Para's 7 and 16 of this document are the most relevant ones. The entitlement to ESA isn't refused under transitional arrangments, it's refused under the basic rules of entitlement in the WRA - a person is not entitled to ESA if they are receiving IS.
This situation is not unusual in social security. IS, JSA and PC all have similiar preclusions.
I would suggest that where there is a possible entitlement to another benefit they should be prioritised and the claimant should ask for the ESA claim to take priority over the IS claim. In the alternative, when making a claim, the claimant could simply write to withdraw his IS claim on the same day.
I've not researched this at all so there may be other options.
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