Retrenchment compensation exemption under section 10(10B) applies to BSNL VRS amounts when scheme conditions and Rule 2BA are met.

Compensation received under the BSNL VRS 2019 scheme was treated as retrenchment compensation for purposes of section 10(10B) of the Income-tax Act, where the scheme and governing conditions, including Rule 2BA compliance, were satisfied. The Tribunal followed its coordinate bench rulings on the same scheme and accepted that the exemption applied to the entire retrenchment compensation, with leave encashment, if any, separately addressed. It also recognised that relief could be granted in appeal even if the original return position did not claim the exemption, and directed the Assessing Officer to allow the tax relief.

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Issues: Whether compensation received under the BSNL Voluntary Retirement Scheme was eligible for full exemption as retrenchment compensation under section 10(10B) of the Income-tax Act, 1961, and whether relief could be granted in appeal notwithstanding the original return position.

Analysis: The assessee had received compensation under BSNL VRS 2019 and claimed that the amount represented retrenchment compensation covered by section 10(10B), with Rule 2BA compliance. The Tribunal followed its coordinate bench decisions on the same scheme and the same legal question. It accepted that the amount received under the scheme was in the nature of retrenchment compensation and that the assessee was entitled to the consequential tax relief. The Tribunal also accepted that the exemption was allowable on the entire retrenchment compensation, with leave encashment, if any, separately protected as directed in the impugned proceedings.

Conclusion: The assessee was held entitled to exemption under section 10(10B) on the entire retrenchment compensation received under the BSNL VRS scheme, and the Assessing Officer was directed to grant the relief.

Ratio Decidendi: Compensation received under an approved BSNL voluntary retirement scheme, when it is in substance retrenchment compensation and satisfies the governing conditions, is exempt under section 10(10B) of the Income-tax Act, 1961, and relief can be granted in appeal on that basis.

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