TaxTMI 
TaxTMI 
2022 (8) TMI 1232
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....Senior Standing Counsel - R1 to R3, Mrs.C.Sangamithirai Special Government Pleader - R4 & R5, Mr.Abdul Saleem - R6 to R8 COMMON ORDER The petitioners challenge audit objections issued by local fund audit calling upon the petitioners to remit income tax on surrender of leave salary (SLS) on the ground that tax has not been deducted at source in terms of the Income Tax Act, 1961 (in short 'Act'). 2. The petitioners are employees of the Tamil Nadu Agricultural University (University/TNAU). To be noted that the petitioners are direct employees of the University, and not employees of allied institutions or constituent colleges and the ratio of this decision will apply only to those employees who are under the direct employment of the University per se. 3. The employees had retired from service in the year 2017 and at the time of retirement had been granted SLS. An objection was raised by local fund audit on the ground that tax ought to have been deducted under the provisions of the Act. Thus, the University sought a clarification from the local fund audit as well as from the Income Tax Department. 4. The latter has, vide clarification dated 17.02.2015, stated as f....
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...., to high light that University employees are not considered as Government employees in the present scheme of the Act similar situation prevails in the cases of IIT and IIM employees also. After considering the legal provision, I find that the LF Audit objection on Encashment of Leave Salary (Sec 10) (10AA) is tenable. Yours Faithfully (C.O.FRANCIS, IRS) Assistant Commissioner of Income Tax, TDS Circle, Coimbatore 5. The sum and substance of the stand of the Department is that the petitioners are not 'Government servants' as set out under Section 10(10AA) Clause (i) of the Act and hence cannot claim benefit of the aforesaid provision that grants an exemption from tax, in certain specific situations. 6. The provisions of Section 10(10AA) read as follows: Incomes not included in total income. 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- ................. (10AA) (i) any payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned....
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....arned counsel for the petitioner are that (i) TNAU is constituted under a State Act, (ii) its employees are bound by the conditions and terms of employment that would be applicable to Government servants (iii) the payment of gratuity as well as provident fund are as applicable to Government servants and thus there is no justification whatsoever, for treating SLS differently. 9. He would refer to several decisions of the Income Tax Appellate Tribunal to attempt to persuade this Court that an employee of an agricultural university must also be taken to be a State Government employee. Mr.Abdul Saleem, learned counsel appearing for the TNAU would fully support the case of the petitioners. His stand is that the TNAU is a statutory body, a State run University and hence its employees are on par with State Government employees. 10. Per contra, Mr.Rajesh, learned counsel appearing for the Income Tax Department would point out to the clear distinction in the two clauses of Section 10AA to drive home the point that the tax treatment of the two are separate and distinct. Since the statutory provisions have not been challenged, the interpretation accorded to the same must be strict and a....
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....y provided they have put in 2 years of service. 3. The General Provident Fund Rules of the Tamil Nadu Government will also apply to the employees of the Tamil Nadu Agricultural University. 4. The Officers who are appointed for a short assignment will also be admitted to the General Provident Fund Rules. The rate of interest to be paid to the subscribers will be the same as adopted by the Tamil Nadu Government from time to time. 14. Section 7 of the TNAU Act provides for an unfettered right of the State to inspect and conduct enquiry into the management of the University, its various activities including teaching, the work conducted by the University, conduct of examination as well as person or persons who are connected with the administration or finances of the University, by the State. 15. The power exercised by the State Government in the functioning and management of the University is unbridled. The Governor of Tamil Nadu is, in terms of Section 9 of the Act, the Chancellor of the University. It is also an admitted position that the funding of the University is entirely at the behest of the State Government. 16. Chapter VI of the TNAU Act deals with fu....
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....main of contractual activities or private actions in which event, a Writ Petition would not lie. 20. The authority for this proposition is the judgment of Hon'ble Supreme Court in the case of Zee Telefilms Ltd. V. Union of India ((2005 ) 4 SCC 649, wherein it is stated as follows: '. . . . 22. Above is the ratio decidendi laid down by a seven Judge Bench of this Court which is binding on this Bench. The facts of the case in hand will have to be tested on the touch stone of the parameters laid down in Pradeep Kumar Biswas's case (supra). Before doing so it would be worthwhile once again to recapitulate what are the guidelines laid down in Pradeep Kumar Biswas's case (supra) for a body to be a State under Article 12. They are:- (1) Principles laid down in Ajay Hasia are not a rigid set of principles so that if a body falls within any one of them it must ex hypothesi, be considered to be a State within the meaning of Article 12. (2) The Question in each case will have to be considered on the bases of facts available as to whether in the light of the cumulative facts as established, the body is financially, functionally, administrative....
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....offer and acceptance in every case . But once appointed to his post or office the Government servant acquires a status and his rights and obligations are no longer determined by consent of both parties , but by statute or statutory rules which may be framed and altered unilaterally by the Government . In other words , the legal position of a Government servant is more one of status than of contract . The hallmark of status is the attachment to a legal relationship of rights and duties imposed by the public law and not by mere agreement of the parties . The emolument of the Government servant and his terms of service are governed by statute or statutory rules which may be unilaterally altered by the Government without the consent of the employee . It is true that Article 311 imposes constitutional restrictions upon the power of removal granted to the President and the Governor under Article 310. But it is obvious that the relationship between the Government and its servant is not like an ordinary contract of service between a master and servant . The legal relationship is something entirely different , something in the nature of status . It is much more than a purely contractual rel....
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....ndia for the purpose of entrainment of proceedings under Article 226 of the Constitution and for enforcement of fundamental right under the Constitution , it does not follow that the employees of such Public Sector Undertaking , Nationalised Banks or other institutions which are classified as ' State ' assume the status of Central Government and State Government employees . It has been held in multiple decisions that employees of Public Sector Undertakings are not at par with government servants ( Ref Officers & Supervisors of I.D.P.L. v . Chairman & M.D. I.D.P.L. AIR 2003 SC 2870 ) . In the noted case of A.K. Bindal v . Union of India [ 2003 ] 5 SCC 163 , while considering the issue of revision of the pay scales of employees of government companies / PSUs at par with government employees , it was held that the employees of government companies cannot claim the same legal rights as government employees. The relevant extract from the said judgment reads as under : " 17. The legal position is that identity of the government company remains distinct from the Government . The government company is not identified with the Union but has been placed under a special syste....
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....titions . " ( Emphasis supplied ) We therefore , reject the present petition , insofar as the petitioners ' challenge to the provisions of Section 10 ( 10AA ) is concerned . 23. In that case, the constitutionality of Section 10(10AA) was itself challenged and that was repelled. Not so in the present case, where, what is challenged is only the question of whether the exemption under Section 10(10AA) is available to employees of TNAU or not. This is a critical difference. 24. There are vital distinctions between the employers in that case and that in the present one. Firstly, PSUs are constituted under the provisions of the Companies Act, 1956, whereas, the Tamil Nadu Agricultural University is constituted under a State enactment coming directly within and under the control of the State. PSUs are independent companies and regulation by the Government is restricted. As far as Banks are concerned, the regulatory agency is the Reserve Bank of India. 25. The TNAU is managed, administered and substantially funded out of Government funds and grants, while PSUs are commercially run companies and have independent sources of revenues. So too with Banks that have a direct ....