BSNL VRS Employees Eligible for Full Exemption of Retrenchment Compensation & Leave Encashment: ITAT Bangalore

Jyothi Selvaraju Vs ITO (ITAT Bangalore)

ITAT Allows BSNL Employees’ Claims for Full Exemption of Retrenchment Compensation and Leave Encashment; Delay, Goetze India and Technical Objections Cannot Defeat Legitimate Relief

The Bangalore ITAT, deciding a batch of 18 appeals involving former BSNL employees who opted for the BSNL Voluntary Retirement Scheme, 2019, held that the entire retrenchment compensation was eligible for exemption under section 10(10B) and the entire leave encashment qualified for exemption under section 10(10AA). The Tribunal observed that merely because the assessees had originally claimed exemption under section 10(10C) or had omitted to claim the correct exemption in their returns, they could not be denied the statutory benefit when the claim was otherwise legally admissible.

The Tribunal noted that the assessees had filed their returns based on the employer’s tax deduction and subsequently sought the correct exemption after judicial decisions recognised that the compensation paid under the BSNL VRS was, in substance, retrenchment compensation eligible under section 10(10B). It held that the delay in filing appeals deserved to be condoned, particularly when numerous Coordinate Benches and several CIT(A)s had already condoned similar delays in identical BSNL cases. The Tribunal further observed that technical considerations should not prevail over substantive justice, especially where denial of relief would result in collection of tax contrary to law.

Rejecting the Revenue’s reliance on the Supreme Court decision in Goetze (India) Ltd., the Tribunal held that the restriction contained therein applies only to the Assessing Officer and does not curtail the powers of appellate authorities to entertain a lawful claim not made in the original return. It also rejected the view that the assessees were required to file revised returns or seek condonation under section 119(2)(b), observing that appellate authorities are fully competent to grant legitimate relief where the facts are already on record.

On the issue of leave encashment, the Tribunal followed the Kerala High Court and other Coordinate Bench decisions holding that employees retiring under the BSNL VRS, 2019 are entitled to the enhanced exemption, treating them as eligible for the benefit available to Central Government employees. Since the issues stood consistently concluded by earlier judicial precedents and no contrary view had been shown, the Tribunal condoned the delays, set aside the orders of the CIT(A), and allowed all the appeals, granting exemption under sections 10(10B) and 10(10AA) to the respective assessees.

Cases Discussed

• Sanchar Nigam Pensioners Welfare Association vs. Union of India (Kerala HC), W.P. No. 16360 of 2023 dated 06/02/2026
• Harish Kumar vs. ITO (ITAT Chandigarh), (2025) 175 taxmann.com 379
• Goetze (India) Ltd. vs. CIT (SC), 284 ITR 323
• ITA No. 992/Bang/2026 (ITAT Bangalore), dated 29/05/2026
• ITA No. 1139/JPR/2025 (ITAT Jaipur), dated 07/10/2025
• ITA No. 233/IND/2025 (ITAT Indore), dated 27/02/2026
• Supreme Court, (2014) 11 SCC 351
• Civil Appeal No. 7696 of 2021 (SC), dated 16/12/2021

FULL TEXT OF THE ORDER OF ITAT BANGALORE

These are the appeals filed by the various assessees challenging the separate orders of the NFAC, Delhi in respect of the A.Ys. 2020-21 and 2021-22. For the sake of easy reference, the details of the appeals as well as the issues involved are tabulated below:

2. The facts involved in all the appeals are similar to each other and in some appeals, one more issue was raised. For the sake of convenience, the common facts are narrated hereunder. Insofar as the other issues involved in some appeals, they will be decided independently.