What did the Tribunal hold?

The Tribunal held that the compensation received under the BSNL VRS-2019 scheme is eligible for exemption under Section 10(108) of the Income-tax Act. The Tribunal followed its previous decisions on identical issues, allowing the exemption.

The assessee received compensation under BSNL's Voluntary Retirement Scheme (VRS-2019) and inadvertently offered it to tax in their return. The assessee later sought exemption under Section 10(108) of the Income-tax Act, which was denied by the lower appellate authority on technical grounds.

What were the issues?

Whether compensation received under a VRS scheme is exempt under Section 10(108) and whether the appellate tribunal can grant relief even if not claimed before the AO.

Manojkumar Parmar vs ITO | ITAT Ahmedabad 2026

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: DR.BRR KUMAR

For Appellant: Shri Vipul Gohil, AR

For Respondent: Shri Saresa Kartik Laxmanbhai, Sr.DR

Hearing: 15.04.2026Pronounced: 23.04.2026

PER: DR. BRR KUMAR, VICE PRESIDENT: The captioned two appeals have been filed by the Assessee against the orders passed by the learned Addl/Jt. Commissioner of Income Tax (Appeals)-2, Coimbatore vide orders both dated 24.12.2025 for the Assessment Years 2020-21 and 2021-22. Since the issues involved in both the appeals are common and identical, we extract the grounds of appeal raised in ITA No.480/Ahd/2026 for Assessment Year 2020-21 for the purpose of adjudication. The decision rendered in the said appeal shall apply mutatis mutandis to the other appeal bearing ITA No. 481/Ahd/2026 for Assessment Year 2021-22. ITA Nos. 480-481/Ahd/2026 - 2– ITA No.480/Ahd/2026 for Assessment Year 2020-21

The Assessee has taken the following ground of appeal:-

That the Ld. CIT(A) has erred in law and on facts in dismissing the appeal without adjudicating the claim of exemption under Section 10(108) of the Income-tax Act. 1961 on merits. The action of the Ld. CIT(A) in denying the exemption on mere technical grounds is arbitrary, unjustified, and contrary to the settled principle that substantive justice must prevail over procedural technicalities.

That the Ld. CIT(A) has erred in law and on facts in denying exemption under Section 10(108) in respect of compensation received under the Voluntary Retirement Scheme 2019 of Bharat Sanchar Nigam Limited (BSNL), though the scheme satisfies the conditions prescribed under Rule 2BA. The Appellant had specifically relied before the Ld. CIT(A) on Harish Kumar v. ITO, ITA No. 42/CHD/2025, order dated 30.05.2025, wherein identical compensation under BSNL VRS-2019 was held exempt under Section 10(108); however, the Ld. CIT(A) failed to consider and follow the same. The issue now stands consistently affirmed by the Hon'ble ITAT, Ahmedabad in Jayeshkumar Tulsidas Sutaria v. ITO (order dated 17.02.2026) and Suman Nandlal Raval v. ITO (order dated 18.02.2026). The impugned order is therefore contrary to settled judicial precedent and liable to be set aside.

That the impugned finding of the Ld. CIT(A) is contrary to the binding decisions of the Hon'ble Supreme Court in Jute Corporation of India Ltd. v. CIT and National Thermal Power Co. Ltd. v. CIT, as well as the judgment of the Hon'ble Bombay High Court in CIT v. Pruthvi Brokers & Shareholders Pvt. Ltd., which categorically hold that appellate authorities are competent to entertain additional legal grounds and grant relief even if such claim was not made before the Assessing Officer. The Ld. CIT(A) has further misapplied the decision of the Hon'ble Supreme Court in Goetze (India) Ltd. v. CIT, without appreciating that the said decision restricts only the powers of the Assessing Officer and does not curtail the juri iction of appellate authorities to entertain a legal claim arising from facts already on record. The impugned order is therefore illegal and liable to be set aside.

That the Ld. CIT(A) has erred in refusing the exemption merely because it was not claimed in the return of income, in complete disregard of CBDT Circular No. 14 (XL-35) of 1955, which mandates that tax authorities must grant all lawful reliefs due to an assessee even if not specifically claimed.

- 3– The impugned order is thus contrary to binding CBDT instructions and opposed to the principles of equity, justice, and good conscience, and is liable to be quashed.

The Appellant was an employee of Bharat Sanchar Nigam Limited (BSNL), a Government of India undertaking. BSNL introduced the Voluntary Retirement Scheme, 2019 (VRS-2019), which was duly approved on 04.11.2019 as part of a restructuring exercise necessitated due to the severe financial distress of the organisation. Under the said scheme, the Appellant opted for voluntary retirement and received an ex gratia compensation of ₹14,30,421/- strictly in accordance with the terms and conditions of the approved scheme. At the relevant time, BSNL was undergoing acute financial hardship, including prolonged delay in payment of salaries to employees, thereby compelling employees to accept separation under the VRS-2019 scheme. The scheme, though styled as “Voluntary Retirement Scheme,” is in substance a separation/retrenchment-cum-compensation scheme introduced in the course of organisational restructuring and downsizing. The compensation received by the Appellant squarely falls within the ambit of exemption provided under Section 10(10C) of the Income-tax Act, 1961, and fulfils all conditions prescribed under Rule 2BA of the Income-tax Rules, 1962. The nature and character of the payment is clearly compensatory and capital in nature, intended to provide relief on separation from service. However, while filing the return of income for Assessment Years 2020–21 and 2021–22, the Appellant, being a lay taxpayer without the benefit of professional advice and under a bona fide mistaken belief, inadvertently offered the - 4– 2020-21 & 2021-22 in ITA Nos.2387 & 2388/Ahd/2025 dated 17.02.2026. For the sake of ready reference, the operative portion of said order is reproduced as under:

“…6. 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 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 - 5– assessee filed the claim 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.

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

In the absence of any change in factual matrix and legal proposition brought to our notice, the appeal of the assessee is hereby allowed.

In the result, both the appeals filed by the assessee are allowed.

This Order pronounced in Open Court on 23.04.2026. (T R SENTHIL KUMAR) VICE PRESIDENT () Ahmedabad; Dated 23.04.2026 Manish, Sr. PSआदेश क" "ितिलिप अ"ेिषत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant

""यथ" / The Respondent. 3. संबंिधत आयकर आयु" / Concerned CIT 4. आयकर आयु"(अपील) / The CIT(A)- 5. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.

MANOJKUMAR PARMAR,AHMEDABAD vs. ITO, WARD 7(2)(1), AHMEDABAD, AHMEDABAD

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