Income Tax Appellate Tribunal - Mumbai
Deputy Commissioner Of Income-Tax vs Maharashtra State Road Transport ... on 20 February, 2006
Equivalent citations: [2006]100ITD187(MUM), [2006]284ITR62(MUM), (2006)102TTJ(MUM)22
ORDER
K.C. Singhal, Judicial Member
1. The Hon'ble President, ITAT, vide its order dated 26-8-2005, has constituted this Special Bench to consider the following issue :
Whether on the facts and in the circumstances of the case assessee-Corporation is required to obtain permission from the High Powered Committee known as Committee on Disputes Constituted in terms of the decision of the Hon'ble Supreme Court in the case of ONGC v. Collector of Central Excise 1995 Suppl. (4) SCC 541 as interpreted by the Hon'ble Delhi High Court in the case of CIT v. Delhi Tourism & Transport Development Corpn. Ltd. Taxman 307 (Delhi)
2. At the outset, we may mention the circumstances giving raise to this reference. The Respondent is an Undertaking owned by Maharashtra Government. The present appeal is by the Revenue against the order of the Learned CIT (A). When the matter came up for hearing before the Regular Bench, the Learned Counsel for the assessee took a preliminary objection that this appeal could not be heard in the absence of requisite clearance from the High Power Committee known as "Committee on Disputes" (C.O.D) as constituted in terms of the decision of the Hon'ble Supreme Court in the case of ONGC v. CCE 1995 Suppl. (4) SCC 541. Reliance was also placed on another decision of the Hon'ble Supreme Court in the case of Mahanagar Telephone Nigam Ltd. (MTNL) v. CBDT and the decision of the Hon'ble Delhi High Court in the case of CIT v. Delhi Tourism & Transportation Development Corpn. Ltd. . According to him, the Hon'ble Delhi High Court, following the decision of the Hon'ble Supreme Court in the case of MTNL (supra) had held that a dispute involving in State Government Undertaking and the Income-tax Department could not be proceeded with in the absence of requisite clearance from C.O.D. But attention of the Bench was drawn to the decision of a Coordination Bench of the Tribunal in the case of Maharashtra Tourism Development Corpn. Ltd. v. Jt. CIT [IT Appeal Nos. 3505 and 3506 (M) 2001] in which it has been held that litigation involving in the Income-tax Department and a public sector undertaking of the State Government cannot be proceeded with in the absence of requisite clearance from C.O.D. However, the Learned CIT (A) could not rebut the submissions made by the Learned Counsel for the assessee. In view of the aforesaid submissions, the Bench observed that appeal of the Revenue could be dismissed but considering the wider repercussions and the importance of the issue, it was felt that this issue be decided by a larger Bench. Accordingly, the Bench requested the Hon'ble President for constituting Special Bench to consider the said question. The Hon'ble President, considering the importance of the issue, constituted this Bench.
3. The Learned Counsel for the assessee has reiterated the contentions raised before the Regular Bench which have already been mentioned by us in Para 2 of this order and, therefore, need not be repeated. In addition, he has also relied on the judgment of the Hon'ble Rajasthan High Court in the case of State of Rajasthan v. ITAT . However, much emphasis was made by him on the judgment of Hon'ble Supreme Court in the case of Chief Conservator of Forests, Government of Andhra Pradesh v. Collector and in the case of MTNL (supra) as well as the judgment of the Hon'ble Delhi High Court in the case of Delhi Tourism & Transportation Development Corpn. (supra). On the contrary, the Learned D.R has relied on the recent judgment of the Hon'ble Andhra Pradesh High Court in the case of Andhra Pradesh Power Generation Corpn. Ltd., copy of which is placed on record. It has been argued that the Hon'ble High Court after considering all the judgments of the Hon'ble Supreme Court has held that clearance from High Powered Committee is required only where the dispute is between two Departments of Union of India and such clearance is not required where the dispute is between the Departments of Union of India and the State Government Undertaking.
