ITAT Chennai Condones Delay of Over 1,500 Days, Allows Full Exemption on BSNL VRS Compensation.

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has held that ex-gratia compensation received under the BSNL VRS-2019 Scheme qualifies for exemption under Section 10(10B) of the Income Tax Act, 1961. The Tribunal also condoned a delay of more than 1,500 days in filing the appeals, observing that substantial justice should prevail where the assessee was unaware of the correct legal position and acted promptly after learning about the available relief.

A Bench comprising Vice President George George K and Accountant Member Padmavathy S set aside the orders of the First Appellate Authority, which had dismissed the appeals in limine on the ground of delay without examining the merits of the case.

The assessee, a senior citizen and retrenched BSNL employee, had received ex-gratia compensation under the BSNL VRS-2019 Scheme. While filing returns for AYs 2020-21 and 2021-22, she claimed exemption of only Rs.5 lakh under Section 10(10C) and offered the balance compensation to tax. The returns were processed under Section 143(1), and the remaining amounts were taxed accordingly.

Before the Tribunal, the assessee submitted that she became aware of the availability of exemption under Section 10(10B) only after decisions in BSNL VRS cases were circulated among employees. It was argued that the delay in filing appeals was neither deliberate nor intentional and arose solely due to lack of awareness of the correct legal position.

The Tribunal observed that the assessee, being a senior citizen and retrenched employee, had shown sufficient and reasonable cause for the delay. It held that substantial justice cannot be denied merely because some additional time elapsed before the assessee became aware of the judicial precedents through employee groups.

On merits, the assessee contended that the BSNL VRS-2019 Scheme was approved by the Union Cabinet as part of the Government’s revival package for BSNL and was funded through budgetary support from the Government of India. Reliance was placed on several appellate orders and the Chandigarh Bench decision in Harish Kumar v. ITO, which had recognized the compensation as eligible for exemption under Section 10(10B).

The Tribunal noted that although termed a VRS scheme, the compensation effectively bore the character of Government-approved retrenchment compensation and could not be treated as an ordinary voluntary retirement scheme.

Following the Chandigarh Bench ruling and other consistent appellate decisions, the Tribunal held that the ex-gratia compensation received under BSNL VRS-2019 is eligible for exemption under Section 10(10B). It accordingly directed deletion of the additions and further instructed the Assessing Officer to grant consequential relief under Section 10(10AA), wherever otherwise admissible.

Thus, the appeals of the assessee were allowed.

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