The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the alleged sum which is in the nature of Retrenchment Compensation received by the appellant/ taxpayer under the forced retirement scheme as per the standing orders dated Oct 29, 2019 issued by the Union Cabinet for the revival plan of BSNL/MTNL, falls under the provisions of Section 10(10B) of the Income Tax Act and not under Section 10(10C) of the Act, and therefore the alleged sum is in the nature of a Capital receipt exempt from tax.

The Tribunal therefore directed the appellant to place a revised computation of income before the respective Jurisdictional Assessing Officers claiming the exemption u/s.10(10B) of the Act, and thereafter the Revenue authorities shall grant the refund entitled to the assessees after due verification of such revised computation of income.

Dr. Manish Borad (Accountant Member) referred to the decision in the case of Jute Corporation of India Ltd. v. CIT [(1991) 187 ITR 688 (SC)], where the Supreme Court has ruled that appellate authorities have the jurisdiction to entertain new claims or additional grounds not raised before the Assessing Officer (AO), provided they assist in determining the correct tax liability.

The Tribunal observed that the amount received from BSNL under the forced Voluntary Retirement Scheme 2019 is in the nature of Retrenchment Compensation and not a normal Voluntary Retirement compensation, and that employees of BSNL fall under the Industrial Disputes Act, therefore exemption under Section 10(10B) of the Income Tax Act is allowable.

Relying on the decision of the Coordinate Bench, Chandigarh in the case of Harish Kumar vs. ITO, the Tribunal reiterated that though in the nomenclature the scheme has been mentioned as VRS, in fact, the same is a retrenchment scheme launched to shed extra employees because BSNL had incurred losses and salaries were not paid. Thus, the amount received was compensation on account of retrenchment and a capital receipt in the hands of the appellant.

Further, the Coordinate Bench, Ahmedabad in the case of Jayeshkumar Tulsidas Sutaria Vs. ITO, which condoned the delay and allowed the exemption under section 10(10B) for compensation received under the BSNL VRS-2019 scheme, pointed out the Tribunal.

The Tribunal also emphasised that the contention of the DR that only a ‘workman’ as defined under the Industrial Disputes Act is eligible for benefit under Section 10(10B) of the Income Tax Act has no force, as the High Court of Madras in the case of Hindustan Photo Film Workers Welfare Centre vs. Govt. of India [(2018) 400 ITR 299 (Madras)] has held that the benefit under Section 10(10B) would be applicable to all employees covered by the scheme.

Briefly, the appellants/ taxpayers are employed with Bharat Sanchar Nigam Limited (BSNL), which is under the administrative control of the Department of Telecommunications, Govt. of India. In order to revive BSNL, the Union Cabinet in its meeting in Oct 2019 approved the revival plan of BSNL and Mahanagar Telephone Nigam Limited, Mumbai (MTNL) vide Office Memorandum issued by the Department of Telecommunications. As part of the revival package, the Government decided to reduce the work force through the BSNL Voluntary Retirement Scheme, 2019 to the employees aged 50 years and above, and on such retirement, Ex-gratia compensation has been paid.

The amount so received by the instant employees is stated to have been offered to tax after claiming exemption under Section 10(10C) of the Income Tax Act of Rs. 5.00 lakh, and they have paid the due taxes on the remaining amount of compensation over and above Rs. 5.00 lakhs. In this bunch of appeals, the claim that the entire amount of compensation received from BSNL being a Capital receipt is not liable to tax as per the provisions of section 10(10B) of the Act has been made for the first time before the CIT(A).

In some cases, the CIT(A) dismissed the appeals on account of delay in filing of the appeals, and in some cases, the CIT(A) has not entertained the new claim made for the first time, holding that the same should have been made in the revised return of income.

Appearances:

For the Appellant/Taxpayer:Tanzil Padvekar and Gopal Sharma

For the Respondent:Dayanand Jawalikar