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TMI Blog2024 (10) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... n claiming sec.10(10A) and 10(10AA) of the Income Tax Act, 1961 (in short "the Act") exemptions; as the case may be regarding their entitlement benefits of leave encashment etc. Needless to say, sec.10(10A) grants exemption to pensionary benefits (including gratuity) whereas sec.10(10AA) applies in case of leave encashment; wherein, the employee is of the "Central Government" or a "State Government" as the case may be followed by the prescribed quantum of the retiral benefits; as the case may be. A few key facts may be noticed hereunder. 3. There is hardly any dispute between the parties that all these four assessees had joined the erstwhile Maharashtra State Electricity Board, [in different capacities], way back in 1980's. They have admittedly superannuated in the impugned assessment years herein. They have received their impugned retiral benefits i.e., gratuity(ies) and leave encashment(s) involving varying sums. These four assessees claimed exemption(s) u/sec. 10(10A) and u/sec.10(10AA) regarding the same. Needless to say, the learned lower authorities are of the view that since these assessees' have superannuated from the Maharashtra State Power Generation Company i.e., "MSPG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... University that is constituted under a State Act. The petitioners herein are employees of the University. Chapter VII of the Tamil Nadu Agricultural University Act, 1971 (in short 'TNAU Act') sets out the conditions of service of employees, section 34 deals with pension, gratuity and other benefits and section 35 deals with conditions of service. 13. Section 35 states that subject to the provisions of the TNAU Act, the appointment, procedure for selection, pay and allowances and other conditions of service of the officers, teachers and other employees shall be 25 prescribed. Chapter XII of the Tamil Nadu Agricultural University Rules (in short 'TNAU Rules') deals with the grant of gratuity-cum-pension-cum-provident fund in the following terms: 2. GRATUITY-CUM-PENSION-CUM PROVIDENT FUND 1. The provisions of the Tamil Nadu Pension Code including the Tamil Nadu Liberalised Pension Rules, 1960 and Family Pension Rules, 1964 of the Tamil Nadu Government will apply mutatis mutandis to the employees of the Tamil Nadu Agricultural University in regard to the payment of gratuity and pension on their retirement. All the amendments of these rules made by the Tamil Nadu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The other sources of funds are set out under section 29 and read as follows: 29. Other funds: The University may have such other funds as may be prescribed by the statutes. 17. Thus, and undisputedly, the management of the University is conducted fully from and out of the income from fees, endowments, grants, donations and gifts and contributions/grants made by the Central Government, any State Government, University Grants Commission, any local authority or any Corporation owned or controlled by the Government. The manner of investment of funds is also set out categorically in the provision itself. 18. In all, the position that obtains is that the Tamil Nadu Agricultural University is a part of the State and none of the parties before me would dispute the position that in the event of any action of the University coming to be assailed under article 226 of the Constitution of India, such challenge would be fully maintainable. 19. Compare and contrast this with other institutions that, while satisfying the requirements of article 12 of the Constitution of India dealing with 'State' would still not be fully amenable to article 226 of the Constitution of India. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The challenge was repelled by the Division Bench, the Bench stating as follows : "5. So far as the challenge to provisions of section 10(10AA) of the Act on the ground of discrimination is concerned, we are of the view that there is no merit there in. This is for the reason that employees of the Central Government and State Government form a distinct class and the classification is reasonable having nexus with the object sought to be achieved. The Central Government and State Government employees enjoy a 'status' and they are governed by different terms and conditions of the employment. Reference here may be made to the decision in Roshan Lal Tandon v. Union of India AIR 1967 SC 1889 wherein it was held by the Supreme Court that the legal position of a Government servant is more one of status than of Contract. The relevant extract from the said judgment reads as under: '6. We 0955 on to consider the next contention of the petitioner that there was a contractual right as regards the condition of service applicable to the petitioner at the time he entered Grade 'D' and the condition of service could not be altered to his disadvantage afterwards by the notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the law itself, and so pertaining to the sphere of status. A contract of service between employer and employee, while for the most part pertaining exclusively to the sphere of contract, pertains also to that of status so far as the law itself has seen fit to attach to this relation compulsory incidents, such as liability to pay compensation for accidents. The extent to which the law is content to leave matters within the domain of contract to be determined by the exercise of the autonomous authority of the parties themselves, or thinks fit to bring the matter within the sphere of status by authoritatively determining for itself the contents of the relationship, is a matter depending on considerations of public policy. In such contracts as those of service the tendency in modern times is to withdraw the matter more and more from the domain of contract into that of status. "(Salmond and Williams on Contracts , 2ndEdn.p.12)." (Emphasis added) Thus, government employees enjoy protection and privileges under the Constitution and other laws, which are not available to those who are not employees of the Central Government and State Governments.' 