Case Law Details
Renuka Narasimha Prabhu Vs ITO (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT), Bangalore, decided seven appeals filed by former BSNL employees for Assessment Year 2020-21 concerning exemption of retrenchment compensation received under the BSNL VRS Scheme, 2019 and exemption of leave encashment. The lead appeals were filed by Jayakumar and Renuka Narasimha Prabhu.
In Jayakumar’s case, the assessee, formerly employed with the Department of Telecommunications (DOT) and later transferred to BSNL, received retrenchment compensation of ₹10,82,505 under the BSNL VRS Scheme, 2019. While filing the return, the assessee claimed exemption of ₹5 lakh under Section 10(10C) based on Form 16 issued by the employer. Subsequently, relying on judicial precedents involving similarly placed BSNL employees, the assessee claimed that the compensation constituted retrenchment compensation eligible for full exemption under Section 10(10B). The Assessing Officer denied the claim while processing the return under Section 143(1), and the CIT(A) rejected the appeal despite accepting that the BSNL VRS Scheme amounted to retrenchment, holding that the assessee was not a “workman.”
Before the Tribunal, the assessee relied primarily on the Pune Bench decision in Shraddha Pralhad Arote & Ors. v. ITO, wherein the argument regarding the assessee not being a workman had been considered and rejected. After examining the rival submissions and various judicial precedents, the Tribunal noted that the BSNL VRS Scheme, 2019 formed part of the Government-approved revival and restructuring plan for BSNL, operated through a Department of Telecommunications Office Memorandum and funded by the Central Government. It observed that several Coordinate Benches had consistently held that compensation received under the Scheme qualified for exemption under Section 10(10B). Following those decisions, the Tribunal held that the assessee was entitled to full exemption of ₹10,82,505 under Section 10(10B) and directed the Assessing Officer to grant the exemption.
In Renuka Narasimha Prabhu’s appeal, the assessee received retrenchment compensation of ₹13,49,010 and initially claimed exemption of only ₹5 lakh. The CIT(A) dismissed the appeal as unadmitted due to a delay of 1,048 days. The assessee also sought exemption of ₹11,13,585 towards accumulated leave encashment, whereas only ₹3 lakh had been allowed by the Revenue authorities. The assessee relied upon the Kerala High Court decision in Sanchar Nigam Pensioners Welfare Association v. UOI to contend that BSNL VRS retirees were entitled to leave encashment exemption as they were treated as Central Government employees.
The Tribunal observed that several CIT(A)s had condoned delays ranging from 900 to 2,000 days in similar cases involving BSNL employees and that Coordinate Benches had also condoned delays in numerous appeals on identical facts. Applying the principle of parity, it reversed the CIT(A)’s refusal to condone the delay. On the merits, it followed its findings in Jayakumar’s case and directed grant of full exemption of ₹13,49,010 under Section 10(10B). Regarding leave encashment, the Tribunal followed the Kerala High Court decision and the Coordinate Bench decisions relied upon by the assessee, holding that the assessee was entitled to exemption of ₹11,13,585 under Section 10(10AA). The Tribunal distinguished the Patna High Court decision relied upon by the Revenue, observing that it dealt with parity between State Bank of India employees and Government employees and not with BSNL employees transferred from the Department of Telecommunications.
The Tribunal applied the same reasoning to the remaining appeals filed by Dattatreya Krishnaji Patel, Siddaiah Jayanth, Ramu Madhu Kanthanayaka, Basappa Balarama and Murthy Rangappa. It condoned the delay wherever applicable, directed the Assessing Officer to grant full exemption of retrenchment compensation under Section 10(10B), and, in cases involving leave encashment, directed grant of full exemption under Section 10(10AA). Consequently, all seven appeals were allowed.
