Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(ITAT) 6777

INCOME TAX APPELLATE TRIBUNAL (PUNE BENCH)
MANISH BORAD, Accountant Member
Meghmala Sudhir Pathak – Appellant
Versus
Income Tax Officer – Respondent
ITA Nos.291 and 292/PUN/2026|ITA Nos.294 and 295/PUN/2026|ITA Nos.296 and 308/PUN/2026|ITA Nos.267 and 268/PUN/2026|ITA Nos.269 and 270/PUN/2026|ITA Nos.271 and 272/PUN/2026|ITA Nos.299 and 300/PUN/2026|ITA Nos.333 and 334/PUN/2026|ITA Nos.335 and 337/PUN/2026

Advocates:
For the Appellants/Petitioners: Ld. Counsel for the assessee
For the Respondents: ld. DR

Ex-gratia under public sector VRS for revival via workforce reduction is retrenchment compensation, fully exempt u/s 10(10B) as capital receipt, not limited to Rs.5L u/s 10(10C); new appellate claims admissible.

Headnote:(A) Income-tax Act, 1961 - Sections 10(10B), 10(10C), 143(1)(a), 250 - Exemption on ex-gratia compensation received under voluntary retirement scheme implemented as part of government-approved revival plan for loss-making public sector undertaking - Though nomenclature suggests voluntary retirement, scheme in substance constitutes retrenchment due to financial distress, non-payment of salaries, and workforce reduction objectives - Employees covered under Industrial Disputes Act entitled to full exemption as capital receipt under section 10(10B) without monetary limit, not restricted to Rs.5 lakh cap under section 10(10C) - New claim raised first time in appeal admissible to determine correct tax liability as per Supreme Court ruling that appellate authorities must assess legitimate tax due - Coordinate bench decisions and prior CIT(A) findings followed holding such payments as retrenchment compensation. (Paras 3, 4, 8-17)

(B) Appellate jurisdiction - Delay in filing appeal condoned where justified by subsequent awareness of favorable judicial precedents; claim not raised in return allowable if arises from same facts and promotes correct tax determination - Revenue directed to verify Form 16, allow exemption on revised computation, and grant refund if entitled. (Paras 5, 6, 9)

Facts of the case:
Multiple employees of public sector undertaking received ex-gratia under voluntary retirement scheme notified pursuant to government revival package approved to reduce workforce amid consecutive losses and salary delays. Amount offered to tax post Rs.5 lakh exemption under section 10(10C); full exemption under section 10(10B) claimed first before CIT(A), rejected on delay or novelty grounds, appealed to Tribunal.

Findings of Court:
Compensation qualifies as retrenchment compensation exempt under section 10(10B); assessees directed to file revised computations before AO for verification via Form 16 and grant of refund.

Issues: Whether ex-gratia under scheme is retrenchment compensation eligible for section 10(10B) exemption; admissibility of new claim in appeal; condonation of delay.

Ratio Decidendi: Scheme, despite voluntary label, effectuates retrenchment for revival, qualifying as capital receipt exempt under section 10(10B); appellate forums empowered to entertain additional grounds for accurate tax assessment per Supreme Court; consistent with precedents treating similar payments to covered employees as non-taxable.

Result: All appeals allowed.

Table of Content
1. bsnl vrs 2019 compensation as retrenchment under revival plan. (Para 1 , 2 , 3 , 4)
2. assessee arguments for s.10(10b) exemption; dr opposes. (Para 5 , 6 , 7)
3. prior cit(a)/tribunal rulings allow new s.10(10b) claims. (Para 8)
4. appeals allowed; revised computation for refund. (Para 9 , 10)

आदेश/ORDER

The captioned appeals at the instance of respective assessee(s) pertaining to A.Yrs. 2020-21 and 2021-22 are directed against the separate orders framed by Addl/JCIT(A)-2, Ahmedabad/National Faceless Appeal Centre, Delhi arising of respective Intimation orders passed u/s.143(1)(a) of the Act.

2. Since common issues have been raised in the above appeals I proceed to adjudicate these appeals by way of this consolidated order for the sake of convenience.

3. The common issue raised in these bunch of appeals is that whether the amount received from Bharat Sanchar Nigam Limited (BSNL) on account of the forced retirement through the BNSL Voluntary Retirement Scheme, 2019 is in the nature of Retrenchment Compensation and is a Capital receipt not liable to be taxed as per the provisions of section 10(10B) of the Act.

4. Brief facts relating to all the assessee(s) in the instant appeals are that they are employed with BSNL which is under administrative control of Department of Telecommunications, Govt. of India. In order to revive BSNL, the Union Cabinet in its meeting dated 23.10.2019 approved the revival plan of BSNL and Mahanagar Telephone Nigam Limited, Mumbai (MTNL) vide Office Memorandum dated 29.10.2019 issued by Department of Telecommunications. As part of the revival package the Government decided to reduce the work force through BSNL Voluntary Retirement Scheme, 2019 to the employees of aged 50 years and above and on such retirement Ex-gratia compensation has been paid. The amount so received by the instant employees is stated to have been offered to tax after claiming exemption u/s.10(10C) of the Act Rs.5.00 lakh and have paid the due taxes on the remaining amount of compensation over and above Rs.5.00 lakhs (in cases where such compensation exceeds Rs.5.00 lakhs). Admittedly, in this bunch of appeals the claim that the entire amount of compensation received from BSNL being Capital receipt is not liable to tax as per the provisions of section 10(10B) of the Act has been made for the first time before ld.CIT(A). It is also noticed that in some cases ld.CIT(A) dismissed the appeals on account of delay in filing of the appeals and in some cases ld.CIT(A) has not entertained the new claim made for the first time holding that the same should have been made in the revised return of income. Aggrieved with the finding of ld.CIT(A), the assessee(s) are in appeal before this Tribunal.

5. Ld. Counsel for the assessee at the outset justifying the delay in filing of appeals before ld.CIT(A) submitted that the issue of claiming benefit of exemption u/s.10(10B) of the Act for the amount received as compensation from BSNL for the force retirement has been adjudicated by the Coordinate Benches of Chandigarh as well as Ahmedabad and other Tribunals consistently holding in favour of the assessee(s). He also submitted that in various cases dealt by the Coordinates Benches, the alleged claim of exemption u/s.10(10B) of the Act has been made for the first time and the same has been admitted by the Tribunal and relief has been granted. Reliance placed on the decision of Coordinate Bench, Ahmedabad in the case of Jayesh Kumar Tulsidas Sutaria Vs. ITO (2026) 183 taxmann.com 587 (Ahmedabad- Trib.)

6. So far as the claim that the alleged sum received in the form of Retrenchment Compensation from BSNL under the forced retirement is a Capital receipt not chargeable to tax and exemption available u/s.10(10B) of the Act has been decided in favour of the assessee(s), ld. Counsel for the assessee placed reliance in the following decisions :

1. Harish Kumar Vs. ITO (2025) 175 taxmann.com 379 (Chandigarh-Trib.)

2. Dayal Singh Vs. ITO – ITA 519/cHD/2024

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