Ex-Gratia Under BSNL Voluntary Retirement Scheme 2019

Ex-Gratia Under BSNL Voluntary Retirement Scheme 2019 Qualifies for Exemption Under Section 10(10B)

Issue

Whether an assessee who opted for the BSNL Voluntary Retirement Scheme, 2019 can claim exemption under Section 10(10B) for ex-gratia compensation before appellate authorities, even if claimed under a wrong provision or omitted in the original/revised return.

Facts

Assessee & Assessment Year: The assessee, an employee of BSNL, opted for retirement under the BSNL Voluntary Retirement Scheme (VRS), 2019 and received ex-gratia compensation during AY 2021-22.
Original Return & Processing: In the original return of income, the assessee claimed exemption under Section 10(10C) and offered the balance compensation to tax. The return was processed under Section 143(1).
Subsequent Exemption Claim: Relying on coordinate Bench decisions holding that ex-gratia compensation received under BSNL VRS, 2019 qualifies as retrenchment compensation, the assessee claimed exemption under Section 10(10B).
Rejection by CIT(A): The Commissioner (Appeals) rejected the claim on the ground that the deduction was not claimed in the original or revised return, relying on the Supreme Court ruling in Goetze (India) Ltd. v. CIT.

Decision

Claim of Wrong Provision: Held that since the assessee mistakenly claimed deduction under a wrong provision in the original return, there was no bar on raising the issue for the first time before the CIT(A), especially when the Department accepted the benefit for BSNL employees [Paras 14–18].
Inapplicability of Goetze (India) Ltd.: Held that the Supreme Court’s ruling in Goetze (India) Ltd. restricts only the powers of the Assessing Officer to entertain fresh claims without a revised return, but does not limit the powers of appellate authorities [Paras 14–18].
Entitlement to Section 10(10B) Exemption: Held that following earlier coordinate Bench decisions, ex-gratia compensation received by BSNL employees under VRS 2019 qualifies for exemption under Section 10(10B) [Paras 14–18].

Key Takeaways

Appellate Authority Powers: The bar in Goetze (India) Ltd. applies strictly to Assessing Officers; appellate authorities retain full power to consider bona fide legal claims not raised in the original or revised return.
BSNL VRS 2019 Compensation: Ex-gratia payments received by BSNL employees under the Voluntary Retirement Scheme, 2019 are eligible for tax exemption as retrenchment compensation under Section 10(10B).
Correction of Mistaken Claims: A taxpayer is not precluded from claiming legitimate tax exemptions before appellate bodies merely due to a wrong section reference or oversight in the initial filing.

IN THE ITAT BANGALORE BENCH ‘B’

Mysore Ramaswamy Harish

Income-tax Officer

SOUNDARARAJAN K., Judicial Member
and BALAKRISHNAN S., Accountant Member

IT Appeal No. 1833 (Bang) OF 2026
[Assessment year 2021-22]

SEPTEMBER 23, 2026

Sumanth Sudharshan, Adv. for the Appellant. Pradeep S., Addl. CIT-DR for the Respondent.

ORDER

Soundararajan K., Judicial Member. – This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 28/02/2026 in respect of the A.Y. 2021-22.

2. The brief facts of the case are that the assessee is an individual and an employee of the BSNL who was opted to retire under the BSNL Voluntary Retirement Scheme, 2019. The Scheme was formulated for restructuring as well as to reduce the cost faced in view of the losses suffered by BSNL. The assessee was aged about 50 years and not conversant with the new technological systems being adopted by BSNL and therefore the organization had formulated the VRS, 2019. Even though the Scheme was named as Voluntary Retirement Scheme, in sum and substance, it is a retrenchment scheme designed to compulsorily reduce the workforce.

3. Under the said scheme, the employee was entitled to receive ex-gratia / compensation and the disbursement was made in four equal installments and the first installment starts during the fourth quarter of the F.Y. 2019-20 (A.Y. 2020-21) and the balance three installments during the F.Y. 2020-21 (A.Y. 2021-22). While paying the retrenchment compensation, the BSNL also deducted the tax at source and therefore the assessee was under the impression that the said compensation is liable for tax under the provisions of the Income Tax Act. On that basis, the assessee had also claimed exemption u/s. 10(10C) of the Act and offered the balance compensation as income in the return of income filed. Later on, the assessee came to know about the decision of the Hon’ble Chandigarh Bench of this Tribunal in the case of Harish Kumar v. ITO (Chandigarh – Trib.) in which the retrenchment compensation received by the BSNL employees were treated as eligible for exemption u/s. 10(10B) of the Act.

