Gujarat High Court
National Dairy Development Board vs Additional Commissioner Of Income Tax on 1 August, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
O/OJCA/446/2011 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CIVIL APPLICATION (OJ) NO. 446 of 2011
In
STAMP NUMBER NO. 2269 of 2011
In
TAX APPEAL NO. 1087 of 2008
With
STAMP NUMBER NO. 2269 of 2011
In
TAX APPEAL NO. 1087 of 2008
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NATIONAL DAIRY DEVELOPMENT BOARD....Applicant(s)
Versus
ADDITIONAL COMMISSIONER OF INCOME TAX....Respondent(s)
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Appearance:
MRS SWATI SOPARKAR, ADVOCATE for the Applicant(s) No. 1
MR KM PARIKH, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 01/08/2016
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. This civil application for condonation of delay is filed by the assessee seeking condonation of delay of 713 days in filing the miscellaneous civil application. In order to appreciate the nature of delay and the explanation offered by the assessee for such delay, it would be useful to record brief facts.
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O/OJCA/446/2011 ORDER
2. Assessee is National Dairy Development Board, a Government of India undertaking. The assessee has filed Tax Appeal No. 1087 of 2008 which came to be admitted by an order dated 08.07.2009. As many as five questions have been admitted for consideration. We may notice that the appeal memo contained two additional questions which were as under:
"(a) Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that interest income earned on a project fund amounting to Rs. 2.36 crores is income of the appellant, when the agreement provides that NDDB shall be custodian of the funds and thus interest ought to have been treated as being diverted by overriding title?
(g) Whether on the facts and in the circumstances of the case, the ITAT was right in law in confirming disallowance of Rs.
2,52,818/- being contribution made to Employees' Recreation Trust by invoking provisions of section 40A(9) of the Act?"
3. The order dated 08.07.2009 admitting the tax appeal itself records the statement of the counsel for the appellant as under:
"Heard learned counsel for the appellant. Learned counsel for the assessee does not press the Question No.(A) and (G) since no permission from COD has been obtained."
4. Thus, the above noted questions A and G were not pressed for admission by the counsel of the assessee on the ground that the Committee of Disputes ['COD' for short] had not granted permission to press such questions.
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5. It is undisputed that by virtue of various judgements of the Supreme Court in view of the disputes between the assessee- a Government of India undertaking and the Department of Income Tax, the assessee needed at the relevant time, permission of the COD to continue the litigation. Even the counsel for the assessee does not dispute that in the year 2009 when the appeal was taken-up for admission hearing, in absence of such permission, the assessee could not have pressed the questions for admission.
6. As is well known, the mechanism of obtaining permission from COD before entering into any litigation between the two Government departments was dismantled by the Supreme Court by a Constitution Bench judgement in case of Electronics Corporation of India Ltd. vs. Union of India and ors. reported in 332 ITR 58. In view of these developments, the assessee now contends that since the requirement of obtaining clearance from COD no longer applies, the assessee should be allowed to raise these questions in the pending tax appeal. Since the statement was made by the counsel of the assessee on 08.07.2009 that he is not pressing for these questions for admission, the Misc. Civil Application has been filed, in which, the prayer made is to recall the said order dated 08.07.2009 insofar as Grounds A and G are concerned and, to hear the applicant on merits. In short, the prayer of the assessee in the Misc. Civil Application is to lift rigors of the statement made by the counsel that the questions No. A and G are not pressed and to allow the assessee to argue Page 3 of 9 HC-NIC Page 3 of 9 Created On Sat Aug 06 00:05:26 IST 2016 O/OJCA/446/2011 ORDER for admission of these questions also. Since this order was passed on 08.07.2009, the application for recall of the order is delayed by 713 days, for which, the application for condonation of delay has been filed.
7. In this application for condonation, the sole reliance is placed on the judgement of the Supreme Court in case of Electronics Corporation of India Ltd. vs. Union of India and ors (supra). It is stated that in the recent judgement, the Supreme Court has recalled the earlier orders providing for permission from COD. It is therefore that the applicant has decided to move the misc civil application for recall of the order. The delay is, therefore, not deliberate and since the applicant has good case on merits, the said order should be recalled.
8. Learned counsel Mr. Soparkar for the assessee submitted that when the tax appeal was taken up for hearing, the requirement of clearance from COD was prevailing. Since permission was not granted to press questions A and G, the assessee could not argue such questions on merits. Now, that the Supreme Court has dismantled the entire mechanism of COD, the assessee must be permitted to argue such additional questions also on merits.
9. On the other hand, learned counsel Mr. Parikh for the department opposed the delay condonation application submitting that any future development in law would not give sufficient cause to the assessee to file application. The Page 4 of 9 HC-NIC Page 4 of 9 Created On Sat Aug 06 00:05:26 IST 2016 O/OJCA/446/2011 ORDER judgement of the Supreme Court cannot be applied with retrospective effect.
