An Australian Tax Office (ATO) worker who was diagnosed with depression after being told his performance was putting a major project at risk has won a battle for compensation.

The experienced IT engineer was employed on a project to develop software to allow people to lodge their tax returns electronically, as part of the E-tax system.

The man had gained his initial degree in India and post-graduate qualifications in Australia.

The Administrative Appeals Tribunal (AAT) heard in November 2012 the man was criticised for not meeting work targets and invited to attend a meeting with his supervisor to discuss the issue.

The AAT heard that at that meeting his supervisor told him she had worked in the IT industry for 25 years and had "worked with people like him before".

The AAT agreed the supervisor had been referring to IT professionals, but also found that the man was hurt by the comment.

The engineer later sent an email to his supervisor stating: "I am extremely distressed by these developments this morning and don't understand what I did wrong to deserve this."

"I have put my heart and soul to the work that I did in this team for the last four years and I certainly don't like to be treated like this ... I certainly don't like to be insulted like this."

The man said he felt extremely distressed, took sick leave and eventually lodged a claim for compensation for a major depressive disorder.

Comcare rejected the claim, saying his employer had simply carried out a reasonable administrative action.

But the AAT overruled that decision, finding the ATO was eligible to pay compensation to the man.

The judgment did not specify the exact amount of compensation, but noted that his legal costs would be covered.