Cases Discussed
- Shraddha Pralhad Arote & Ors. v. ITO, ITA No.262 & 261/Pun/2026 dated 24.3.2026
- Sanchar Nigam Pensioners Welfare Association v. UOI (Kerala High Court), W.P. No.16360/2023 dated 6.2.2026
- Civil Jurisdiction Appeal No.12326/2017 (Patna High Court), dated 26.2.2024
- ITA No.1139/JPR/2025 dated 7.10.2025
- Harish Kumar, ITA No.42/Chd/2025
FULL TEXT OF THE ORDER OF ITAT BANGALORE
ITA No.1005/BANG/2026 is filed by the Assessee, JAYAKUMAR, against the order of ld. CIT(Appeals) dated 16-Jan-2026 for the Assessment Year 2020-21 wherein the full exemption of Rs.10,82,505 u/s. 10(10B) of the Income Tax Act, 1961 [the Act] was not allowed to the assessee in respect of retrenchment compensation received as per the BSNL VRS Scheme, 2019, but restricted to exemption of only Rs.5 lakhs.
2. The Assessee is concerned about grant of full exemption of Rs.10,82,505 being compensation received from BSNL.
3. Briefly stated the facts show that the appellant was earlier employed with Department of Telecommunication [DOT] and thereafter with BSNL, was out of service because of the BSNL VRS Scheme, 2019. The assessee received Rs.10,82,505 as part of the compensation. At the time of filing of return of income, the assessee claimed exemption u/s. 10(10C) of Rs.5 lakhs as per Form 16 issued by the employer. The assessee having little knowledge, therefore did not agitate the same. But subsequently a decision of Chandigarh Bench in the case of Harish Kumar and several orders of the CIT(Appeals) in the case similarly placed employees of BSNL came to the knowledge of the assessee and also communicated through the employer held that it is a retrenchment compensation and therefore assessee is entitled to exemption u/s. 10(10B) of the Act of the complete amount.
4. This was denied by the ld. AO while processing the return filed by the assessee u/s. 143(1) of the Act. The assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) in fact agreed with the argument of the assessee that BSNL VRS Scheme, 2019 is actually a retrenchment as per the decision of the Coordinate Bench in the case of Harish Kumar in ITA No.42/Chd/2025, however, as the assessee is not a workman, it was held that assessee is not eligible for exemption u/s. 10(10B) of the Act. Thus, the claim of the assessee was rejected. Aggrieved with the same, the assessee is in appeal before us.
5. The ld. AR, Shri Shambhu Sharma, CA, has submitted a paperbook containing 36 pages. He also submitted a case law paperbook containing 10 judicial precedents. His main reliance was of the decision of the Pune Bench in ITA No.262 & 261/Pun/2026 dated 24.3.2026 in the case of Shraddha Pralhad Arote & Ors. v. ITO. He submits that para 16 of that decision wherein specifically the argument of the ld. DR with respect to whether the assessee is a workman or not, has been considered and rejected. Thus, the issue squarely covers in favour of the assessee.
6. The ld. DR, Shri Ganesh R Ghale, vehemently supported the order of the ld. lower authorities.
7. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities as well as various judicial precedents cited before us. The assessee is a retired employee who initially served with the DOT and subsequently with BSNL. During the year 2020-21 the assessee was retrenched from the services in terms of BSNL VRS Scheme, 2019 which is integral part of reviving and restructuring plan for BSNL approved by the Union Cabinet on 23.10.2019. The Scheme was operated through DOT Office Memorandum and was funded by the Central Govt. According to that Scheme, the assessee received a compensation of Rs.10,82,505. The issue involved is whether the assessee is entitled for exemption u/s. 10(10B) of the Act and thus the whole of the compensation received by the assessee can be claimed as exempt under that section. The Coordinate Benches of ITAT Ahmedabad, Indore & Mumbai have categorially held this issue in favour of the assessee. Further the issue whether assessee is a workman or not, has also been dealt with by the Coordinate Bench in the case of Shraddha Pralhad Arote (supra). In view of the above facts, the assessee has relied upon 144 decisions of various Coordinate Benches dealing with this issue. In view of the above facts, we hold that assessee is eligible for full exemption u/s. 10(10B) of the Act of the compensation received under the BSNL VRS Scheme, 2019 Scheme. The ld. AO is directed to grant full exemption to the assessee u/s. 10(10B) of the Act.
