Case Law Details
Ashokchandra Chandulal Gheewala Vs ITO (ITAT Surat)
Surat ITAT Holds BSNL VRS-2019 Ex-gratia Eligible for Full Exemption as Retrenchment Compensation under Section 10(10B)
The Surat Bench of the ITAT held that ex-gratia compensation received by BSNL employees under the BSNL Voluntary Retirement Scheme (VRS), 2019 is in the nature of retrenchment compensation and is eligible for exemption under section 10(10B) of the Income-tax Act, rather than the limited exemption available under section 10(10C).
The assessee, a retired BSNL employee, had initially offered the VRS compensation to tax after claiming only the ₹5 lakh exemption under section 10(10C). Subsequently, after becoming aware of favourable Tribunal decisions holding that BSNL VRS compensation qualifies as retrenchment compensation under section 10(10B), he filed appeals claiming full exemption. Though the CIT(A) dismissed the appeals on account of substantial delay, the Tribunal condoned the delay, observing that the assessee had acted promptly upon learning the correct legal position and that substantial justice should prevail over technical considerations.
On merits, the Tribunal followed a consistent line of decisions of the Chandigarh, Ahmedabad, Pune, Mumbai and Bangalore Benches, which had held that the BSNL VRS-2019 scheme was essentially a retrenchment measure introduced to reduce surplus manpower and revive BSNL, notwithstanding its nomenclature as a voluntary retirement scheme. Therefore, the compensation received thereunder was held to be eligible for exemption under section 10(10B).
Accordingly, the Tribunal directed the Assessing Officer to grant exemption under section 10(10B), subject to verification of the computation and other necessary particulars. Since the compensation had been received over two assessment years (AYs 2020-21 and 2021-22), the AO was also directed to pass orders for both years simultaneously to ensure proper computation of the exemption and grant consequential relief, including refund, wherever due. The appeals were allowed for statistical purposes.
Cases Discussed
- Harish Kumar Vs. ITO (ITAT Chandigarh), ITA No. 42/Chd/2025
- Renuka Narsimha Prabhu Vs. ITO (ITAT Bangalore), ITA 992/Bang/2026
- Bajirao Shankar Jadale Vs. ITO (ITAT Mumbai), ITA No. 1389/Mum/2026
- Shraddha Prahlad Arote Vs. Income-tax Officer (ITAT Pune), ITA No. 262 and 261/Pun/2026
- Jayesh Kumar Tulsidas Sutaria Vs. The Income-tax Officer (ITAT Ahmedabad), ITA Nos. 2387 & 2388/Ahd/2025
- Collector, Land Acquisition Vs Mst. Katiji and others (Supreme Court of India), 1987 AIR 1353, 1987 2 SCC 387
- Sh. Sarabjit Singh vs Income Tax Officer (ITAT Chandigarh), ITGA No. 764/Chd/2018
- Sh. Rajeshwar Sharma & Others Vs. ITO (ITAT Chandigarh), ITA No.870/Chd/2018 & Others
- M/S Hindustan Photo Film Workers Welfare Centre (Madras High Court), WP No. 18566 of 2015 dated 17.03.2017
FULL TEXT OF THE ORDER OF ITAT SURAT
The captioned two (2) appeals are filed by assessee; the details of these appeals are as under:
(i) ITA 433/SRT/2026 is directed against the order of first appeal dated 26.02.2026 passed by learned (Appeals)-Addl/JCIT(A)-7, Delhi [“Ld. CIT(A)”], which in turn arise out of the intimation of assessment dated 28.08.2021 passed by learned CPC, Bengaluru [“AO”] u/s 143(1) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2020-21.
(ii) ITA 434/SRT/2026 is directed against the order of first appeal dated 26.02.2026 passed by Ld. CIT(A), which in turn arise out of the intimation of assessment dated 13.01.2022 passed by Ld. AO u/s 143(1) of the Act for Assessment-Year [“AY”] 2021-22.
