Former Employee Secures Major Relief: ITAT Allows Section 10(10B) Exemption on BSNL VRS 2019 Compensation:

The ITAT Ahmedabad held that compensation received by the ex-BSNL employee under Voluntary Retirement Scheme (VRS) 2019 is entitled to exemption under Section 10(10B) of the Income Tax Act, 1961. The Tribunal directed the Assessing Officer to recompute the employee’s taxable income and grant any refund due under the law for Assessment Years 2020-21 and 2021-22.

The case relates to Nilesh Mulchandbhai Shah, who received compensation of Rs 11.69 lakh in Assessment Year 2020-21 and Rs 25.65 lakh in Assessment Year 2021-22 under Bharat Sanchar Nigam Limited (BSNL) Voluntary Retirement Scheme (VRS) 2019. The assessee had not claimed exemption under Section 10(10B) while filing his income tax returns, believing that the compensation was taxable. After the ITAT Chandigarh held in another case that compensation under the same scheme qualified for exemption, he approached the Commissioner of Income Tax (Appeals) [CIT(A)] seeking relief.

Although the CIT(A) condoned the delay in filing the appeals, it dismissed them on the ground that the appeals were not maintainable because the income tax returns had been processed under Section 143(1) without any variation in the declared income.

The Income Tax Appellate Tribunal (ITAT) observed that similar cases involving BSNL employees had already been decided in favour of taxpayers. It relied on the Supreme Court’s ruling in Collector, Land Acquisition, Anantnag v. Katiji regarding condonation of delay and CBDT Circular No. 14 of 1955, which directs tax authorities to assist taxpayers in claiming legitimate reliefs rather than taking advantage of their ignorance.

"Since we have accepted assessee's claim for exemption under Section 10(10B) of the Act for the compensation of Rs.11,69,071/- received by Assessee, the exemption of Rs.5,00,000/- granted to the Assessee under Section 10(10C) of the Act stands withdrawn as double exemption cannot be granted for the same compensation of Rs.5,00,000/- under Section10(10B) and 10(10C) of the Act," the tribunal held.

Accordingly, the Tribunal allowed both appeals and held that the compensation received in both assessment years was exempt under Section 10(10B). However, it clarified that the exemption of Rs 5 lakh previously granted under Section 10(10C) for the same compensation would be withdrawn to prevent double exemption. The assessee was directed to submit the relevant compensation details and revised income computations to the Assessing Officer.