ADDAGADDE NAGARAJ RAMESH,BENGALURU vs. INCOME TAX OFFICER, WARD 3(3)(1), BENGALURU

ITA 623/BANG/2026Status: DisposedITAT Bangalore09 October 2026AY 2020-2117 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the ex-gratia compensation received by the assessees under the BSNL VRS Scheme, 2019, is eligible for full exemption under Section 10(10B) of the Income Tax Act, 1961. The reasoning was that the scheme was an integral part of a government-approved revival and restructuring plan for BSNL, involving government-directed manpower reduction to restore financial viability. The scheme was operated through a DOT office memorandum and funded by the Central Government. The Tribunal noted that coordinate benches of the ITAT in Ahmedabad, Indore, and Mumbai had categorically held this issue in favor of the assessees. The Tribunal also addressed the issue of whether the assessees were 'workmen,' referencing the decision in Shraddha Pralhad Arote (supra) which had considered and rejected this argument. Consequently, the Assessing Officer was directed to grant full exemption under Section 10(10B). Regarding the delayed appeals of Anand Chipalkatti, the Tribunal found the explanation for the delay plausible and sufficient, condoning the delay and admitting the appeals on merits. The findings in ITA No. 623/Bang/2026 were applied mutatis mutandis to these appeals.

What were the facts?

The appeals before the Income Tax Appellate Tribunal (ITAT) Bangalore Bench concerned assessment years 2020-21 and 2021-22. The primary issue involved ex-gratia payments received by employees from Bharat Sanchar Nigam Limited (BSNL) under its Voluntary Retirement Scheme (VRS) 2019. The assessee, Addagadde Nagaraj Ramesh, and another assessee, Anand Chipalkatti, claimed exemption for these payments. The assessing officer and the CIT(A)/NFAC had disallowed the exemption. The appeals were clubbed due to common issues. For Anand Chipalkatti, the appeals were also delayed, and the CIT(A) had dismissed them on that ground.

What were the issues?

1. Whether the ex-gratia received by the assessee from BSNL under the VRS 2019 is exempt under Section 10 of the Income Tax Act, 1961, specifically under Section 10(10B) as retrenchment compensation, or under Section 10(10C) as voluntary retirement compensation. - Assessee's contention: The ex-gratia received is in substance retrenchment compensation and therefore exempt under Section 10(10B) of the Act, as the BSNL VRS 2019 was part of a government-approved revival plan involving manpower reduction. The assessee also argued that even if initially offered under Section 10(10C), exemption should be granted under the correct provision if entitlement exists, citing decisions like Harish Kumar v. ITO and Shraddha Pralhad Arote v. ITO. - Revenue's contention: The revenue supported the orders of the lower authorities, implying the exemption was not admissible. 2. Whether the delay in filing appeals before the CIT(A) by Anand Chipalkatti should be condoned. - Assessee's contention: The delay was due to incorrect professional advice and lack of awareness regarding the correct tax provisions, and not due to negligence. Substantial justice should prevail over technicalities. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 10,Section 10(10B),Section 10(10C),Section 250,Section 249(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A’’BENCH: BANGALORE

Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY

For Appellant: CA Prathik P., A.R
Hearing: 13.07.2026Pronounced: 09.10.2026

PER KESHAV DUBEY, JUDICIAL MEMBER:

The appeal in ITA No.623/Bang/2026 at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC, Delhi dated 23.01.2026 vide DIN & Order No. ITBA/NFAC/S/250/2025- 26/

The order continues below.

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