Retrenchment compensation under BSNL's voluntary retirement scheme qualifies for exemption, and a new appellate claim was entertainable.

Compensation paid under the BSNL Voluntary Retirement Scheme, 2019 was treated as retrenchment compensation arising from workforce reduction linked to revival of the undertaking, so it qualified as a capital receipt exempt under section 10(10B) rather than being confined to section 10(10C). The Tribunal also held that an appellate authority may entertain a new exemption claim where it is necessary to determine the correct tax liability, even if the claim was not raised in the original or revised return. The additions were therefore deleted and the assessee's appeals were allowed.

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Issues: (i) Whether the compensation received under the BSNL Voluntary Retirement Scheme, 2019 is retrenchment compensation and a capital receipt exempt under section 10(10B) of the Income-tax Act, 1961 rather than a payment covered by section 10(10C); (ii) whether the appellate authority could entertain the assessee's new claim for exemption under section 10(10B) though it was not made in the original return or revised return.

Issue (i): Whether the compensation received under the BSNL Voluntary Retirement Scheme, 2019 is retrenchment compensation and a capital receipt exempt under section 10(10B) of the Income-tax Act, 1961 rather than a payment covered by section 10(10C).

Analysis: The payment arose from the BSNL revival-linked forced retirement scheme and was treated as compensation paid on termination of services in substance, not as ordinary voluntary retirement ex-gratia. The scheme and the surrounding circumstances showed workforce reduction for revival of BSNL, and the Tribunal followed the consistent view of coordinate benches and the Madras High Court that such payments are retrenchment compensation. It held that section 10(10B) applies to the amount received and that the exemption is not confined to the limited ceiling under section 10(10C).

Conclusion: The compensation was held to be retrenchment compensation and a capital receipt exempt under section 10(10B), in favour of the assessee.

Issue (ii): Whether the appellate authority could entertain the assessee's new claim for exemption under section 10(10B) though it was not made in the original return or revised return.

Analysis: The Tribunal applied the settled principle that appellate authorities have jurisdiction to admit a new claim or additional ground when it is necessary to determine the correct tax liability. It relied on the rule that tax authorities must assess the legitimate tax due and may grant relief even where the claim was not made before the Assessing Officer, provided the issue is otherwise allowable on merits.

Conclusion: The new claim was held to be entertainable at the appellate stage, in favour of the assessee.

Final Conclusion: The disallowances were set aside and the common issue was decided in favour of the assessee, resulting in allowance of the appeals.

Ratio Decidendi: Compensation paid under a BSNL-linked workforce reduction scheme, though described as voluntary retirement ex-gratia, can constitute retrenchment compensation taxable, if at all, only within section 10(10B), and an otherwise lawful exemption claim may be entertained at the appellate stage even if not raised in the original return.

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