The assessee has raised the grounds as mentioned in respective Appeal Memos (Form No. 36).
2. The background facts leading to these appeals are as under:
(i) The assessee-individual was a permanent employee of Central Govt. in the Department of Telecom. Subsequently, he was absorbed in BSNL, a public sector enterprise owned by Central Govt. During the previous year 2019-20 (relevant to AY 2020-21), he retired from BSNL and claims to have received a total sum of Rs. 31,65,890/- in two consecutive years as ‘ex-gratia under Voluntary Retirement Scheme, 2019 (VRS)’. The year-wise break-up of the receipt of Rs. 31,65,890/-as per submission of Ld. AR is like this – Rs. 9,90,940/- was received in the previous year 2019-20 (relevant to AY 2020-21) in which the assessee got retirement and remaining Rs. 21,74,950/- [Rs. 7,12,337 + 12,09,342 + 2,53,271] was received in the subsequent previous year 2020-21 (relevant to AY 2021-22). While filing return of AY 2020-21, the assessee offered taxable amount of Rs. 4,90,940/- after claiming exemption of Rs. 5,00,000/- u/s 10(10C) and while filing return of AY 2021-22, the assessee offered full receipt of Rs. 21,74,950/- as taxable amount. The Ld. AO processed assessee’s returns u/s 143(1) accordingly.
(ii) Subsequently, when the assessee came to know that the said receipts were fully exempted u/s 10(10B) of the Act, the assessee filed appeals before Ld. CIT(A) and contested for exemption u/s 10(10B). Precisely, the assessee claimed that the impugned “ex-gratia” receipts were in the nature of “Retrenchment compensation exempt u/s 10(10B)”. The Ld. CIT(A), however, found that the appeals filed by assessee were delayed [delay of 1,554 days in AY 2020-21 and delay of 1,4416 days in AY 2021-22]. Being unsatisfied with the explanation given by assessee for condonation of delays, the Ld. CIT(A) dismissed assessee’s appeals as “not admitted” without giving any adjudication on merits of assessee’s claim.
(iii) Now, aggrieved by orders of Ld. CIT(A), the assessee has come in present appeals before ITAT.
3. Ld. AR for the assessee at first addressed the issue relating to the delay in filing appeals before Ld. CIT(A). It was submitted that the assessee was unaware that the ex-gratia amounts received by him under the BSNL Voluntary Retirement Scheme, 2019 were eligible for exemption u/s 10(10B) of the Act. It was only after pronouncement of the decision of ITAT, Chandigarh Bench in Harish Kumar Vs. ITO, ITA No. 42/Chd/2025, order dated 30.05.2025 wherein it was held that the amounts received by BSNL employees under VRS, 2019 were eligible for exemption u/s 10(10B), the assessee became aware of his legal entitlement and immediately preferred appeals before Ld. CIT(A). It was thus submitted that the delay was occasioned solely due to lack of awareness of the legal position and was neither deliberate nor attributable to any negligence, lethargy or mala fide intention on the part of the assessee. The Ld. AR prayed to condone the delay occurred at the stage of filing appeals before Ld. CIT(A).
4. Ld. DR for revenue opposed the Ld. AR’s request.
5. We have carefully considered rival submissions and perused the material available on record. We find that the explanation furnished by the assessee appears to be bona fide and remains uncontroverted. The assessee approached the Ld. CIT(A) after becoming aware of the legal position emerging from the aforesaid decision of the ITAT, Chandigarh bench. Therefore, the assessee has a “sufficient cause” for occurrence of delay in filing appeals before Ld. CIT(A). It is a settled position by Hon’ble Supreme Court in Collector, Land Acquisition Vs Mst. Katiji and others 1987 AIR 1353, 1987 2 SCC 387 that whenever substantial justice and technical considerations are opposed to each other, the cause of substantial justice must be preferred by adopting a justice-oriented approach. Thus, taking into account the facts of cases and the decision of Hon’ble Supreme Court, we take a judicious view and condone delays in filing appeals before Ld. CIT(A).