4. The contentions of both the parties have been considered carefully. In order to appreciate the controversy before us, let us understand the ratio laid down by the Hon'ble Supreme Court of India in various cases. In the case of ONGC v. CCE 1992 Suppl. (2) SCC 432, the Apex Court expressed its unhappiness over the litigation between the Public Sector Undertakings of the Central Government and the Union of India by observing as under :
3. This Court has on more than one occasion pointed out that Public Sector Undertakings of Central Government and the Union of India should not fight their litigations in Court by spending money on fees of counsel, court fees, procedural expenses and wasting public time. Courts are maintained for appropriate litigations, Court's time is not to be consumed by litigations which are carried on either side at public expenses from the source. Notwithstanding these observations repeated on a number of occasions, the present cases appear to be an instance of total callousness. The letter of October 3, 1988, indicated that the Cabinet Secretary was looking into the matter. That has not obviously been followed up. As an instance of wasting public time and energy this matter involves a principle to be examined at the highest level.
In view of the above observations, the Apex Court called upon the Cabinet Secretary to handle the aforesaid matter personally and report to the Court as to why such litigation is being conducted when the two sides are Public Sector Undertaking and Union of India. The Cabinet Secretary in its report to the Apex Court stated as under:
I would also lie to State that the Government respects the views expressed by this Hon'ble Court and has accepted them that public undertakings, Central Government and the Union of India should not fight their litigation in Court by spending money on fees on counsel, court fees, procedural expenses and wasting public time. It is in this context that the Cabinet Secretariat be issued instructions from time to time to all Departments of the Government of India as well as to public undertakings of the Central Government to the effect that all disputes, regardless of the type, should be resolved amicably by mutual consultation or through the good offices of empowered agencies of the Government or though arbitration and recourse of litigation should be eliminated.
Expressing its happiness over the report, the Hon'ble Supreme Court issued the directions as under:
3. We direct that the Government of India shall set up a Committee constituting representatives from the Ministry of Industry, the Bureau of Public Enterprises, and the Ministry of Law to monitor disputes between Ministry and Ministry's Government of India, Ministry and Public Sector Undertaking of the Government of India and Public Sector Undertakings in between themselves, to ensure that litigation comes to Court or to a Tribunal without the matter having been examined by the Committee and its clearance for litigation. Government may include a representative of the Ministry concerned in a specific case and one from the Ministry of Finance in the Committee, Senior Officers only should be nominated so that the Committee would function with status, control and discipline.
4. It shall be the obligation of every Court and every Tribunal where such a dispute is raised hereafter to demand a clearance from the Committee in case it has not been so pleaded and in the absence of the clearance, the proceedings would not be proceeded with.
5. The Committee shall function under the ultimate control of the Cabinet Secretary but his delegate may look after the matters. This Court would expedite quarterly report about the functioning of this system to be furnished to the Registry beginning from 1st January, 1992.
[Source - 1995 Suppl. (4) SCC 541] In the case of Canara Bank v. National Thermal Power Corpn. [2001] 1 SCC 43, the Hon'ble Supreme Court clarified as under:
12. What the Court has directed in ONGC case is that frivolous litigation between Government departments and public sector undertaking of the Union of India should not be dragged in the courts and be amicably resolved by the Committee. The judgment is intended to prevent avoidable litigation between the Government departments and the undertakings of the Union of India. In the present litigation there does not appear to be a genuine dispute between the Government of India undertaking.
In the case of Chief Conservator of Forests, Government of Andhra Pradesh (supra), the Hon'ble Supreme Court had to consider a dispute between the Department of State Government and the Collector of the same State. After considering the earlier judgment in the case of ONGC (supra) their Lordships observed as under:
Under the scheme of the Constitution, Article 131 confers original jurisdiction on the Supreme Court in regard to a dispute between two States of the Union of India or between one or more States and the Union of India. It was not contemplated by the framers of the Constitution or CPC that two departments of a State or the Union of India will fight a litigation in a court of law. It is neither appropriate nor permissible for two departments of a State or the Union of India to fight litigation in a Court of law. Indeed, such a course cannot but be detrimental to the public interest as it also entails avoidable wastage of public money and time. Various departments of the Government are its limbs and, therefore, they must act in co-ordination and not in confrontation. Filing of a writ petition by one department against the other by invoking the extraordinary jurisdiction of the High Court is not only against the propriety and polity as it smacks of indiscipline but is also contrary to the basic concept of law which requires that for suing or being sued, there must be either a natural or a juristic person. The States/Union of India must evolve a mechanism to set at rest all inter-departmental controversies at the level of the Government and such matters should not be carried to a court of law for resolution of the controversy. The facts of the present case make out a strong case that there is a felt need of setting up of committees by the State Government also to resolve the controversy arising between various departments of the State or the State and any of its undertakings. It would be appropriate for the State Governments to set up a committee consisting of the Chief Secretary of the State, the Secretaries of the departments concerned, the Secretary of Law and where financial commitments are involved, the Secretary of Finance. The decision taken by such a committee shall be binding on all the departments concerned and shall be the stand of the Government.
