BSNL Voluntary Retirement Scheme compensation qualifies as fully exempt retrenchment compensation under Section 10(10B).

3. The Revenue submits that the recent Tribunal orders, originating in Harish Kumar v. ITO (Chandigarh – Trib.) by Chandigarh Bench and followed by the Mumbai, Pune and Ahmedabad Benches, are founded upon an erroneous extension of the logic of Section 10(10B) to the BSNL Voluntary Retirement Scheme (VRS), 2019. It is a fundamental misapplication of the “Closure Doctrine” established in the Hindustan Photo Film Workers’ Welfare Centre (CITU) v. Govt. of India (Madras) (“HPF”) case. The Revenue also places emphasis on countering the findings in Rajendra Himmatrao Patil v. ITO (ITA Nos. 302/pUN/2026), Meghmala Sudhir Pathak v. ITO (ITA Nos. 290/pUN/2026), and Shraddha Pralhad Arote v. ITO (ITA Nos. 262/pUN/2026).

4. The core of this dispute rests on whether a tax tribunal can transform a voluntary exit from a reviving entity into an involuntary retrenchment from a dying one. It is submitted that these rulings have not appreciated the primary distinction between a “Going Concern” in revival and an undertaking in liquidation.

5. Section 10(10B), reproduced below, contains Explanation (a), which creates a deeming fiction; compensation paid at the time of “closing down of the undertaking” is deemed to be retrenchment:

“[(10B) any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, [at the time of his retrenchment: Provided that the amount exempt under this clause shall not exceed-

Provided further that the preceding proviso shall not apply in respect of any compensation received by a workman in accordance with any scheme which the Central Government may, having regard to the need for extending special protection to the workmen in the undertaking to which such scheme applies and other relevant circum- stances, approve in this behalf.]

Explanation.-For the purposes of this clause-

80(c) the expressions “employer” and “workman” shall have the same meanings as in the Industrial Disputes Act, 1947 (14 of 1947);]”

6. The appellants consistently rely on HPF case. However, HPF and BSNL represent two opposite poles of corporate existence. In HPF, the Hon’ble Madras High Court was dealing with a company that had officially ceased operations. Para 6 of the decision of the Hon’ble Madras High Court is reproduced herewith:

“The Government of India decided to close down the company. For specific purpose of enabling employees to come out of financial crisis, Government approved a non- budgetary support. same being compensation under section 10(10B) would be exempted.”

7. However, the BSNL facts are different. As per the Cabinet Note dated 29.10.2019, the BSNL scheme was part of a “Revival Package” involving 4G spectrum allotment and debt restructuring.)

11. The Tribunals in Harish Kumar (Chandigarh) and Rajendra Patil (Pune) have erroneously held that the BSNL VRS was “Retrenchment in the garb of VRS” due to financial stress. Section 10(10B) imports the definition of “Retrenchment” from Section 2(oo) of the Industrial Disputes Act, 1947 (IDA). Section 2(oo) of IDA explicitly excludes “voluntary retirement”:

“[(oo) “retrenchment” means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include-(a) voluntary retirement of the workman; or

12. In BSNL VRS-2019, the separation was triggered by the employee’s “Option.” In retrenchment, the employer triggers the exit unilaterally. The law says “A is not B.” The Tribunals’ interpretation is that “A is B” because the employer was in financial distress. In BSNL VRS-2019, the employee exercised a “Voluntary Option” on a portal. This mutuality removes the stigma of retrenchment.

Quote, “15. Further, I find the Coordinate Bench, Ahmedabad in the case of Jayeshkumar Tulsidas Sutaria v. ITO (supra) following the decision of Coordinate Bench, Chandigarh in the case of Harish Kumar v. ITO Ward- 5(5), Chandigarh -ITA No. 42/CHD/2025 order dated 30.05.2025 has decided the issue in favour of the assessee by observing as under :

“3. The assessee was employed with Bharat Sanchar Nigam Limited (BSNL), a Government of India enterprise. BSNL notified the Voluntary Retirement Scheme (VRS) 2019 on 04.11.2019, which was duly approved and implemented by the employer. The assessee opted for the scheme and accordingly received compensation under the VRS, as per the terms laid down by BSNL. It is submitted that the assessee had not been paid regular salary for several months prior to opting for the scheme and was under severe financial and professional uncertainty. In view of these circumstances, the assessee opted for the scheme as a measure of financial security. The compensation received by the assessee was in the nature of compensation under the BSNL VRS-2019 scheme. The compensation amount received under the scheme was offered to tax in the return of income due to lack of awareness regarding the exemption available under section 10(10B) of the Income-tax Act, 1961. The employer had also deducted tax at source on the said amount. No exemption was claimed in the original or revised return of income. The CPC, Bengaluru issued an intimation under section 143(1) for the said year without granting any exemption, and no rectification or appeal was initiated at that time. It was only upon learning about the recent judgment of the Hon’ble ITAT Chandigarh Bench in the case of Harish Kumar v. 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.

