taxvrsindiapuneit
Pune ITAT Declares ₹65.21 Lakh VRS Payment Capital Receipt, Not Taxable Salary
Published: October 7, 2026
Anil Kumar, former Aurangabad plant worker, won a tax appeal on June 8, 2026, when Pune ITAT ruled that his ₹65.21 lakh VRS payout was a capital receipt. The Tribunal’s decision means the amount will not be taxed as salary, and the Assessing Officer must amend the earlier assessment for AY 2019‑20.
Anil Kumar, 45, had worked at XYZ Industries’ Aurangabad plant until its shutdown in FY 2018‑19, when the company launched a voluntary retirement scheme that paid him ₹65.21 lakh. He filed his 2019 income‑tax return, classifying the payment as advance salary and claiming relief under Section 89.
The Income Tax Department rejected the claim, treating the receipt as taxable under Section 56(2)(xi) and withholding the full amount from his net income.
Kumar contested the classification, arguing the sum arose from his voluntary resignation rather than employer‑initiated termination. He cited the scheme’s wording that cessation of employment was a resignation, not retrenchment.
The CIT(A)/NFAC upheld the tax‑able view, but the Pune Income Tax Appellate Tribunal, on June 8 2026, reversed the decision, ruling the ₹65.21 lakh a non‑taxable capital receipt.
The Tribunal relied on consistency with earlier judgments where similar payouts were treated as capital receipts, noting that the scheme expressly excluded notice pay and severance under the Industrial Disputes Act.
Consequently, the Assessing Officer must revise the assessment for AY 2019‑20, removing the ₹65.21 lakh from taxable income. Kumar, who now runs a small grocery shop, says the ruling eases his financial burden. The tax department has yet to file an appeal, leaving the matter effectively settled for the worker.