS, as per the terms laid out by BSNL. The compensation amount received under the scheme was offered to tax by the appellant in the return of income due to lack of awareness about the availability of exemption under Section 10(10B) of the Income Tax Act. 1961. The employer had also deducted TDS on the said amount. No exemption was claimed in the original or revised return for the year by the appellant. The CPC, Bengaluru issued an intimation u/s 143(1) for the said year without granting any exemption, and no rectification or appeal was initiated at that time. The issue on this appeal pertains to exemption u/s 10(10B) of the Income Tax Act
The appellant in his written submission has stated that it was only upon learning about the recent judgment of the Hon’ble ITAT Chandigarh, in the case of Harish Kumar vs. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025, dated 30.05.2025), that the Appellant came to know that the compensation received under the BSNL VRS 2019 scheme is eligible for full exemption u/s. 10(10B), subject to Rule 2BA compliance.
The grievance raised in the grounds of appeal does not emanate from the order appealed against. It is not a case where the appellant claimed exemption u/s.10(10B) and it was denied by the Assessing Officer. The appellant having omitted to claim relief in the return of income can claim the relief by filing the revised return. In cases where the time limit for filing the revised return has expired, the appellant may seek condonation of delay from the jurisdiction PCIT and then proceed with filing the revised return. The issue raised in grounds of appeal does not emanate from the order of intimation u/s.143(1), Hence, the appeal is dismissed…”
5. Aggrieved by the orders of the Ld.CIT(A), the assessee is in further appeal before us.
6. 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.
7. In the result, both the appeals of the assessee are allowed.”
8. Since, there is no change in the legal proposition and the factual matrix of the case, respectfully following the decision of the Co-ordinate Bench, the issue raised by the assessee in the present appeal is decided in favour of the assessee. It is held that the assessee is entitled to exemption u/s 10(10B) of the Act upon the amount in question.
9. In the result, the appeal preferred by the assessee is allowed.
This Order is pronounced on 25/08/2026