4. Aggrieved by the orders of the Assessing Officer, the assessee carried the matter in appeal before the Ld.CIT(A), who dismissed the appeal of the assessee as non maintainable by observing as follows:

“.In the present case, the delay in filing of the appeal is almost four years which is an inordinate and huge delay. Moreover, as has been elaborately discussed above, the appellant has also failed to provide any reasonable ground that could assist the first appellate authority to draw sufficient cause for the inordinate delay of 1,396 days in filing of this appeal. The inordinate delay in the present case, if condoned, would make the term ”Sufficient cause” in section 249(3) of the Income Tax Act, 1961 hollow and meaningless.

20. In light of the facts of the case, provisions of the Income Tax Act, 1961 and judicial decisions in the matter as discussed above, I am constrained to conclude that the appellant has failed to submit any reasonable ground for condoning the inordinate delay of 1,396 days i.e almost four years in filing this appeal. Being bereft of any sufficient cause as envisaged in section 249(3) of the Act, the appeal cannot be admitted. Since the appeal is not maintainable, there is no need to adjudicate on the merits therein.

5. Aggrieved by the orders of the Ld.CIT(A, the assessee is in further appeal before us.

6. We have gone through the records and considering the merits of the case, we condoned the delay and proceed to adjudicate the issue.

7. The Ld. Counsel for the assessee submitted that due to lack of awareness of the legal provisions at the time of filing the return of income, the assessee inadvertently offered the compensation received under BSNL VRS-2019 to tax. Subsequently, based on the decision of the Hon’ble ITAT Chandigarh Bench in Harish Kumar v. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025 dated 30.05.2025), wherein compensation under the same BSNL VRS-2019 scheme was held to be exempt under section 10(10B), the assessee now seeks exemption of such compensation. We find that the assessee filed theclaim before the Ld. CIT(A) and since the income of the assessee is not taxable, the assessee is eligible for the refund of the TDS.

8. In the result, both the appeals of the assessee are allowed.”

16. The contention of ld. DR that only a ‘workman’ as defined under the Act is eligible for benefit u/s.10(10B) of the Act has no force as the Hon’ble High Court of Madras in the case of Hindustan Photo Film Workers Welfare Centre v. Govt. of India (2018) 400 ITR 299 (Madras) has held that benefit u/s.10(10B) would be applicable to all employees covered by the scheme.

17. In light of the above decisions which are squarely applicable on the facts of instant cases and the consistent view taken by the Coordinate Benches, I am of the considered view that the alleged sum is in the nature of Retrenchment Compensation received by the assessee(s) in appeal, under the forced retirement scheme as per the standing orders dated 29.10.2019 issued by the Union Cabinet for the revival plan of BSNL/MTNL and such compensation falls under the provisions of section 10(10B) of the Act and not u/s.10(10C) of the Act and therefore the alleged sum is in the nature of Capital receipt exempt from tax. In order to get relief as has been directed in this order, assessee(s) are directed to place revised computation of income before the respective Jurisdictional Assessing Officers claiming the exemption u/s.10(10B) of the Act as discussed (supra) and thereafter the Revenue authorities shall grant the refund (if any) entitled to the assessee(s) after due verification of such revised computation of income. Impugned findings of ld.CIT(A) are set aside. Common issue raised in the Grounds of appeal raised by respective assessee(s) stands allowed.”

9. Since the facts in the instant bunch of appeals are same, therefore, following the same parity of reasoning, I hold that the alleged sum received under BSNL Voluntary Retirement2019 Scheme is in the nature of Retrenchment Compensation received by the assessee(s) in appeal and such compensation falls under the provisions of section 10(10B) of the Act and not u/s.10(10C) of the Act and is in the nature of Capital receipt exempt from tax. Assessee(s) are directed to place revised computation of income before the respective Jurisdictional Assessing Officers claiming the exemption u/s.10(10B) of the Act of the alleged sum and thereafter the Revenue authorities shall compute the tax liability and grant the refund (if any) entitled to the assessee(s) after due verification of such revised computation of income. Impugned findings of ld.CIT(A) are set aside and the common issue raised in the Grounds of appeal by respective assessee(s) stands allowed.” Unquote.

“While on this subject, it is also useful to take note of Hon’ble Supreme Court’s judgment in the case of Mahendra Singh Dhantwal v. Hindustan Motors Ltd. ITR68, wherein compensation in lieu of reinstatement was treated as eligible for retrenchment compensation under section 10(10B). To us, the takeaway from this judgment seems to be that it is not the form but the substance that matters so far definition of retrenchment compensation is concerned. Right now we are dealing with an employee who is giving up his source of livelihood under the threat of dislocation, and the hyper technical interpretations based on technicalities about the wordings in the settlement deed, signed by him under these compelling circumstances, is being taken as the understanding about assessee’s actual conduct; that is too pedantic an approach and it cannot meet our approval. Let us also not forget that while taking calls on these issues, which deal with employees in the lower rung of hierarchy, we must not be too pedantic or hyper technical in approach. We have to be pragmatic in approach and we must give full effect to the true intent of the public welfare provisions. To us, the arrangement in question is nothing but a termination of employment with the offer of compensation. Viewed thus, the payment in question cannot be anything but retrenchment compensation.

10. In our considered view, the conditions of section 10(10B), so far as eligibility for exemption is concerned, is satisfied. That, however, is not the end of the matter”.