2006 (2) TMI 200 - AT - Income Tax

Summary

Issues Involved:
- Requirement of permission from the High Powered Committee (Committee on Disputes) for litigation between a State Government Undertaking and the Income-tax Department.

Detailed Analysis:

1. Background and Preliminary Objection:
The Respondent, a Maharashtra Government Undertaking, faced an appeal by the Revenue against the CIT(A)'s order. The assessee's counsel raised a preliminary objection, arguing that the appeal could not proceed without clearance from the High Powered Committee (C.O.D), as mandated by the Supreme Court in ONGC v. CCE 1995 and interpreted by the Delhi High Court in CIT v. Delhi Tourism & Transport Development Corp. Ltd. The Regular Bench, considering the wider implications, referred the issue to a Special Bench.

2. Contentions of the Parties:
The assessee's counsel reiterated the need for C.O.D clearance, citing judgments from the Supreme Court and the Delhi High Court. The Departmental Representative (D.R) countered with a recent Andhra Pradesh High Court judgment, arguing that C.O.D clearance is required only for disputes between Union of India departments, not between a Union department and a State Government Undertaking.

3. Supreme Court's Observations and Directions:
The Supreme Court, in ONGC v. CCE (1992), expressed discontent with litigation between Central Government Public Sector Undertakings and the Union of India, directing the establishment of a committee to monitor and clear such disputes before they reach the courts. This directive aimed to prevent unnecessary public expenditure and judicial time wastage.

4. Clarifications in Subsequent Supreme Court Judgments:
In Canara Bank v. NTPC (2001), the Supreme Court clarified that the directive in ONGC was to prevent frivolous litigation between Union of India departments and undertakings. In Chief Conservator of Forests v. Collector (2003), the Supreme Court suggested a similar mechanism for State Government disputes but did not extend the ONGC directive to State Government disputes.

5. Applicability to State Government Undertakings:
The Supreme Court's directive in ONGC was specific to disputes within the Union of India. In Chief Conservator of Forests, the Supreme Court suggested State Governments establish their own dispute resolution mechanisms. Therefore, the ONGC directive does not apply to disputes between State Government Undertakings and Union of India departments.

6. Analysis of High Court Judgments:
The Delhi High Court in CIT v. Delhi Tourism & Transport Development Corp. Ltd. and the Rajasthan High Court in State of Rajasthan v. ITAT extended the ONGC directive to State Government disputes, but these interpretations were not supported by the Supreme Court's original directive. The Andhra Pradesh High Court, in Andhra Pradesh Power Generation Corp. Ltd. v. Asstt. CIT, dissented from these views, emphasizing that no mechanism exists for disputes between State and Union entities and that the ONGC directive does not apply.

7. Conclusion and Tribunal's Decision:
The Tribunal concluded that appeals involving State Government Undertakings and the Income-tax Department can proceed without C.O.D clearance. The ONGC directive is limited to disputes within the Union of India, and no similar mechanism exists for State Government disputes. The matter was referred back to the Regular Bench for disposal on merits.

8. Final Order:
The Tribunal held that the appeals could be heard without C.O.D clearance and directed the Regular Bench to dispose of the appeals on their merits.