4. The assessee had filed his return of income showing the part of the retrenchment compensation as taxable income. The said return was processed by the CPC and the return was accepted and intimation u/s. 143(1) was made. Thereafter the order of the Hon’ble Chandigarh Bench of this Tribunal in the case of Harish Kumar(supra) was known to the assessee and based on that, the assessee filed appeal before the Ld.CIT(A) with a delay and also enclosed application to condone the said delay. The Ld.CIT(A) considered the appeal filed by the assessee with the delay and condoned the delay in filing the appeal and thereafter dismissed the appeal on merits.

5. The Ld.CIT(A) had dismissed the appeal on the ground that section 10(10B) grants exemption in respect of retrenchment compensation received under the Industrial Disputes Act, 1947 whereas section 10(10C) deals with the amounts received under a voluntary retirement scheme and therefore held that the assessee is not entitled for exemption u/s. 10(10B) of the Act. The Ld.CIT(A) further held that the assessee had originally claimed exemption u/s. 10(10C) of the Act and therefore relying on the judgment of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. v. CIT 284 ITR 323 (SC) had held that the claim not made in the original return or in the revised return cannot be entertained.

6. As against the said order, the assessee filed the present appeal before this Tribunal.

7. The Ld.AR appearing for the assessee submitted that the deduction to be claimed u/s. 10(10B) of the Act was considered by the various Tribunals and all the Tribunals took a view that the retrenchment compensation received by the employees of the BSNL are eligible for deduction u/s. 10(10B) of the Act.

8. The Ld.AR also relied on the several orders of the Hon’ble Ahmedabad, Pune, Chandigarh, Jaipur & Indore Benches and Coordinate Bench order of this Tribunal and prayed to take a lenient view so that the assessee will get his benefit in accordance with the provisions of the Act. The Ld.AR further submitted that if the appeal is dismissed on technicalities, it would amount to unjust enrichment to the revenue since the levies are made against the provisions of the Act and therefore prayed to allow the appeal. The Ld.AR further submitted that on the ground of equity, the assessee is also entitled for the benefits similar to the several assessees got from the Ld.CIT(A)s / ITATs. The Ld.AR further submitted that the issue has to be looked into based on the provisions and simply it cannot be rejected by citing the technicalities. The Ld.AR further submitted that the assessee had claimed the deduction u/s. 10(10C) of the Act thereby the deduction has been granted for Rs. 5 Lakhs whereas he is entitled for deduction of the entire amount u/s. 10(10B) of the Act. The Ld.AR further submitted that the assessee had claimed the deduction under a wrong provision since the employer had deducted the TDS and if the said claim is not in order, in order to render justice, the AO can modify the said claim and grant the deduction under the correct provision and therefore prayed to consider the said facts and allow the appeal filed by the assessee. The Ld.AR submitted that even the AO is not authorized to grant the deduction other than the one claimed in the return of income and also not filed a revised return, the appellate authorities i.e. this Tribunal is having enormous powers to entertain a plea and if it is in order, grant the benefit to the assessee. The Ld.AR submitted that the compensation received by the assessee is nothing but retrenchment received by the assessee and therefore the benefit should be granted u/s. 10(10B) of the Act. The Ld.AR further submitted that the judgment of the Hon’ble Supreme Court in the case of Goetze India Ltd.(supra) cannot be applied to the AO but applicable to the appellate authorities including this Tribunal.

9. The Ld.DR submitted that the assessee is not entitled to reagitate the issue and also submitted that the assessee had voluntarily filed his return of income declaring the income as taxable and therefore he cannot now dispute the same before the appellate authority for the first time. The Ld.DR further submitted that the assessee is not workman and therefore he is not entitled for the exemption u/s. 10(10B) of the Act.