6. On merits, the assessee is claiming that the entire amount of ex-gratia receipt of Rs. 31,65,890/- from BSNL, must be treated as “Retrenchment compensation exempt u/s 10(10B)” and not as “VRS compensation exempt u/s 10(10C)”.
7. Ld. AR for assessee submitted that this very issue has already been analysed and adjudicated by different benches of ITAT in favour of assessee. A few decisions in this regard are:
(i) ITAT, Chandigarh – Harish Kumar Vs. ITO, ITA No. 42/Chd/2025, order dated 30.05.2025
(ii) ITAT, Ahmedabad – Jayesh Kumar Tulsidas Sutaria Vs. The Income-tax Officer, ITA Nos. 2387 & 2388/Ahd/2025, order dated 17.02.2026 (Learned Judicial Member was a part of the bench)
(iii) ITAT, Pune – Shraddha Prahlad Arote Vs. Income-tax Officer, ITA No. 262 and 261/Pun/2026 and others, order dated 24.03.2026
(iv) ITAT, Mumbai – Bajirao Shankar Jadale Vs. ITO, ITA No. 1389/Mum/2026, order dated 10.04.2026.
(v) ITAT, Banglore – Renuka Narsimha Prabhu Vs. ITO, ITA 992/Bang/2026, order dated 29.05.2026
8. Accordingly, Ld. AR requested to grant benefit of above decisions to the present assessee/appellant.
9. Per contra, Ld. DR for revenue supported the orders passed by Ld. CIT(A). He contended that the assessee received ex-gratia under VRS scheme framed and implemented by BSNL and it is not a case of retrenchment compensation at all. Therefore, the impugned receipts were eligible for exemption u/s 10(10C) and not u/s 10(10B) as held by Ld. CIT(A). He submitted that the Ld. CIT(A) has rightly granted due relief to assessee by giving exemption u/s 10(10C). He submitted that there is no infirmity, perversity or adversity in the orders of Ld. CIT(A), the same must be upheld.
10. We have considered rival contentions of both sides and perused the documents held in case file including the orders of lower authorities in the light of provisions of law and the judicial rulings quoted in earlier para. On a careful consideration, we find that the controversy before us stands adjudicated by different benches of ITAT. In the above-mentioned decisions, the ITAT Benches have held that the compensation received by BSNL employees under VRS, 2019 scheme was in the nature of ‘retrenchment compensation’ eligible for exemption u/s 10(10B). For an immediate reference, we re-produce below the relevant portions of first two decisions quoted in earlier para:
(a) Harish Kumar Vs. ITO, ITA No. 42/CHD/2025, ITAT, Chandigarh:
“3. The brief facts of the case that the Assessee was an employee of the Department of Telecommunication Services and Department of Telecom Operations (DOT). The department had been transformed in BSNL w.e.f. 01/10/2000. The assessee had opted BSNL Retirement Scheme 2019 (Voluntary Retirement Scheme) and he received total emoluments of Rs. 30,17,000/-. The Assessee had claimed exemption of Rs. 30,17,000/- u/s 10(10B) of the Act in its ITR. However, the Assessing Officer disallowed Rs. 25,17,000/- out of total emoluments of Rs. 30,17,000/- and added back to the income of the Assessee as the scheme was on voluntary basis not compulsory as per 2nd proviso of Section 10(10B) of the Act. The Assessee has claimed that the Assessing Officer has wrongly added amount of Rs. 25,17,000/- on account of disallowing of compensation under BSNL Retirement Scheme 2019. Further, the Assessing Officer has wrongly allowed exemption u/s 10(10B) of the Act on account of compensation under scheme approved by Central Government to the extent of Rs. 5,00,000/- only in place of Rs. 30,17,000/-. Since as per the A.O., the scheme was on voluntary basis and not compulsory therefore, he restricted exemption upto Rs. 5,00,000/- as per 2nd proviso of section 10(10B) of the Act. Aggrieved from the above order, the assessee preferred appeal before the CIT(A), how remained unsuccessful.