8. Accordingly, the orders of the ld. lower authorities are reversed and the appeal of the assessee is allowed.
9. ITA No.992/BANG/2026 is filed by the assessee, RENUKA NARASIMHA PRABHU, against the order of the ld. CIT(Appeals)-12, Mumbai dated 14.1.2026 for AY 2020-21 wherein the assessee also an employee worked with DOT and thereafter transferred to BSNL and retrenched from services in view of the BSNL VRS Scheme, 2019, got ex gratia compensation of Rs.13,49,010. She initially claimed exemption of only Rs.5 lakhs while filing return of income and subsequently claimed full exemption. The ld. CIT(A) noted that the order u/s. 143(1) of the Act was passed on 28.8.2021 and appeal is filed on 23.12.2025, thus there is a delay of 1048 days which was not explained by the assessee showing sufficient cause and hence the appeal of the assessee was dismissed as unadmitted.
10. Against this, the assessee is in appeal before us. The only claim of the assessee is that assessee should be allowed full exemption of Rs.13,49,010 u/s. 10(10B) of the Act and further relief leave encashment exemption received by the assessee of Rs.11,13,585 should also be allowed to the assessee in completeness, whereas the assessee was allowed only exemption of Rs.3 lakhs. The Hon’ble Kerala High Court in the case of Sanchar Nigam Pensioners Welfare Association v. UOI in W.P. No. 16360/2023 dated 6.2.2026 has already confirmed that VRS retirees from BSNL are entitled to leave encashment tax exemption as they are treated as Central Govt. employees. Thus the assessee must be granted exemption of leave encashment also to the full extent.
11. The ld. AR submitted that a paperbook containing 46 pages and also a judicial paperbook containing 249 pages covering 14 judicial precedents. We have heard the ld. AR.
12. The ld. DR vehemently supported the order of the ld. CIT(A). It was further his claim that assessee being a private employee, could not have been granted benefit of a Central Govt. employee as BSNL is a public sector undertaking, but not Central Govt. Even otherwise, he submitted that the decision of the Hon’ble Patna High Court Civil Jurisdiction Appeal No.12326/2017 dated 26.2.2024 has clearly held that leave encashment limit raised to Rs.25 lakhs is only effective from 1.4.2023, whereas the case of the assessee is pertaining to AY 2020-21.
13. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. With respect to the issue of exemption claimed by the assessee u/s. 10(10B) of the Act in respect of compensation received on retrenchment of Rs.13,49,010 received from BSNL VRS Scheme, 2019, for reasons given by me in ITA No.1005/BANG/2026 in the case of Mr. Jayakumar, I direct the ld. AO to grant the assessee complete exemption of Rs.13,49,010.
14. With respect to the claim of the assessee in respect of accumulated leave encashment of Rs.11,13,585 which is accepted by the revenue authorities only upto Rs.3 lakhs, assessee has relied upon several decisions.
15. However, with respect to condonation of delay, the ld. AR submitted that the ld. CIT(A) should have condoned the delay as in the case of 72 cases before the Coordinate Benches across the country in the case of BSNL employees on identical facts and circumstances, delay has been condoned by the ld. CIT(A) itself ranging from 900 to 2000 days. The assessee has produced the list of 72 cases where the delay is condoned by the ld. CIT(A). Further in case of 144 appeals, the Coordinate Benches have condoned the delay in the case of BSNL employees on identical facts and circumstances. Thus on the parity itself, the appeal of the assessee should have been admitted by the ld. CIT(A). Accordingly, I reverse the order of the ld. CIT(A) in not condoning the delay.
16. With respect to leave encashment, the Hon’ble Kerala High Court has categorically held that all retirees from BSNL in terms of BSNL VRS Scheme, 2019 are entitled to leave encashment tax emption as they are deemed to be Central Govt. employees. The ld. AR has further relied upon the decision of the Coordinate Bench of Jaipur & Indore Benches wherein in ITA No.1139/JPR/2025 dated 7.10.2025 and in ITA No.233/IND/2025 dated 27.2.2026 the enhanced limit of exemption of Rs.25 lakhs introduced by the CBDT Notification dated 31/2023 u/s. 10(10AA) which is beneficial should be applied at the time of appellate adjudication. The case of the assessee before the Indore Bench was for AY 2020-21. We are also confronted with the same assessment year.
