ITAT Ahmedabad Allows Former BSNL Employee's Claim For Tax Exemption On VRS Compensation

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has recently allowed a former BSNL employee's claim for exemption on compensation received under the BSNL Voluntary Retirement Scheme (VRS).

The tribunal held that he was entitled to the benefit under Section 10(10B) of the Income Tax Act by following earlier coordinate Bench decisions on the issue.

Section 10(10B) of the Income Tax Act provides a tax exemption for eligible retrenchment compensation received by an employee, subject to the prescribed conditions.

A bench comprising Judicial Member Sanjay Garg and Accountant Member Narendra Prasad Sinha allowed the appeal filed by Jashvantbhai Ashabhai Patel, a former BSNL employee. The appeal challenged the order of the Commissioner of Income Tax (Appeals).

Section 10(10B) of the Income Tax Act exempts eligible retrenchment compensation received by an employee, subject to the prescribed conditions.

The tribunal noted that the assessee had initially offered the VRS compensation of ₹12.14 lakh to tax. He did not claim the exemption in either the original or revised return. He also did not challenge the intimation issued under Section 143(1) of the Income Tax Act.

The Bench further recorded that the assessee claimed he became aware of the exemption only after the Chandigarh Bench of the ITAT, in Harish Kumar v. ITO, held that compensation received under the BSNL VRS-2019 scheme qualified for exemption under Section 10(10B).

The bench noted, "It was only upon learning 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."

The tribunal observed that the issue was squarely covered by earlier coordinate Bench decisions. It found no change in either the legal position or the factual matrix of the case.

The bench held, "Since, there is no change in the legal proposition and the factual matrix of the case, respectfully following the decision of the Co-ordinate Bench, the issue raised by the assessee in the present appeal is decided in favour of the assessee."

Accordingly, the tribunal held that the assessee was entitled to exemption under Section 10(10B) on the VRS compensation. It allowed the appeal.