Archive · 27 Aug 2026
Pune ITAT Says Pfizer VRS Payout Is Not Taxable
A former Pfizer employee received ₹65.21 lakh after choosing to leave his job under a voluntary retirement plan.
Tax officials said the money should be taxed as income from other sources.
The employee argued that it was a special payment for giving up his job and should not be taxed.
The tribunal agreed with him.
It said he had chosen to resign and was not fired by the company.
Because of this, the rule about payments linked to termination did not apply.
The tribunal treated the payment as a capital receipt.
It ordered the tax assessment to be changed.
The Pune ITAT ruled that a former Pfizer employee’s ₹65.21 lakh VRS payout was a non-taxable capital receipt.
The payment included ex-gratia severance, early-bid and group-participation incentives, and notice-period pay.
The tribunal found that the employee voluntarily resigned rather than being terminated by Pfizer.
It held that Section 56(2)(xi) of the Income-tax Act did not apply to the payment.
The ITAT set aside the lower appellate order and directed the Assessing Officer to modify the assessment.
- Who
- Prakash Sukhdeo Sonawane, a former employee of Pfizer Healthcare India Pvt. Ltd., and the Income Tax Department.
- What
- The Pune ITAT ruled that his ₹65.21 lakh voluntary-retirement payment was a non-taxable capital receipt.
- When
- The tribunal order was dated June 8, 2026, and concerned assessment year 2019-20.
- Where
- The case was decided by the Pune Bench of the Income Tax Appellate Tribunal and involved Pfizer’s Aurangabad plant.
- Why
- The tribunal found that Sonawane voluntarily resigned under the retirement scheme and was not terminated by Pfizer.
Pune ITAT and taxpayer
Tax authorities
Nature of the payment
Pune ITAT and taxpayer
The payment was a capital receipt arising from voluntary retirement and was not chargeable to tax.
Tax authorities
The CIT(A)/NFAC treated the payment as taxable income from other sources.
Whether employment was terminated
Pune ITAT and taxpayer
The employee voluntarily resigned under Pfizer’s scheme, so Pfizer had not terminated his employment.
Tax authorities
The CIT(A)/NFAC considered the payment to have been received in connection with termination of employment.
Application of Section 56(2)(xi)
Pune ITAT and taxpayer
The tribunal held that the provision did not apply because the scheme involved voluntary resignation rather than company-initiated termination.
Tax authorities
The lower appellate authority applied Section 56(2)(xi) and treated the amount as taxable.
- Payout
- ₹65,21,105 received during financial year 2018-19
- Ex-gratia/severance
- ₹50,70,250.01
- Other incentives
- ₹12 lakh as early-bid and group-participation incentives
- Notice-period payout
- ₹2,50,855.80 for three months
- Tax provision considered
- Section 56(2)(xi) of the Income-tax Act, 1961
- Case
- Prakash Sukhdeo Sonawane vs Income Tax Officer, Ward-1(1), Aurangabad; ITA No. 2180/PUN/2025
- Tribunal direction
- The Assessing Officer was directed to modify the assessment