17. Decision relied by the ld. DR of the Patna high court deals with parity between employee of State bank of India and the Government employees for the purposes of monetary limit and number of days. It is not on the issue of whether the employees of BSNL can be considered as central Government employees when they have come from department of telecommunication.
18. Therefore, respectfully following the decision of the Coordinate Bench, we hold that assessee should also be granted the benefit of exemption of Rs.11,13,585 in respect of accumulated leave encashment u/s. 10(10AA) of the Act.
19. Accordingly the ld. AO is directed to grant exemption of Rs.13,49,010 u/s. 10(10) in respect of compensation received on retrenchment and further of Rs.11,13,585 in respect of accumulated leave encashment received by the assessee. Thus, the appeal of the assessee is allowed.
20. ITA No.1248/BANG/2026 for AY 2020-21 is filed by DATTATREYA KRISHNAJI PATEL wherein the assessee has claimed exemption of compensation received on retrenchment under BSNL VRS Scheme, 2019 of Rs.17,64,702. In this case also, the ld. CIT(A) did not condone the delay. Therefore for the reasons given by me that on the principle of parity, the delay has been condoned by several CIT(A) and Coordinate Benches, the ld. CIT(A) should have condoned the delay in the case of similarly placed employees of BSNL. Further with respect to compensation on retrenchment of Rs.17,64,702 as decided in the appeal ITA No.1005/BANG/2026 in the case of Mr. Jayakumar, for similar reasons, I direct the ld. AO to grant exemption of retrenchment compensation of Rs.17,64,702. Thus, the appeal of the assessee is allowed and the ld. AO is directed to accordingly grant exemption.
21. ITA No.1285/BANG/2026 for AY 2020-21 is filed by the assessee, SIDDAIAH JAYANTH, claiming exemption received on retrenchment of Rs.14,92,214 received under BSNL VRS Scheme, 2019 and further claimed exemption of Rs.4,37,900 in respect of accumulated leave encashment. I have allowed in ITA No.992/BANG/2026 for AY 2020-21 on both these issues on identical facts and circumstances and therefore for the same reasoning, I direct the ld. AO to allow exemption of compensation received on retrenchment of Rs.14,92,214 and also exemption in respect of accumulated leave encashment of Rs.4,37,900. Accordingly, this appeal is allowed.
22. ITA No.1320/BANG/2026 for AY 2020-21 is filed by RAMU MADHU KANTHANAYAKA (the assessee) claiming exemption of compensation received on retrenchment of Rs.11,49,073 and exemption of accumulated leave encashment of Rs.4,66,093.
23. Both these issues are covered by my decision in the case of ITA No.992/BANG/2026 in the case of Renuka Narasimha Prabhu for AY 2020-21, therefore for the reasons given therein, I direct the ld. AO to allow exemption of retrenchment compensation of Rs.11,49,073 and exemption of accumulated leave encashment of Rs.4,69,093 in the case of this assessee also. The appeal of the assessee is allowed.
24. ITA No.1342/BANG/2026 for AY 2020-21 is filed by the assessee, BASAPPA BALARAMA, wherein the assessee has claimed compensation received on retrenchment of Rs.14,96,509 received from BSNL VRS Scheme, 2019. For the reasons given in ITA No.992/BANG/2026 and ITA No.1005/BANG/2026 for AY 2020-21, I direct the ld. AO to grant the exemption of compensation received on retrenchment amounting to Rs.14,96,509. Accordingly the appeal of the assessee is allowed.
25. ITA No.1427/BANG/2026 for AY 2020-21 is filed by MURTHY RANGAPPA wherein the claim of the assessee is the full exemption of Rs.11,49,073 u/s. 10(10B) of the Act as the assessee has received compensation on retrenchment under BSNL VRS Scheme, 2019. The assessee’s second claim is that he has received Rs.4,69,093 as leave encashment for which the whole of the amount should be the exempt income. I have already dealt with both the issues in ITA No.992/BANG/2026. Accordingly the ld. AO is directed to allow the exemption of the full sums received by the assessee in the instant case with respect to retrenchment compensation as well as the leave encashment. The appeal of the assessee is allowed.
26. In the result, all the assessee’s appeals are ALLOWED.
Order pronounced in the open court on 29th May, 2026
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