BSNL VRS Compensation Held Fully Exempt – ITAT Pune Treats It as Retrenchment u/s 10(10B)

 

In a batch of appeals, the ITAT Pune examined whether ex-gratia compensation received by BSNL employees under the Voluntary Retirement Scheme (VRS), 2019 is taxable or exempt.

The Tribunal held that although the scheme is termed as “VRS”, in substance it amounts to retrenchment undertaken as part of a Government-approved revival plan to reduce workforce. Accordingly, such compensation is in the nature of capital receipt and qualifies for exemption under section 10(10B), and not merely limited exemption of Rs.5 lakh under section 10(10C).

It was further held that even if the assessee had originally claimed exemption under section 10(10C), a fresh claim under section 10(10B) can be raised before appellate authorities, as they are duty-bound to determine correct tax liability.

Relying on multiple coordinate bench decisions and High Court rulings, the Tribunal concluded that the compensation received is retrenchment compensation under the Industrial Disputes Act, hence fully exempt, and directed the AO to grant exemption on the entire amount.

Key Ratio:

Substance over form prevails – BSNL VRS compensation, though nomenclated as VRS, is in effect retrenchment compensation and fully exempt u/s 10(10B).

The copy of the order is as under:

1774340708-tRcZGW-1-TO