Chennai ITAT: BSNL Retrenchment Benefits Exempt Under Sections 10(10B) & 10(10AA) Even Without Revised Return Filing

Case Overview

Case Name: Hariharan Rajeswari Vs ITO (ITAT Chennai)
Appeal Numbers: ITA No. 3182 & 3179/Chny/2026
Date of Order: 27/07/2026
Assessment Years: 2020-21 & 2021-22
Forum: Income Tax Appellate Tribunal, Chennai

Background and Factual Matrix

The assessee in this case was a former employee of Bharat Sanchar Nigam Limited (BSNL), a Central Government Public Sector Undertaking. BSNL, with the sanction of the Central Government, implemented a voluntary separation and workforce restructuring scheme aimed at reducing its employee-related expenditure and restoring financial stability. Employees who chose to participate in this scheme were eligible to receive ex-gratia compensation in connection with their retrenchment from service.

The assessee exercised the option under the scheme and, as a consequence, received a total ex-gratia compensation aggregating to Rs. 59,99,833/-, out of which a sum of Rs. 29,11,062/- was received during the relevant financial year corresponding to Assessment Year 2020-21.

At the time of filing the return of income for AY 2020-21 on 07-11-2020, the assessee, owing to insufficient understanding of the applicable provisions of the Income Tax Act, 1961, claimed exemption under Section 10(10AA) to the extent of Rs. 3,92,227/- and under Section 10(10C) to the extent of Rs. 5,00,000/-, and discharged tax liability on the remaining amounts. The correct and more beneficial exemptions available under Section 10(10B) were not claimed at all, or were only partially availed, purely on account of a lack of awareness of the correct legal position.

The return was processed by the Central Processing Centre (CPC), Bengaluru under Section 143(1) of the Act vide order dated 07.09.2021, and the intimation was issued allowing only the exemptions as originally claimed by the assessee in the return.

Subsequently, the assessee came across decisions rendered by Coordinate Benches of the ITAT, including the ruling in Harish Kumar Vs ITO (ITA No.42/Chd./2025), as well as the binding precedent laid down by the jurisdictional Madras High Court in Hindustan Photo Film Workers' Welfare Centre (CITU) Government of India, New Delhi [2017] 79 taxmann.com 298 (Mad.) dated 17.03.2017. These decisions unambiguously settled that BSNL employees who opted for such retrenchment schemes are entitled to claim exemption under Section 10(10B) of the Income Tax Act, 1961.

Armed with this knowledge, the assessee preferred an appeal under Section 250 of the Act before the Ld. Addl./JCIT (A), Kochi, and raised fresh claims for the following additional exemptions:

  • Rs. 9,07,256/- under Section 10(10B) of the Act (AY 2020-21)
  • Rs. 11,11,579/- under Section 10(10AA) of the Act (AY 2020-21)
  • Rs. 30,88,771/- under Section 10(10B) of the Act (AY 2021-22)

However, the Ld. Addl./JCIT (A), Kochi, vide order dated 31.03.2026, rejected these fresh claims on the singular technical ground that the assessee had not filed a revised return of income to incorporate these claims before approaching the appellate forum.

Aggrieved by this rejection, the assessee preferred two separate appeals before the Chennai Bench of the Income Tax Appellate Tribunal.

Grounds of Appeal

ITA No. 3182/Chny/2026 (AY 2020-21)

The primary grievances raised by the assessee in this appeal were as follows: