BSNL VRS compensation treated as retrenchment relief, with delay condoned and tax additions deleted

Delay in filing the first appeals was condoned because the assessee gave a bona fide explanation based on lack of awareness of the correct legal position and later discovery of the remedy through circulated BSNL VRS orders, with refusal to condone viewed as defeating substantial justice. Ex-gratia compensation received under the BSNL VRS-2019 scheme was treated as retrenchment compensation under a Government-approved revival package funded by budgetary support, so it qualified for exemption and the tax additions were deleted. Consequential relief relating to the related retirement benefit exemption was also directed if otherwise eligible.

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Issues: (i) Whether the assessee had shown sufficient and reasonable cause for condonation of the delay in filing the first appeals before the appellate authority; (ii) Whether ex-gratia compensation received under the BSNL VRS-2019 scheme was eligible for exemption under section 10(10B) of the Income-tax Act, 1961, and the resultant tax additions were liable to be deleted.

Issue (i): Whether the assessee had shown sufficient and reasonable cause for condonation of the delay in filing the first appeals before the appellate authority.

Analysis: The delay was explained as arising from the assessee's lack of awareness of the correct legal position regarding exemption for VRS compensation, and the subsequent discovery of the remedy only after judicial orders in BSNL VRS matters were circulated among employees. The assessee was a senior citizen and a retrenched BSNL employee. The explanation was accepted as bona fide, and the Court held that refusal to condone the delay would defeat substantial justice.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): Whether ex-gratia compensation received under the BSNL VRS-2019 scheme was eligible for exemption under section 10(10B) of the Income-tax Act, 1961, and the resultant tax additions were liable to be deleted.

Analysis: The BSNL VRS-2019 scheme was implemented pursuant to a Government of India revival package approved by the Union Cabinet and the compensation was funded through budgetary support. The scheme was treated as partaking the character of a government-approved retrenchment scheme rather than an ordinary voluntary retirement scheme. The Court followed consistent co-ordinate bench and appellate precedents holding that such compensation falls within section 10(10B), and no contrary precedent was brought by the Revenue.

Conclusion: The ex-gratia compensation was held exempt under section 10(10B), the additions were directed to be deleted, and consequential relief relating to section 10(10AA) was also directed to be granted, if otherwise eligible.

Final Conclusion: The appeals succeeded and the assessee obtained full relief on both the delay issue and the merits of exemption, resulting in deletion of the impugned tax additions.

Ratio Decidendi: Where a belated appeal is supported by a bona fide and reasonable explanation, substantial justice warrants condonation of delay; and compensation paid under a Government-approved BSNL VRS-2019 scheme funded by public support is to be treated as retrenchment compensation eligible for exemption under section 10(10B).

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