BSNL VRS-2019 Ex-Gratia Compensation Qualifies as Retrenchment Pay: Surat ITAT Grants Full Exemption Under Section 10(10B)
Overview of the Ruling
The Surat Bench of the Income Tax Appellate Tribunal has delivered a significant ruling in Ashokchandra Chandulal Gheewala Vs ITO (ITAT Surat), holding that the ex-gratia compensation disbursed to employees of Bharat Sanchar Nigam Limited (BSNL) under the BSNL Voluntary Retirement Scheme (VRS), 2019 is, in substance, retrenchment compensation. Consequently, such receipts are entitled to full exemption under Section 10(10B) of the Income-tax Act, 1961, and cannot be restricted to the limited exemption ceiling available under Section 10(10C).
This ruling aligns the Surat Bench with a growing body of consistent decisions from multiple ITAT Benches across the country, further cementing the legal position in favour of former BSNL employees who opted for the VRS-2019 scheme.
Background and Facts of the Case
Profile of the Assessee
The assessee, Mr. Ashokchandra Chandulal Gheewala, was originally a permanent employee of the Central Government, serving under the Department of Telecom. Upon the formation of BSNL as a public sector enterprise, he was absorbed into its workforce. During the previous year 2019-20 (relevant to Assessment Year 2020-21), he opted for the BSNL VRS-2019 scheme and retired from service.
Nature and Quantum of Compensation Received
The assessee received a total ex-gratia amount of Rs. 31,65,890/- under the BSNL VRS-2019 scheme, disbursed in two tranches across consecutive financial years:
- Rs. 9,90,940/- received in the previous year 2019-20 (relevant to AY 2020-21)
- Rs. 21,74,950/- (comprising Rs. 7,12,337 + Rs. 12,09,342 + Rs. 2,53,271) received in the previous year 2020-21 (relevant to AY 2021-22)
Original Tax Treatment by the Assessee
At the time of filing returns, the assessee was not aware of the exemption available under Section 10(10B). As a result:
- For AY 2020-21, he claimed exemption of only Rs. 5,00,000/- under
Section 10(10C)and offered the balance of Rs. 4,90,940/- to tax. - For AY 2021-22, he offered the entire receipt of Rs. 21,74,950/- as taxable income without claiming any exemption.
The Assessing Officer (AO) processed both returns under Section 143(1) of the Income-tax Act, 1961, without granting any additional relief.
Proceedings Before the CIT(A) and the Issue of Delay
After the ITAT Chandigarh Bench delivered its landmark ruling in Harish Kumar Vs. ITO (ITA No. 42/Chd/2025), the assessee became aware that the BSNL VRS-2019 compensation is fully exempt under Section 10(10B). Armed with this knowledge, he promptly filed appeals before the CIT(A) seeking the benefit of full exemption.
However, the CIT(A) noted that the appeals were filed with a delay of 1,554 days in respect of AY 2020-21 and a delay of 1,441 days in respect of AY 2021-22. Finding the explanation for such delay insufficient, the CIT(A) dismissed both appeals as "not admitted," without adjudicating the matter on merits.
ITAT's Decision on Condonation of Delay
Assessee's Argument
Before the Tribunal, the Authorised Representative (AR) for the assessee contended that the delay was solely attributable to the assessee's lack of awareness of his legal entitlement under Section 10(10B). It was only after the pronouncement of the ITAT Chandigarh decision in Harish Kumar Vs. ITO (ITA No. 42/Chd/2025) on 30.05.2025 that he became cognisant of the applicable exemption and promptly moved the appellate forum. The delay was neither deliberate nor tainted by negligence or mala fide intent.