4. I have heard the rival contentions and gone through record. The Ld. counsel for the assessee has demonstrated before me that though, in the nomenclature, the scheme has been mentioned as VRS (Voluntary Retirement Scheme), however, in fact the same was retrenchment scheme. The Assessee was an employee of the Bharat Sanchar Nigam Limited (BSNL). The BSNL had incurred losses during the three consecutive years. The salaries of the employees were not paid. The Assessee and other employees were over the age of 50 years and were not conversant with the new technology adopted by the BSNL. The BSNL, therefore, launched Voluntary Retirement Scheme to shed the extra employees. The Ld. counsel in this respect has referred to the revival scheme of the Department of Telecommunications dated 29.12.2019, whereby, the purposes of the scheme was revival of BSNL and MTNL by way of reducing employees cost. Inter-alia, The compensation/exgratia on VRS was to be paid in two installments of 50% each during the financial years 1920-21 and 2020-21.
5. In this case, the Assessee received first installment of compensation/ exgratia on VRS during the financial year 2019-20 upon which the claim exemption u/s 10(10B) of the Act to the Assessee has been allowed by the Ld. CIT(A)in the appellate order in relation to the assessment year 2020-21. The relevant part of the order of Ld. CIT(A) is reproduced as under :-
“The appellant was employee of Department of Telecom Services. The Government of India in its Cabinet meeting dated 23.10.2019 approved the proposals of DOT for revival of BSNL and MTNL vide its Cabinet Note dated 22.10.2019. In its Circular Dated 04.11.2019 the BSNL envisaged a Scheme for effective implementation of VRS and invited options from employees under the scheme for seeking voluntary retirement. Reliance is also placed by the appellant upon the decision of Hon’ble Madras High Court in the case of M/S Hindustan Photo Film Workers Welfare Centre WP No. 18566 of 2015 dated 17.03.2017. Facts of this case is identical to the case of HTML-TD. Both the entitles were closed in similar situation. Therefore, the provisions of section 10(10B) of the Act are clearly attracted in the case of the appellant.
3.10 Further, the decision dated 20.09.2023 of Jurisdictional Hon’ble’ble ITAT Chandigarh A” Bench was also perused wherein several appeals of employees of HTML-TD were taken up. The Hon’ble ITAT opined in para 48 that the matter had been examined by the Hon’ble Madras High Court and thereafter has attained finality in view of dismissal of the SLP by Hon’ble Supreme Court and also added that: “such matters need not be litigated any further”.
3.11 Respectfully following the decision of the Jurisdictional Hon’ble ITAT and for the reasons mentioned above, the A.O. is directed to allow compensation received by the appellant at the time of VRS as exempt income u/s 10(10B) of the Act. Accordingly, Ground No.1 stands Allowed.”
7. Copy of ITAT order has been submitted, this decision dated 20.09.2023 Hon’ble ITAT Chandigarh Bench was perused wherein several appeals of employees of HTMLTD were taken up. The Hon’ble ITAT opined in Para 48 that the matter had been examined by the Hon’ble Madras High Court and thereafter has attained finality in view of dismissal of the SLP By Hon’ble Supreme Court and also added that “such matters need not be litigated any further”.
8. Respectfully following the decision of the Jurisdictional Hon’ble ITAT, the A.O is directed to allow compensation received by the appellant at the time of VRS as exempt income u/s 10(10B) of the Act.
Accordingly, the only one ground raised by the appellant in this appeal is allowed.”