In the case of MTNL (supra), the Hon'ble Supreme Court after considering its earlier decisions in various cases, observed as under:
It was not contemplated by the framers of the Constitution or the Code of Civil Procedure that two departments of a State or the Union of India and/or a department of the Government and a public sector undertaking fight litigation in a court of law. Such a course is detrimental to public interest as it entails avoidable wastage of public money and time. These are limbs of the Government and must act in co-ordination and not confrontation. The High Powered Committee is set up not only to conciliate between the Government Departments. There could not be frivolous litigation proposed by a Department or a public sector undertaking. This could be prevented by the High Powered Committee. In such cases, there is no question of resolving the dispute; the Committee only has to refuse permission to litigate. No right of the Department or the public sector undertaking is affected in such a case. Even if the Department or the public sector undertaking finds the decision of the Committee unpalatable, discipline requires that they abide by it.
The combined reading of the above judgments shows that Hon'ble Supreme Court, considering the provisions of Article 131 of the Constitution of India, observed that two arms of the Government should not fight their litigation in the Courts by spending money unnecessarily and wasting public time. Accordingly, their Lordships directed the Government of India to set up a committee consisting of the representatives from Ministry of Industry, Bureau of Public Enterprises and Ministry of Law to monitor the disputes arising between various Departments of Government of India and to ensure that such dispute comes to the Court only after clearance of such Committee. All the Courts and the Tribunals were also directed not to entertain any such litigation unless clearance is given by such committee. This mechanism came into existence to deal with the disputes between two or more Departments of Government of India. In all the cases before the Apex Court (except in Chief Conservator of Forests v. Collector), the litigation was between two Departments of Union of India.
5. In Chief Conservator of Forests' case (supra), no doubt, the dispute arose between two organizations of State Government of Andhra Pradesh and their Lordships of Supreme Court followed its earlier judgment in the case of ONGC (supra). However, it is pertinent to note that their Lordships suggested the setting up of a committee on similar lines which is apparent from the following observations:
15. The facts of this appeal, noticed above, make out a strong case that there is a felt need of setting up of similar committees by the State Government also to resolve the controversy arising between various departments of the State or the State and any of its undertakings. It would be appropriate for the State Governments to set up a committee consisting of the Chief Secretary of the State, the Secretaries of the departments concerned, the Secretary of Law and where financial commitments are involved, the Secretary of Finance. The decision taken by such a committee shall be binding on all the departments concerned and shall be the stand of the Government.
The above observations make it clear beyond doubt that mechanism established as per ONGC's case (supra) was not extended to solve the litigation between departments of the State Government. On the contrary, each State is required to set up its own mechanism to solve their dispute. Applying the same analogy, we are of the view that in the absence of any mechanism to deal with the disputes between one department or undertaking of State Government on one hand and department/undertaking of Union of India on the other hand, the right of appeal of any party cannot be effaced. At this juncture, we may refer to the observations of their Lordships in the case of Mahanagar Telephone Nigam Ltd. (supra) to the effect that right to enforce a right in a Court of Law cannot be effaced. However, this right was made subject to clearance from the High Powered Committee. As already observed that High Powered Committee was constituted by Government of India only to deal with the litigation between two limbs of Government of India. Any litigation by State Government Department/Undertaking is impliedly outside the scope of such committee. In view of the observations of the Hon'ble Supreme Court in the case of Chief Conservator of Forests (supra) for setting up of separate committee to deal with the litigation between two limbs of State Government. There is not even a single case where litigation was between Department of State Government and Department of Union of India. In view of the above discussions, in our opinion, the direction of the Apex Court in ONGC (supra) cannot be applied to a case where one litigant is Department/Undertaking of State Government and the other litigant is Department/Undertaking of Union of India.
6. Much reliance has been placed on the judgment of the Hon'ble Delhi High Court and Rajasthan High Court by the Learned Counsel for the assessee. The judgment of the Hon'ble Delhi High Court is in CIT v. Delhi Tourism and Transportation Development Corpn.'s case (supra). We have gone through the said judgment. Their Lordships have quoted the observations of the Hon'ble Supreme Court in the case of Mahanagar Telephone Nigam Ltd. 's case (supra) and then observed as follows :
In the absence of a clearance by the High Powered Committee, the appeal is not required to be entertained at this stage and, therefore, we dismiss this appeal. However, it will be open for the appellant to file an application for revival of this appeal after clearance is obtained. The appeal is dismissed accordingly.
