ITAT Pune Allows Complete Section 10(10B) Exemption for BSNL VRS-2019 Payments
Background and Context
The Pune Bench of the Income Tax Appellate Tribunal (ITAT), with Dr. Manish Borad as Accountant Member, decided a group of appeals filed by several assessee(s) who had served in Bharat Sanchar Nigam Limited (BSNL). These appeals related to Assessment Years 2020-21 and 2021-22 and challenged separate orders passed by the Addl/JCIT(A)-5, Chennai and the National Faceless Appeal Centre, Delhi.
All appeals arose out of intimations issued under Section 143(1)(a) of the Income Tax Act, 1961, where the Centralized Processing Centre had processed returns and accepted tax paid on ex-gratia received under the “BSNL Voluntary Retirement Scheme, 2019” (BSNL VRS-2019).
The central controversy was whether:
- the ex-gratia paid under BSNL VRS-2019 should be treated as:
- Voluntary retirement compensation eligible only for a limited exemption of ₹5,00,000 under
Section 10(10C), or - Retrenchment compensation under a Government-approved revival/downsizing plan, fully exempt as a capital receipt under
Section 10(10B)(subject to the limits/conditions within that clause).
- Voluntary retirement compensation eligible only for a limited exemption of ₹5,00,000 under
The assessee(s) had generally filed their returns claiming exemption of ₹5,00,000 under Section 10(10C) and offered the balance compensation to tax. Subsequently, based on emerging judicial precedent on BSNL VRS-2019, they sought to re-characterize the entire ex-gratia as retrenchment compensation exempt under Section 10(10B) for the first time at the appellate stage.
Common Issue in All Appeals
Nature of BSNL VRS-2019 Compensation
The Tribunal recorded that in all these appeals, the assessee(s):
- Were employees of BSNL, an entity under the administrative control of the Department of Telecommunications, Government of India.
- Opted for exit under BSNL VRS-2019, which was rolled out after the Union Cabinet, in its meeting dated 23.10.2019, approved a revival plan for BSNL and Mahanagar Telephone Nigam Limited (MTNL).
- Received ex-gratia payments under this scheme after attaining 50 years of age, as part of a Government-backed workforce rationalization measure.
In the original returns, each assessee had:
- Claimed exemption of ₹5,00,000 under
Section 10(10C), and - Paid tax on the remaining component of the ex-gratia amount (where the compensation exceeded ₹5,00,000).
Later, during appellate proceedings before the CIT(A), they argued that:
- The BSNL VRS-2019 was not an ordinary voluntary retirement scheme but a compulsory downsizing / forced retirement measure embedded in a Government revival and restructuring package.
- Hence, the payments had the character of retrenchment compensation and therefore were capital receipts covered by
Section 10(10B), rather than bySection 10(10C).
In a number of cases, the CIT(A):
- Declined to condone delay in filing appeals, or
- Refused to consider the fresh
Section 10(10B)claim on the ground that such a claim could only be made through a revised return, not at the appellate stage.
These findings were challenged before the ITAT.
Admissibility of New Legal Claim at Appellate Stage
Reliance on Supreme Court in Jute Corporation of India Ltd. v. CIT
The Tribunal referred to the decision of the Hon’ble Supreme Court in Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688 (SC). In that judgment, the Supreme Court held that:
- Appellate authorities, including the first appellate authority, possess jurisdiction to entertain new claims or additional grounds, even if such claims were not raised before the Assessing Officer.
- The overarching objective is to ensure that the correct tax liability of the assessee is determined, and that the Revenue does not retain any tax which is not legitimately due.
Applying this principle, the ITAT concluded that the CIT(A) was not justified in rejecting the assessee(s)’ new legal plea under Section 10(10B) merely because:
- It was not made in the original return, or
- No revised return had been filed.
The Tribunal emphasized that when a legal claim is squarely supported by existing judicial precedent and pertains to proper determination of taxable income, the appellate forums are duty bound to examine it on merits.