2005 (11) TMI 31 - HC - Income Tax

Applicability of the provisions of section 195 - The petitioner obtained a stay of collection of disputed tax and interest on February 14, 2003, from the Tribunal subject to certain conditions. The appeals were heard by the Appellate Tribunal and the arguments were concluded on both the sides on January 5, 2004. The parties were directed to file written submissions, which they did. The Tribunal instead of pronouncing the orders on the merits reopened the appeals as part-heard for the purpose of considering the issue as to whether the petitioner required the permission of the Committee of Disputes . That after hearing the parties, the Appellate Tribunal held that the matter has to be referred to the Committee of Disputes and accordingly dismissed the stay petitions in limine with the further observation that the appeals preferred by the petitioner cannot be admitted - The view taken by the Appellate Tribunal is vitiated by errors apparent on the face of the record. The Tribunal misdirected itself in applying the decisions of the Supreme Court in ONGC cases. The Tribunal committed a grave error in passing the impugned order instead of disposing of the appeals on the merits. The impugned order is unsustainable in law and the same is accordingly quashed

Summary

Issues Involved:
1. Applicability of the Supreme Court's directive on the requirement of clearance from the Committee of Disputes.
2. Jurisdiction and applicability of the Committee of Disputes to disputes between State Government undertakings and the Central Government.

Issue-wise Detailed Analysis:

1. Applicability of the Supreme Court's directive on the requirement of clearance from the Committee of Disputes:

In Oil and Natural Gas Commission v. Collector of Central Excise [1992], the Supreme Court expressed concerns about public sector undertakings and the Union of India engaging in litigation, wasting public money and time. The Court directed the Cabinet Secretary to handle such disputes and report to the Court. Subsequently, a High-Powered Committee was established to ensure that no litigation between Government departments and public sector undertakings reached the courts without the Committee's clearance.

The Supreme Court reiterated this directive in subsequent cases, including Oil and Natural Gas Commission v. Collector of Central Excise [1995], Oil and Natural Gas Commission v. Collector of Central Excise [2004], and Mahanagar Telephone Nigam Ltd. v. Chairman, CBDT [2004]. The Court emphasized that disputes should be resolved amicably through the Committee to avoid unnecessary litigation.

In the present case, the petitioner, a State Government undertaking, faced a dispute with the Income-tax Department regarding the applicability of section 195 of the Income-tax Act, 1961. The Income-tax Appellate Tribunal (ITAT) dismissed the stay petitions and held that the matter required clearance from the Committee of Disputes before proceeding.

2. Jurisdiction and applicability of the Committee of Disputes to disputes between State Government undertakings and the Central Government:

The Supreme Court's directive for the Committee of Disputes was intended to resolve disputes between the Union of India and its public sector undertakings, not between State Government undertakings and the Central Government. This distinction was highlighted in cases like Chief Conservator of Forests v. Collector [2003], where the Court noted that the Constitution provides mechanisms for resolving disputes between the Centre and the States.

The Andhra Pradesh High Court observed that the Committee of Disputes was not intended to resolve disputes between State Government undertakings and the Central Government. The Tribunal's decision to require clearance from the Committee was a misapplication of the Supreme Court's directive. The High Court quashed the Tribunal's order and directed it to dispose of the appeals on the merits within three months, maintaining the interim arrangement for the petitioner.

Conclusion:

The High Court allowed the writ petition, holding that the principle of clearance from the Committee of Disputes is not applicable to disputes between State Government undertakings and the Central Government. The Tribunal's decision was set aside, and the appeals were restored for disposal on the merits. The High Court emphasized the need for a clear distinction between disputes involving the Union of India and its undertakings and those involving State Government undertakings and the Central Government.