6. However, in respect of the 2nd installment of compensation/exemption on VRS the claim of the assessee has been disallowed, which in my view is not justified. When the claim of the Assessee relating to the first installment has been accepted by the Ld. CIT(A). There was no question to reject the claim of the Assessee in relation to second installment of compensation received by the Assessee. Moreover, Ld. counsel for the Assessee had duly demonstrated that the Assessee had not been paid salary for the last so many months and there was no option to the assessee than to accept the VRS scheme which, in fact, was retrenchment scheme in the garb of the VRS scheme. The amount received by the Assessee was, in fact, the compensation on account of retrenchment.
7. Faced with somewhat similar facts and circumstances, the co-ordinate Bench of the Tribunal in the case of “Sh. Sarabjit Singh vs Income Tax Officer” ITGA No. 764/Chd/2018, vide order dated 06.04.2019 has held as under :-
“We have considered the rival submissions and have also gone through the record. The issue is squarely covered by the decision of the Co-ordinate Chandigarh Bench of the Tribunal the Case of other employees in similar facts and circumstances vide order dated 11.3.2019 passed in ITA No.870/Chd/2018 & Others titled as ‘Sh.Rajeshwar Sharma & Others Vs. ITO’. This Tribunal observed as under:
“Though in strict terms, it may not be said that the amount received by the assessee was on account of commutation of pension, however, the fact on the file is that the aforesaid amount was given by the new employer who has taken over the company from the earlier employer and he had terminated the services of the employees on account of job retrenchment. The amount was paid as a Compensation for retrenchment of services taking into consideration the length of service, basic salary, the age and other factors. In our view, the said amount is a compensation paid by the employer while terminating the services of the employee on account of 1oss of job and further subsistence, thus, the said amount was just a capital receipt in the hands of the assessee. In fact, no part of amount received by the assessee is taxable. We, therefore, allow the appeal of the assessee and delete the disallowance and consequent additions made by the Assessing officer in this respect. We further hold that the assessee is entitled to claim refund / adjustment of the tax paid in respect of the aforesaid compensation received, if so, claimed by the assessee. Following the above decision of the Tribunal in the identical facts and circumstances, this appeal of the appellant stands allowed with identical directions.”
8. In view of the above discussion and following the above decision of the Tribunal, the impugned disallowance made by the lower authorities is ordered to be deleted.”
(b) Jayesh Kumar Tulsidas Sutaria Vs. The Income-tax Officer, ITA Nos. 2387 & 2388/Ahd/2025, order dated 17.02.2026 (Present Judicial Member was a part of the bench which rendered this decision):
“3. The assessee was employed with Bharat Sanchar Nigam Limited (BSNL), a Government of India enterprise. BSNL notified the Voluntary Retirement Scheme (VRS) 2019 on 04.11.2019, which was duly approved and implemented by the employer. The assessee opted for the scheme and accordingly received compensation under the VRS, as per the terms laid down by BSNL. It is submitted that the assessee had not been paid regular salary for several months prior to opting for the scheme and was under severe financial and professional uncertainty. In view of these circumstances, the assessee opted for the scheme as a measure of financial security. The compensation received by the assessee was in the nature of compensation under the BSNL VRS-2019 scheme. 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 earning 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.
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(108) 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.”
11. Respectfully following above decisions, we too hold that the impugned receipts from BSNL are in the nature of retrenchment compensation eligible for exemption u/s 10(10B). Accordingly, we direct the AO to allow exemption u/s 10(10B) of the Act, subject to verification of necessary details. We also direct the assessee to file a computation of exemption u/s 10(10B) to the AO. Needless to mention that the AO shall grant due opportunities to assessee and grant consequential relief, including refund, if any, in accordance with law. We also make it clear that since the receipts are spread over two consecutive years, viz. AY 2020-21 and 2021-22, the AO shall preferably pass orders of both years simultaneously to avoid any ambiguity in the working of exemption. Ordered accordingly.
12. Resultantly, these appeals are allowed for statistical purposes.
Order pronounced in open court on 17/07/2026
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