Commissioner of Income Tax vs Tamil Nadu Industrial Investment Corporation Ltd.

K. Raviraja Pandian, J.—This appeal is filed by the Revenue against the order of the Income Tax Appellate Tribunal "B" Bench, Chennai dated April 29, 2005 passed in I. T. A. No. 257/Mds/2001.

The respondent/assessee is the Tamilnadu Industrial Investment Corporation Limited and is owned by the Government of Tamilnadu. The respondent is an assessee under the appellant. For the assessment year 1997-98, the assessee filed return returning an income of Rs. 7,72,85,230. The Assessing Officer completed the original assessment u/s 143(3) of the Act determining the total loss of Rs. 10,46,44,684. Later, the Assessing Officer reduced the loss to Rs. 7,02,90,400 disallowing the claim on investment of Rs. 3,43,54,284. The Assessing Officer disallowed the depreciation by giving effect to the order of the Commissioner of Income Tax passed u/s 263 of the Act. While giving effect to the order u/s 263 of the Act, the Assessing Officer adopted the book profit of Rs. 4,99,88,250 as taxable income of the assessee. Against that order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), who held that the said order cannot be contested in appeal as it is beyond jurisdiction. No reference is called for in this regard. The assessee carried the matter on further appeal before the Tribunal. The Tribunal allowed the appeal of the assessee. Aggrieved by the same, the Revenue is on appeal before us by formulating the following substantial question of law:

Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in cancelling the order of the Commissioner of Income Tax u/s 263 of the Income Tax Act is valid ?

Heard the arguments of the learned Counsel for the Revenue.

The appellant being the Income Tax Department and the respondent being a State owned corporation, before filing an appeal against the respondent, the appellant ought to have obtained clearance from the Committee on Disputes (CoD). The apex court, in the case of Oil and Natural Gas Corporation Ltd. Vs. City and Indust. Dev. Corpn., Maharashtra and Others, , after referring to the earlier cases in 1992 (61) ELT 3 (SC) , Oil and Natural Gas Commission and Another Vs. Collector of Central Excise, , Oil and Natural Gas Commission Vs. Collector of Central Excise, in which directions have been issued to set up governmental committee to resolve the dispute between the intragovernmental or intergovernmental disputes involving Government Departments or Government owned companies of the Central and State Governments, rather than adjudicating the same before courts of law, and having regard to the facts of the particular case, that the matter was pending since 1990 and considering the nature of the controversy, which is a recurring feature, directed that a Committee be formed to sort out the differences between the Central Government and the State Government entities.

The Supreme Court in the case of Chief Conservator of Forests, Govt. of A.P. Vs. The Collector and Others, has held as follows:

Disputes between Government Departments cannot be contested in court. States/Union of India must evolve a mechanism for resolving interdepartmental controversies. Constitution of committees suggested which should consist of Chief Secretary, Secretaries of the departments concerned, Secretary of Law and Secretary of Finance (where financial commitments are involved) whose decision should be binding on all departments concerned.

The apex court also held that 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. The same has been reiterated in the latest decision of the Supreme Court in the case of Commissioner of Income Tax, Delhi-VI Vs. Oriental Insurance Co. Ltd., in Civil Appeals Nos. 4529 of 2008, etc., decided on July 18, 2008.

In order to discharge that obligation, when we posed a question to the learned Counsel as to whether such a clearance has been obtained from the CoD, she admitted that such a certificate from the CoD has not been obtained. Hence, the appeal is dismissed as not entertainable in the absence of the clearance, however, by giving liberty to the appellant to move this Court after obtaining clearance from the CoD. No costs.