BSNL VRS compensation exemption and leave encashment ceiling relief applied under the Income-tax Act for eligible employees.

BSNL VRS-2019 compensation was treated as exempt under section 10(10B) because the facts were identical to an earlier ITAT ruling on the same scheme, subject to verification of eligibility conditions; tax deducted or paid was refundable. Leave encashment was directed to be examined under section 10(10AA) within the prescribed statutory ceiling, including the enhanced limit under the CBDT notification, and exemption was allowed only to that extent. On both issues, the assessee obtained relief and the appeals were allowed.

---

---

Issues: (i) Whether compensation received under BSNL VRS-2019 was exempt under section 10(10B) of the Income-tax Act, 1961; and (ii) whether leave encashment was exempt under section 10(10AA) of the Income-tax Act, 1961 subject to the prescribed statutory limit.

Issue (i): Whether compensation received under BSNL VRS-2019 was exempt under section 10(10B) of the Income-tax Act, 1961.

Analysis: The compensation was received on voluntary retirement under BSNL VRS-2019, and the factual matrix was found to be identical to an earlier Tribunal decision on the same scheme. Following that decision, the compensation was treated as eligible for exemption, subject to verification of the eligibility conditions attached to the claim.

Conclusion: The compensation received under BSNL VRS-2019 was held exempt under section 10(10B) and could not be brought to tax, with consequential refund of tax deducted or paid thereon.

Issue (ii): Whether leave encashment was exempt under section 10(10AA) of the Income-tax Act, 1961 subject to the prescribed statutory limit.

Analysis: The leave encashment claim was directed to be examined in accordance with the statutory ceiling prescribed under section 10(10AA) and the CBDT notification enhancing the exemption limit. The Assessing Officer was required to verify the admissible exemption accordingly.

Conclusion: Leave encashment was directed to be allowed exemption within the statutory limit under section 10(10AA).

Final Conclusion: The assessee succeeded on both issues, with relief granted in respect of BSNL VRS compensation and leave encashment, and the appeals were allowed.

Ratio Decidendi: Compensation received under a government-approved BSNL voluntary retirement scheme was treated as exempt under section 10(10B) on the facts found, and leave encashment was allowable only to the extent of the statutory exemption limit under section 10(10AA).

---