Commissioner of Income Tax vs United India Insurance Co. Ltd.

K. Raviraja Pandian, J.—These appeals are filed against the order of the Tribunal, Madras C Bench, Chennai, dated 6-12-2006 passed in ITA Nos. 1841 & 1842/Mad/2005.

The respondent is an insurance company, a Government of India undertaking and an assessee under the appellant. The relevant assessment years are 2002-03 and 2003-04. The respondent is in the business of "insurance" including third party insurance for motor vehicles. As a part of such business, the assessee is required to settle motor accident claims as awarded by the Motor Accidents Claims Tribunal. A part of compensation awarded and disbursed by the Motor Accidents Claims Tribunal includes interest u/s 171 of the Motor Vehicles Act. The assessing officer passed an order u/s 201(1) treating the assessee as an assessee-in -default, as he has noticed that no deduction of TDS has been made by the insurance company as required u/s 194A of the Income Tax Act, 1961 from the amount paid as interest.

The assessee carried the matter on appeal to the Commissioner (Appeals), who rejected the assessees claim.

The assessee, aggrieved by the order of the Commissioner (Appeals), went on further appeal to the Tribunal. The Tribunal, holding that that in view of the various case laws including that of the apex Court, prior to insertion of Clause (ix) to Section 194A the interest on compensation awarded by Motor Accidents Claims Tribunal paid by the insurance company was not exigible to TDS in terms of Section 194A of the Act and the amendment by means of insertion of Clause (ix) has far-reaching consequence and the same is substantive in effect and therefore, there cannot be any retrospective effect of the same, set aside the order of the lower authorities and decided the issue in favour of the assessee. The revenue is before us, on appeal against the said order by formulating the following substantial questions of law:

Whether in the facts and in the circumstances of the case, the Tribunal is right in holding that there is no requirement of deduction of tax at source on the interest on compensation awarded by the Motor Accidents Claims Tribunal paid by the insurance company prior to insertion of Clause (ix) to Section 194A(3) ?

Whether in the facts and in the circumstances of the case, the Tribunal was right in relying on a clause that carved out an exemption limit to hold that tax is not at all deductible prior to the carving out of such exemption limit?.

We heard the arguments of the learned Counsel for the appellant and perused the materials available on record.

The appellant (sic-respondent)) being a Government of India undertaking before filing an appeal against (sic-by) the IT department, we are of the view, has to obtain 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, , afterreferring to the earlier cases in OIL AND NATURAL GAS COMMISSION and Another Vs. COLLECTOR OF CENTRAL EXCISE., ,; ONGC v. CCE (1995)Supp (4) SCC 54, 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 intra governmental or inter governmental 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 fact 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 composition of such committee is also stated to be as follows:

The Cabinet Secretary of the union;

Chief Secretary of the State;

Secretaries of the departments concerned of the Union and the States; and

Chief Executive Officers of the undertakings concerned.

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 inter-departmental 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 CIT v. Oriental Insurance Co. Ltd., in Civil Appeal No. 4529 of 2008, etc., decided on 18-7-2008.

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, he admitted that such a certificate from CoD has not been obtained. The matter has been adjourned periodically from 9-6-2008 for the purpose of obtaining CoD. Hence, we are of the view that instead of keeping the matter pending, it can be disposed of by giving liberty to the appellant to revive the appeals as and when the CoD is obtained.

The appeals are dismissed as not entertain able in the absence of the clearance, however, by giving liberty to the appellant to revive the appeals after obtaining clearance from CoD. No costs. Consequently, connected miscellaneous petition is closed.