TaxTMI 
TaxTMI 
2025 (6) TMI 2068
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....,00,000/-. Subsequently, the assessee filed his revised return of income claiming the exemption of whole of the leave encashment received on retirement amounting to Rs. 20,87,840/-. 3.1 The case of the assessee was selected for scrutiny under CASS for the reasons that salary shown in return of income is less than the salary income as per Form No. 26AS. Thereafter notices were issued under section 143(2) and 142(1) and in response the assessee filed necessary submissions / information thereafter the AO completed the assessment under section 143(3) r.w.s 144B of the Act whereby exemption for leave encashment was restricted to Rs. 3,00,000/- for the reason that the assessee retired as an employee of Haryana Vidyut Prasaran Nigam Ltd. and he was neither the Central Government or the State Government employee in order to claim full exemption of leave encashment under section 10(10AA)(i) of the Act. 4. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) referring to the provisions of Clause (i) of Section 10AA and Clause (ii) of Section 10AA of the Act. The Ld. CIT(A) stated that in respect of leave encashment on retirement in case of non Government emp....
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.... to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services; (ii) any gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972 ), to the extent it does not exceed an amount calculated in accordance with the provisions of sub- sections (2) and (3) of section 43 of that Act; (iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependents on his death, to the extent it does not, in either case, exceed one- half month's salary for each year of completed service, calculated on the basis of the average salary for the ten months immediately preceding the mon....
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....ediately before such date. " 6.2. From the above notification, it is clear that the employees who were transferred in the Power Department like the assessee were eligible for all the benefits which were available before their transfer i.e. when they were the employee of the State Government. As per the provisions contained in Section 10( 10)(i) of the Act, the exemption was available for death-cum-retirement gratuity to the employees of the State Government, therefore, the assessee was eligible for exemption u/s 10(10)(i) of the Act and not u/s 10(10)(iii) of the Act as has been held by the AO. It is also noticed that the department itself has allowed the exemption to another employees also on the basis of the notification issued on 01.07.1999 by the Government of Haryana in which it has been declared that the Dakshin Haryana Bijli Vitran Nigam Ltd. is a Government Company and there is no existence of public fund and the employees of the wrest while HSEB were very much covered under GPF scheme which applies only to the Government employees. Moreover, the DHBVN also adopted the Haryana Civil Service (Revised Pension), Part-1, Rules, 2009 which shall apply to all pensioners entitl....
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....overnment 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 system of control and conferred certain privileges by virtue of the provisions contained in Sections 619 and 620 of the Companies Act. Merely because the entire share holding is owned by the Central Government will not make the incorporated company as Central Government. It is also equally well settled that the employees of the government company are not civil servants and....
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....stified. This is so because over the decades, the pay-scales admissible to government servants, and even employees of the Public Sector Undertaking and Nationalised Banks and all others have been upwardly revised, keeping in view, the financial growth in the country as well as on account of rising inflation. The last drawn salaries have increased manifold since time and notification issued under Clause (ii) of Section 10 (10AA) was lastly issued, as taken note of hereinabove, on 31.05.2002. We therefore, issue notice to the respondents limited to this aspect. 7.1 Further Ld. DR submitted that although coordinate bench decisions exist, the statutory interpretation of Section 10(10AA) must prevail over any individual ruling. 7.2 The Ld. DR distinguished the coordinate bench decisions by pointing out that the electricity distribution companies like HVPNL are corporate bodies constituted under the Companies Act and not "State" or "local authority" as defined under the Income Tax Act. Therefore, employees of such corporations cannot be treated as "employees of the State Government" for the purpose of Section 10(10AA)(i). 7.3 The Ld. DR contended that the assessee's employer, HV....
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.... to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a bench of superior strength or in some cases to a bench of superior jurisdiction." Judicial Discipline Among Co-ordinate Benches: In Hatkesh Co-op. Hsg. Society Ltd. vs. ACIT ([2016] 75 taxmann.com 39), the Bombay High Court reiterated that judicial discipline mandates that a later bench of the tribunal should adopt the view taken by an earlier co-ordinate bench on the same issues, except in very limited circumstances such as: The earlier order being per incuriam or sub silentio. A statutory or judicial change in law. Differences in factual circumstances. In case of deviation, the next bench shall record its reasons for not following the earlier decision and, if necessary, refer the matter to a larger bench. Relevant Paragraph of the Judgement- "5. The impugned order of the Tribunal after making a note of its Co-ordinate Bench's order dated 24 June ....
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....s judicial discipline. The tribunal must refer conflicting views to the President for the constitution of a larger bench. Relevant Paragraphs of the Judgement- "19. Having said so, the impugned view taken by the Tribunal by no means can be said to be correct approach. Needless to mention that if the Tribunal wanted to differ to the earlier view taken by the Tribunal in the identical set of facts, the judicial discipline required reference to the larger bench. One co-ordinate bench finding fault with another co-ordinate bench is not a healthy way of dealing with the matters. In this view of the matter, we have no option but to set aside the impugned judgment passed by the Tribunal on 20th November, 2009 incorporated at Exh.A to the petition. 20. In the result, impugned judgment dated 20th November, 2009 is quashed and set aside. Appeal is restored to the file of the Tribunal with direction to hear and decide the same afresh by a reasoned order following principles of natural justice. If the Tribunal decides to take view contrary to the view holding the field, then in that event it is expected of the Tribunal to pass appropriate order leading to reference to a large....
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....efore it is to make a reference to the Hon'ble President for the constitution of Special Bench so that the issue may be finally decided by a Larger Bench." Right to Question Earlier Judgments: While adherence to earlier decisions promotes stability, tribunals must also ensure the correctness of legal interpretations. In Union of India vs. Paras Laminates (P) Ltd. (MANU/SC/0173/1991), the Supreme Court recognized the necessity of allowing subsequent benches to question earlier decisions in cases of perceived legal error. Such cases must be referred to a larger bench to resolve differences. Relevant Paragraphs of the Judgement- "9. It is true that a Bench of two members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. This is particularly true when the earlier decision is rendered by a larger Bench. The rationale of this rule is the need for continuity, certainty and predictability in the administration of justice. Persons affected by decisions of Tribunals or Courts have a right to expect that those exercising judicial functions will follow the reason or ground of the judicial decision in ....
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.... as it is likely to shake the confidence of the public in the system. It is, therefore, desirable that in case a subsequent Bench of the Tribunal is of the view that the finding given by the Tribunal in an earlier year requires reappraisal either because the appreciation in its view was not quite correct or inequitable or some new facts have come to light justifying reappraisal or reappreciation of the evidence on record, it should have the matter placed before the President of the Tribunal so that the case can be referred to a larger Bench of the Tribunal for adjudication and for which there is a provision in the Act." In conclusion, A co-ordinate bench of Tribunal must follow precedents laid by another co-ordinate benches, except under limited exceptions. If there is disagreement, matters should be sent to larger bench by placing the matter before the President of Tribunal. 8. We have heard the rival contention and perused the material available on the record. In the present case, we find that there is no dispute that HVPNL is a public sector utility wholly owned by the State Government. However, the decisive question is whether such employment qualifies as Government....