10. As is well known through series of judgements over a period of time, the Supreme Court had overruled the procedure for obtaining clearance from COD for inter departmental or inter Government disputes. This was in order to avoid wastage of public time and money since, in any case, two different departments, corporations or Governments would be litigating against each other. In case of Oil and Natural Gas Commission and anr vs. Collector of Central Excise reported in 1995 Supp (4) Supreme Court Cases 541, the Supreme Court directed setting up of such a Committee as under:
"3. We direct that the Government of India shall set up a Committee consisting representatives from the Ministry of Industry, the Bureau of Public Enterprises and the Ministry of Law, to monitor disputes between Ministry and Ministry of Government of India, Ministry and Public Sector Undertaking of the Government of India and Public Sector Undertakings in between themselves, to ensure that no litigation comes to Court or to a Tribunal without the matter having been first 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 Page 5 of 9 HC-NIC Page 5 of 9 Created On Sat Aug 06 00:05:26 IST 2016 O/OJCA/446/2011 ORDER the absence of the clearance, the proceedings would not be proceeded with."
11. Later on, in case of Oil and Natural Gas Commission vs. Collector of Central Excise reported in (2004) 6 SCC 437 such mechanism was applied even to pending cases. It was directed as under:
"8. Wherever appeals, petitions etc. are filed without the clearance of the High Power Committee, so as to save limitation, the appellant or the petitioner as the case may be, shall within a month from such filing, refer the matter to the High Power Committee with prior notice to the Designated Authority in Cabinet Secretariat of Government of India authorised to receive notices in that behalf. Sri. K.T.S. Tulsi, learned Additional Solicitor General, stated that in order to coordinate these references of the High Power Commit tee the Government proposes to nominate the Under Secretary (Coordination) in the Cabinet Secretariat as the nodal authority to coordinate these references. The reference shall be deemed to have been made and become effective only after a notice of the reference is lodged with the said nodal authority. The reference shall be deemed to be valid if made in the case of the Union of India by its Secretary, Ministry of Finance Department of Revenue, and in the case of Public Sector Undertakings by its Chairman, Managing Director or chief Executive, as the case may be. It is only after such reference to the High Power Committee is made in the manner indicated that the operation of the order or proceedings under challenge shall be suspended till the High Power Commit tee resolves the dispute or gives clearance to the litigation. If the High Power Committee is unable to resolve the matter for reasons to be recorded by it. It shall grant clearance for the litigation."Page 6 of 9
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12. In case of Oil and Natural Gas Corporation Ltd. vs. City and Industrial Development Corporation, Maharastra Ltd. and ors. reported in (2007) 7 SCC 39 these aspects were highlighted.
13. Later on, however, a Constitution Bench of the Supreme Court reconsidered the situation and the directions issued by the Supreme Court in earlier judgements for setting up such a mechanism. The Constitution Bench of Supreme Court in case of Electronics Corporation of India Ltd. vs. Union of India and ors (supra) observed that:
Whilst the principle and the object behind the said orders is unexceptionable and laudatory, experience has shown that despite the best efforts of the committee on disputes, the mechanism has not achieved the results for which it was constituted and has in fact led to delays in litigation. It was observed that the mechanism has outlived its utility. In the chained senario in the opinion of the Court, the time had come to recall the directions. The Court, therefore passed following order:
"10. In the circumstances, we hereby recall the following Orders reported in :
(i) ONGC v. CCE [1995] Supp (4) SCC 541 dated October 11,1991;
(ii) ONGC v. CCE (2004) 6 SCC 437 dated January 7,1994;Page 7 of 9
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(iii) ONGC v City and Industrial Development Corporation (2007) 7 SCC 39 dated July 20,2007."
14. Few things immediately emerge from the said judgement of the Constitution Bench in case of Electronics Corporation of India Ltd. vs. Union of India and ors. One is that the Court recognized the laudatory object behind constitution of COD and the requirement of permission from such a body. However, it was noticed that over a period of time this has allowed to causing delay in filing proceedings and the mechanism had thus outlived its utility. The Court, therefore, recalled earlier directions and thereby liberated the Government departments from the requirement of obtaining clearance from COD before entering into litigation with another department. In fact, the entire constitution of COD stood dismantled.
15. This, however, does not mean that during the time when such regime existed and operated, its effect was effaced by the Supreme Court in the said judgement. To the extent, the COD mechanism was applicable and was applied, such issues were not to be reopened. It only meant that for future litigation and arguably, perhaps for the proceedings already filed, there would be no such requirement.
16. In the present case, the assessee had given up two questions A and G, may be under the compulsion of no permission from COD. Nevertheless, as per the prevailing Page 8 of 9 HC-NIC Page 8 of 9 Created On Sat Aug 06 00:05:26 IST 2016 O/OJCA/446/2011 ORDER mechanism, the assessee could not have raised such questions without necessary permission. Having done so, the assessee cannot now reopen the questions on the ground that merely two years later, the Supreme Court dismantled the COD mechanism. Accepting any such contention would give rise to a floodgate of litigation which, at the relevant time, was not allowed to be prosecuted by the COD.
17. In the result, civil application for condonation of delay is dismissed. Resultantly, application for recall of the order dated 08.07.2009 is also dismissed.
(AKIL KURESHI, J.) (A.J. SHASTRI, J.) Jyoti Page 9 of 9 HC-NIC Page 9 of 9 Created On Sat Aug 06 00:05:26 IST 2016