10. We have heard the arguments of both sides and perused the materials available on record.

11. The merit involved is that the assessee was not granted the benefit u/s. 10(10B) of the Act since the assessee himself voluntarily filed his return of income and claimed the deduction only u/s. 10(10C) of the Act. The said return was processed and the return was accepted as such. Now the assessee had claimed the deduction under the correct provision 10(10B) of the Act based on the order of the Chandigarh Bench of this Tribunal and the said claim was rejected by the Ld.CIT(A) on the ground that the correct provision has been invoked by the assessee and on the ground that the new plea cannot be raised for the first time before him.

12. We have considered the facts and also the order of the Chandigarh Bench of this Tribunal in which the Tribunal had granted the deduction u/s. 10(10B) of the Act on the retrenchment compensation received by the BSNL employees pursuant to the Voluntary Retirement Scheme, 2019. Before us, it was demonstrated that the issue has been decided by the several benches of this Tribunal and therefore the benefits could not be denied to the same set of employee. We have also considered the various orders pronounced by the several Tribunals in which the Tribunals had condoned the similar delays in filing the appeals and also granted exemption u/s. 10(10B) of the Act on the compensation received on retrenchment. The Tribunals also accepted that the claim was made by the assessee mistakenly since the employer had deducted the TDS while making the said payments. In some of the orders, the Tribunals also granted the relief when the assessee had, on the wrong understanding of the provisions, not claimed the exemption under the respective provisions.

13. We have also considered the order of the Coordinate Bench of this Tribunal in RENUKA NARASIMHA PRABHU v. ITO [ITA No. 992/Bang/2026, Dated 29-5-2026] wherein the Tribunal had given the findings as follows:

“15. However, with respect to condonation of delay, the ld. AR submitted that the ld. CIT(A) should have condoned the delay as in the case of 72 cases before the Coordinate Benches across the country in the case of BSNL employees on identical facts and circumstances, delay has been condoned by the ld. CIT(A) itself ranging from 900 to 2000 days. The assessee has produced the list of 72 cases where the delay is condoned by the ld. CIT(A). Further in case of 144 appeals, the Coordinate Benches have condoned the delay in the case of BSNL employees on identical facts and circumstances. Thus on the parity itself, the appeal of the assessee should have been admitted by the ld. CIT(A). Accordingly, I reverse the order of the ld. CIT(A) in not condoning the delay.”

14. We have also considered the reasoning given by the Ld.CIT(A) that the assessee had not claimed such deductions in his return of income and also not filed any revised return before the AO and therefore the appeal is liable to be dismissed. It is not the case of the revenue that the assessee is not entitled for such deduction but on technical grounds, the revenue had denied the deductions. Further, the assessee had mistakenly claimed the deduction in the original return of income under the wrong provision and therefore there is no question of saying that the assessee cannot raise the issue for the first time before the Ld.CIT(A). Further, the department had accepted that the benefit should be granted in respect of the employees of BSNL. Therefore, the order of the Ld.CIT(A) is liable to be interfered.

15. Further, the Ld.CIT(A) had also relied on the judgment of the Hon’ble Supreme Court reported in Goetze (India) Ltd. (supra) and rejected the appeal on the ground that the claim not made in the return cannot ordinarily be entertained otherwise, than by filing a revised return. We have also gone through the above cited judgment and we do not find that the Hon’ble Supreme Court had restricted the powers of the appellate authority. In fact, the judgment had restricted the power of the AO and therefore the above said judgment would not be applicable to the facts of the present case.

16. Therefore, this issue is covered by the earlier orders of the Coordinated Benches of this Tribunal and against which no further proceedings were taken up by the revenue and therefore the said orders have become final and in that circumstances, we are also taking the same view.

17. Considering the several orders of the Coordinated Benches of this Tribunal as well as the order of the Ld.CIT(A), we are allowing the appeal filed by the assessee insofar as the claim made u/s. 10(10B) of the Act.

18. In the result, the appeal filed against the dismissal order of the Ld.CIT(A) is allowed and the assessee is entitled for the benefit of exemption u/s. 10(10B) of the Act.

19. In the result, the appeal filed by the assessee is allowed.