6. The submission of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Being employees of the companies it is the responsibility of the companies to pay them salary and if the company is sustaining losses continuously over a period and does not have the financial capacity to revise or enhance the pay scale, the petitioners cannot claim any legal right to ask for a direction to the Central Government to meet the additional expenditure which may be incurred on account of revision of pay scales. It appears that prior to issuance of the office memorandum dated 12-4-1993 the Government had been providing the necessary funds for the management of public sector enterprises which had been incurring losses. After the change in economic policy introduced in the early nineties, the Government took a decision that the public sector undertakings will have to generate their own resources (0 meet the additional expenditure incurred on account of increase in wages and that the Government will not provide any funds for the same. Such of the public sector enterprises (government companies) which had become sick and had been referred to BIFR, were obviously running on huge losses and did not have their own resources to meet the financial liability which would have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment are stated to apply to TNAU employees in terms of Chapter XII of the TNAU Rules. Likewise, provident fund is governed by the General Provident Fund Rules of the Tamil Nadu Government. The rate of interest to be paid to subscribers to the General Provident Rules are the same as adopted by the Tamil Nadu Government from time to time. 28. That apart, there are a slew of decisions of the Income-tax Appellate Tribunal, wherein in the context of section 10(10AA) of the Act, employees of several Universities, such 25 the Haryana Agricultural University and Mahatma Gandhi University, have been held to be holding civil posts under the State Government. The decisions are (i) Ram Kanwar Rana v. ITO [2016] 71 taxmann.com 54/159 ITD 431 (Delhi - Trib.), () ITO (TDS) . Mahatma Gandhi University [2019] 107 taxmann.com 186/73 [TR (Trib,) 44/177 ITD 508 (Cochin - Trib,), (iii) Dev Raj Sood v. ITO [ITA No. 905/Del/2017, dated 30-5-2017] (iv) Mahatma Gandhi University case (supra) and (v) Indra Kumari Bajajv. ITO [ITA No. 2735/Del/2017, dated 4-12-2019]. 29, In light of the detailed discussion as above, I have no doubt in my mind that the petitioners, employees of Tamil Nadu Agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be agreed between the State Government and the State Transmission Utility or generating company or transmission licensee or distribution licensee, as the case may be. (3) Notwithstanding anything contained in this section, where,- (a) the transfer scheme involves the transfer of any property or rights to any person or undertaking not wholly owned by the State Government, the scheme shall give effect to the transfer only for fair value to be paid by the transferee to the State Government; (b) a transaction of any description is effected in pursuance of a transfer scheme, it shall be binding on all persons including third parties and even if such persons or third parties have not consented to it. (4) The State Government may, after consulting the Government company or company or companies being State Transmission Utility or generating company or transmission licensee or distribution licensee, referred to in sub-section (2) (hereinafter referred to as the transferor), require such transferor to draw up a transfer scheme to vest in a transferee being any other generating company or transmission licensee or distribution licensee, the property, interest in property, rights and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on and after the effective date. Explanation.- For the purpose of this Part, - (a) Government company" means a Government Company formed and registered under the Companies Act, 1956. (b) company" means a company to be formed and registered under the Companies Act, 1956 to undertake generation or transmission or distribution in accordance with the scheme under this Part. Section 132. (Use of proceeds of sale or transfer of Board, etc.): In the event that a Board or any utility owned or controlled by the Appropriate Government is sold or transferred in any manner to a person who is not owned or controlled by the Appropriate Government, the proceeds from such sale or transfer shall be utilised in priority to all other dues in the following order, namely (a) dues (including retirement benefits due) to the officers and employees of such Board or utility, who have been affected by the aforesaid sale or transfer; (b) payment of debt or other liabilities of the transferor as may be required by the existing loan covenants. "Section 133. (Provisions relating to officers and employees): - (1) The State Government may, by a transfer scheme, provide for the transfer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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