PRAFULKUMAR SUMANLAL MODI,AHMEDABAD vs. INCOME TAX OFFICER, WARD 7(2)(1), AHMEDABAD

The Assessee has raised following grounds of appeal: 1. The Learned ADDL/JCIT(A) erred in fact and in law in denying exemption under Section 10(10B) in respect of compensation received of Rs.8,66,397 under BSNL VRS 2019 SCHEME on invalid ground that the appellant is not a “workman” under Section 2(s) of the Industrial Disputes Act, 1947.

We have heard both the sides and have perused the material on record.

The Assessee in the present case is an individual. During the relevant previous year the Assessee received compensation under Bharat Sanchar Nigam Limited Voluntary Retirement Scheme - 2019 [for short 'BSNL VRS-2019']. Due to lack of awareness of the legal provisions at the time of filing the return of income and on account of the fact that the employer deducted tax at source from the said compensation received under the BSNL VRS-2019, the Assessee inadvertently offered the same to tax in the return of income for the Assessment Year 2020-2021 which was processed under Section 143(1) of the Act. However, the Assessee claimed exemption of INR.5,00,000/- under Section 10(10C) of the Act.

Subsequently, based on the decision of the Chandigarh Bench of the Tribunal in the case of Harish Kumar vs. ITO Ward 5(5), Chandigarh (ITA No. 42/CHD/2025 dated 30/05/2025), wherein compensation under the BSNL VRS-2019 scheme was held to be exempt under Section 10(10B), the Assessee filed appeal before the Learned CIT(A) raising additional claim of exemption under Section 10(10B) of the Act in respect of the compensation received. It was contended by the Assessee that the compensation was not taxable and therefore, the Assessee was eligible for the refund of the amount of tax deducted at source from such compensation. The Learned CIT(A) dismissed the appeal holding that the Assessee was not entitled to benefit of Section 10(10B) of the Act. Thus, the Learned CIT(A) held that compensation of INR.22,68,040/- [INR.27,68,040/- less INR.500,000/- claimed as deduction under Section 10(10C) of the Act] was not exempt under Section 10(10B) of the Act.

Being aggrieved the Assessee has now preferred the present appeal on the grounds reproduced in paragraph 2 above.

There is no change in the legal proposition and the factual matrix. In the above decisions, the Tribunal has consistently held that the compensation received under the BSNL VRS-2019 by identically placed employees was exempt from tax under Section 10(10B) of the Act. The Revenue has failed to distinguish the above decisions of the Tribunal either on facts or in law. Further, the view taken by the Tribunal finds support in Circular No. 14 of 1955 issued by the Central Board of Direct Taxes directing officers not to take advantage of ignorance of an assessee as to their rights and assist them in claiming and securing reliefs/refunds.

We further note that the reasoning adopted by the Learned CIT(A) has been considered and rejected by the following decision of the Tribunal: (a) Harish Kumar v. Income Tax Officer (ITA No. 42/CHD/2025, dated, May 30, 2025), (b) Hetal Chaitanya Jani (L/H of Late Chaitanya Vasudev Jani) v. ITO (ITA Nos. 2834 & 2835/AHD/2026) and (c) Yogesh Shyamsunder Maheshwari v. DCIT/ACIT, Circle-3, Nagpur &

The above decision of the Tribunal are consistent with the judgment of the Hon’ble Madras High Court in the case of Hindustan Photo Film Workers' Welfare Centre (CITU) vs. Government of India, New Delhi [2018] 400 ITR 299 (Madras)[17-03-2017] which has since been affirmed by the Division Bench vide judgment, dated 01/07/2021, reported in [2022] 441 ITR 661 (Madras). In The relevant extract of the said judgment in the case of Hindustan Photo Film Workers' Welfare Centre (CITU) [supra] reads as under: “29. The case of the revenue is that the package given to the workmen is a VRS package and it would fall within Section 10(10C)(viii) and accordingly, taxable if the receipt exceeds the exempted limit. The case of the petitioner is that the severance package received by them would fall within Section 10(10B) and shall not be included as income e in computing total income of the employees. The contention of the revenue that TDS proceeding is independent of the other provisions of the Act cannot be disputed, but however, what the revenue seeks to a state is that it is for the Assessing Officer to examine as to whether the receipts in the hands of the employee is a compensation for a closure or a package received as a Voluntary Retirement settlement. 30. Admittedly, the instant case, is not a case of a single assessee, but a large section of employees of HPF Ltd., a Government of India company. If it is clear from the plain language adopted in the scheme as regards the nature of benefit which is extended to the employees, then the employees need not be driven to approach the Assessing Officers to establish that the receipts are not taxable in their hands. Therefore, the nature of the benefit which flows to the employees under the package has to be tested on its plain language without adding any interpretation. 31. As mentioned above, the Government of India had recommended a scheme to give relief to the employees of HPF. This proposal was approved by the Cabinet Committee on Economic Affairs and such approval was a non-plan budgetary support. The Government of India did not authorise the HPF to bring out a VRS package, but what was approved was a non-plan budgetary support, which is in the nature of a grant given by the Central Government to the second respondent for a specific purpose and a specific reason. The purpose is to rehabilitate the employees of HPF and the reason being that the employees have been receiving the pay scales as of 1987, the increase in the cost of living has made it very difficult for them to survive and meet their financial obligations and the Government thought fit to offer this package to enable the employees to come out of the financial crises. If such was the sanction made by the Central Government, it undoubtedly would qualify the parameters laid down under sub-section (10B) of Section

In view of the above, accepting the claim of the Assessee we hold that the compensation received by the Assessee during the relevant previous year under BSNL VRS - 2019 is exempt under Section 10(10B) of the Act. The Assessing Officer is, therefore, directed to computed the taxable income of the Assessee accordingly and grant refund due, if any, as per law. The Assessing Officer shall verify that deduction in not granted under Section 10(10B) and also under Section 10(10C) of the Act in respect of same compensation. The Assessee is directed to place before the Assessing Officer the details of compensation received under BSNL VRS – 2019 and the computation of income claiming exemption under Section 10(10B) of the Act for the same. Thus, in terms of the aforesaid, Ground No. 1 raised by the Assessee is allowed.

In result, the present appeal preferred by the Assessee is allowed.