We have already quoted the observations of their Lordships of the Hon'ble Supreme Court in the case of MTNL (supra) in the earlier part of our order. Nowhere their Lordships observed about the clearance of dispute from such Committee where dispute was between Department of a State and Union of India. The High Power Committee referred to therein related to a Committee to deal with disputes between two limbs of Government of India only. With all due respect to their Lordships of the Hon'ble High Court, it appears that by inadvertence, their Lordships proceeded on wrong footing.
7. In the case of State of Rajasthan (supra), the Hon'ble High Court at Page 690 observed as under :
The Apex Court has observed that, inter se dispute of the State Government on the one side and the Central Government on the other side directly should not come to the court for its resolution.
We have already quoted the relevant position of judgment of the Hon'ble Supreme Court in the case of ONGC (supra). Nowhere their Lordships of Apex Court referred to dispute between State Government on one side and Central Government on other side. That case related to a situation where both the parties were limbs of Union of India. With all due respect to their Lordships, the Hon'ble High Court appears to have proceeded on wrong footing by inadvertence.
8. On the other hand, the Hon'ble Andhra Pradesh High Court has dealt with this issue at great length in Andhra Pradesh Power Generation Corpn. Ltd. v. Asstt. CIT (Hyd) [Writ Petition No. 3900 of 2005 and IT Appeal Nos. 215-216 of 2005]. This order is dated 3-11-2005, copy of which is placed on file. After referring to all the judgments of the Apex Court, the Court observed at Page 10 of the order as under:
"In none of the cases referred to hereinabove, the disputes were between the Central Government and the State Government or between public sector undertakings of the State Government and the Central Government or between public sector undertakings of the State and the public sector undertakings of the Central Government. It is thus clear there is no "High-Powered Committee" constituted for resolution of any dispute between the Central Government and the State Government or between the public sector undertakings of the State Government and public sector undertakings of the Central Government or between one Department of the Central Government and the State Government or between the departments of Central Government and the departments of the State Government. Obviously, no such "High Powered Committee" could have been constituted by the Central Government to resolve the disputes between the Central Government and the State Governments for which purposes Constitution itself provides mechanism as well as the Forum for resolution of such disputes."
Further at Pages 11 and 12 it was observed as under :
The disputes between the Centre and the State are required to be resolved in accordance with the provisions of the Constitution, which provides the mechanism as well as the Forum for resolution of all such disputes. There is no Forum, as such, created or constituted by the Central Government to resolve the disputes between the State Government public sector undertakings on the one hand and the departments of Central Government on the other. Nor there is any mechanism or Forum created and constituted for resolution of disputes between the State Government public sector undertakings and the Central Government public sector Undertakings.
Their Lordships further examined the judgment of the Hon'ble Delhi High Court as well as Rajasthan High Court and then observed as under:
The Rajasthan High Court in State of Rajasthan v. Income-tax Appellate Tribunal and another and the Delhi High Court in Commissioner of Income-tax v. Delhi Tourism and Transportation Development Corporation Limited, obviously, did not properly appreciate the ratio laid down by the Supreme Court in Oil and Natural Gas Commission cases (supra 1 to 3). We are not inclined to agree with the view taken by the Rajasthan and the Delhi High Court in the said decisions.
Finally, at Page 14, they observed as under :
The view taken by the Appellate Tribunal is vitiated by errors apparent on the fact of the record. The Tribunal misdirected itself in applying the decisions of the Supreme Court in Oil and Natural Gas Commission cases (supra 1 to 3). The Tribunal committed a grave error in passing the impugned order instead of disposing of the appeals on merits. The impugned order is unsustainable in law and the same is accordingly quashed.
The above discussion shows that their Lordships of Andhra Pradesh High Court dissented from the decisions of Delhi High Court as well as Rajasthan High Court. The view taken by us is fortified by the judgment of the Hon'ble Andhra Pradesh High Court.
9. In view of the above discussion, we hold that appeals can be heard by the Tribunal without any clearance from High Powered Committee constituted by Government of India, where litigation is between State Government Undertaking and Income-tax Department.
10. The matter would not go to regular Bench for disposal of appeals on merits.