ITAT Ahmedabad Holds BSNL's VRS-2019 Compensation Tax-Exempt

The Income Tax Appellate Tribunal (ITAT), Ahmedabad, has allowed tax exemption on compensation received by employees under Bharat Sanchar Nigam Limited's Voluntary Retirement Scheme (BSNL VRS-2019).

It held that the compensation was exempt from tax and directed the Assessing Officer to recompute the assessees' taxable income and grant refunds, if due.

A Bench comprising Judicial Member Rahul Chaudhary and Accountant Member Gangadhar Panda relied on earlier decisions of the Tribunal, which had recognised the eligibility of compensation received under BSNL VRS-2019 for exemption under Section 10(10B) of the Income Tax Act, 1961.

The provision exempts compensation received by a workman as retrenchment compensation from tax, subject to the conditions and limits prescribed under the provision.

The appeals concerned compensation received by the assessees under BSNL VRS-2019 during the relevant assessment years.

In one case, the assessee had received ₹3,16,797 as compensation but had not claimed exemption while filing the income tax return, believing that the amount was taxable. In another case, the compensation amounted to ₹7,91,017.

The assessees subsequently sought exemption under Section 10(10B) of the Income Tax Act, 1961, relying on earlier Tribunal decisions, including Harish Kumar v. ITO, in which compensation received under BSNL VRS-2019 was held eligible for exemption.

However, the Commissioner of Income Tax (Appeals) rejected their claims, observing that voluntary retirement was distinct from retrenchment and that the Tribunal decisions relied upon by the assessees had misinterpreted the statutory provisions.

The ITAT noted that the Ahmedabad Bench had already allowed similar claims in Jayeshkumar Tulsidas Sutaria v. ITO, as well as in other cases involving compensation received under BSNL VRS-2019.

It observed that the Revenue had failed to distinguish those decisions on either facts or law.

The Tribunal also referred to the Supreme Court's decision in Collector, Land Acquisition, Anantnag v. Katiji and CBDT Circular No. 14 of 1955, which directs tax authorities not to take advantage of an assessee's ignorance of their rights and to assist taxpayers in securing legitimate reliefs.

"...we hold that compensation of Rs. 3,16,797/-received by the Assessee during the relevant previous year under BSNL VRS 2019 is exempt under Section 10(10B) of the Act. The Assessing Officer is, therefore, directed to computed the taxable income of the Assessee accordingly and grant refund due, if any, as per law..", the Court said.

Accordingly, the Tribunal held that the compensation received by the assessees was exempt from tax. It directed the Assessing Officer to recompute their taxable income and grant any refund due in accordance with law.

The assessees were directed to furnish details of the compensation received and the corresponding income computations.

All four appeals were allowed.

For Appellant: Kushboo Shah, Authorised Representative

For Respondent: Yogesh Mishra, Senior Departmental Representative