SEETHARAMULU AITIPAMULA,HYDERABAD vs. INCOME TAX OFFICER, WARD 68(1), DELHI

ITA 7201/DEL/2026Status: DisposedITAT Delhi28 September 2026AY 2021-202210 pages
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What were the facts?

The assessee, Seetharamulu Aitipamula, is an appellant before the Income Tax Appellate Tribunal (ITAT), Delhi Bench, for Assessment Years 2020-21 and 2021-22. The appeals arise from orders passed by the Commissioner of Income Tax(Appeals)/Addl. JCIT(A)-1, Noida, concerning proceedings under Section 143(1) of the Income Tax Act, 1961. The dispute centers on the rejection of the assessee's claim for exemption under Section 10(10B) of the Act for ex-gratia compensation received under the Voluntary Retirement Scheme (VRS) of Bharat Sanchar Nigam Ltd. (BSNL). The assessee, a retired BSNL employee, claimed Rs. 13,18,139/- for AY 2020-21 and Rs. 24,75,190/- for AY 2021-22 as exempt. The lower authorities rejected this claim, holding that the compensation was not eligible for Section 10(10B) exemption.

What did the Tribunal hold?

The Tribunal held that the ex-gratia compensation received by the assessee under the BSNL Voluntary Retirement Scheme, 2019, is in the nature of retrenchment compensation and falls under the provisions of Section 10(10B) of the Act, not Section 10(10C). Consequently, such compensation is in the nature of a capital receipt and is exempt from tax. The Tribunal's reasoning was based on following the decisions of coordinate benches of the ITAT, including those in Pune, Ahmedabad, and Chandigarh, which had consistently decided similar issues in favour of the assessees. The Tribunal noted that the Revenue had not presented any contrary High Court decisions. The Tribunal also referred to the Supreme Court's judgment in Mahendra Singh Dhantwal v. Hindustan Motors Ltd., which emphasized that the substance, rather than the form, matters in defining retrenchment compensation, and that a pragmatic approach should be taken for employees in the lower rung of hierarchy. The Tribunal set aside the impugned findings of the CIT(A). As an operative direction, the assessee(s) were directed to place a revised computation of income before their respective Jurisdictional Assessing Officers claiming the exemption under Section 10(10B), after which the Revenue authorities would compute the tax liability and grant any refund due after due verification. No issue was expressly left undecided.

What were the issues?

1. Whether the ex-gratia compensation received by the assessee from BSNL under the VRS, 2019, is in the nature of retrenchment compensation and eligible for exemption under Section 10(10B) of the Income Tax Act, 1961, as a capital receipt, or if it is only eligible for exemption up to Rs. 5.00 lakhs under Section 10(10C) of the Act. Assessee's Contentions: The assessee argued that the compensation received under the BSNL VRS, 2019, for forced retirement is in the nature of retrenchment compensation and thus exempt under Section 10(10B). The assessee relied on various coordinate bench decisions of the ITAT, including Prathibha Jagadish v. ITO, Jayesh Kumar Tulsidas Sutaria v. ITO, Harish Kumar v. ITO, Dayal Singh v. ITO, Suresh Pal Chauhan v. ITO, Hindustan Photo Film Workers Welfare Centre v. Govt. of India, CIT (TDS) v. Hindustan Photo Film Workers Welfare Centre, Union of India v. M/s. Hindustan Photo Film Workers Welfare Centre and others, Shree Rajeshwar Sharma v. ITO, CIT v. Mahalakshmi Textile Mills Ltd., PCIT v. Karnataka State Cooperative Federation Ltd., and CIT v. Pruthvi Brokers & Shareholders. The assessee also pointed to CIT(A) orders that condoned delays and allowed similar appeals from BSNL employees. Revenue's Contentions: The Revenue supported the orders of the CIT(A). It argued that the claim for exemption under Section 10(10B) was not made in the original returns and should have been filed via a revised return. The Revenue contended that compensation received under VRS is eligible only for the Rs. 5.00 lakh exemption under Section 10(10C). The Revenue further argued that recent Tribunal orders extending Section 10(10B) logic to the BSNL VRS, 2019, were based on an erroneous extension of the 'Closure Doctrine' from the Hindustan Photo Film Workers' Welfare Centre case. The Revenue emphasized the distinction between a 'Going Concern' in revival and an undertaking in liquidation, arguing that the BSNL VRS was a voluntary exit from a reviving entity, not an involuntary retrenchment from a dying one. The Revenue cited the deeming fiction in Explanation (a) to Section 10(10B) concerning 'closing down of the undertaking'.

Which sections of the Income-tax Act were involved?

Section 10(10B),Section 10(10C),Section 143(1)

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Income Tax Appellate Tribunal, DELHI

Before: SHRI SATBEER SINGH GODARA

For Respondent: DR (Through

Heard together (2 matters)

ITA 7200/DEL/2026
ITA 7201/DEL/2026

Read from the judgment's own cause title. This page is filed under one of them.

PER SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER:

This assessee’s twin appeals ITA No. 7200 & 7201/Del/2026; for A.Ys 2020-21 & 2021-22 arise against Commisioner of Income Tax(Appeals)/ Addl. JCIT(A)-1 (for short, “CIT(A)”), Noida’s orders dated 15.06.2026 passed in DINs & Order Nos. ITBA/APL/S/250/2026-27/1089706294(1) & ITAB/APL/S/250/2026-27/1089706443(1), involving proceedings u/s 143(1) of the Incom

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