Commissioner Of Income Tax, Madurai v. M/S. Pandian Roadways Corpn. Ltd

In the High Court of Judicature at Madras Dated :15.12.2009 Coram : The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mr.Justice M.M.SUNDRESH Tax Case (Appeal) No.480 of 2004 Commissioner of Income Tax,Madurai. ... Appellant Vs. M/s. Pandian Roadways Corpn. Ltd., Madurai. ... Respondent TAX CASE (APPEAL) under Section 260A of the Income Tax Actagainst the order of the Income Tax Appellate Tribunal Madras 'B'Bench dated 24.6.2003 made in ITA.No.2234 /Mds/95 for the assessmentyear 1992-93 against order dated 1.8.95 on the file of Commissionerof Income Tax Appeal in I.T.A.128/95-96 against the order dated28.2.95 in PAN/GIR.No.47-027-CX-5395 on the file of DeputyCommissioner of Income Tax Spl. Range-II, Madurai. For Appellant : Mr.J.Nareshkumar For Respondent: Mr.J.Balachandar for M/s.S.Sridhar JUDGMENT JUDGMENT OF THE COURT WAS DELIVERED BY K.RAVIRAJA PANDIAN,J The appeal is filed by the revenue against the order of theIncome Tax Appellate Tribunal, 'B' Bench, Chennai dated 24.6.2003made in ITA.Nos.2234 /Mds/95. The relevant assessment year is1992-93. 2. The facts as culled out from the statement of facts statedin the memorandum of appeals are as follows:- The assessee is engaged in the business of bus transport.For the assessment year 1992-93, the assessee inter alia claimed https://hcservices.ecourts.gov.in/hcservices/ deduction on account of exgratia amount paid in excess over theprovision, contribution to the Institute of Road Transport andreimbursement towards student concessional passes. The assessingofficer disallowed part of the ex-gratia amount being thedifference between the exgratia amount actually paid to the workersand the amount shown in the memo of taxable income and made anaddition of Rs.12.88 lakhs. The assessing officer also disallowedthe contributions to the Institute of Road Transport which had beenmade after the end of the relevant accounting year. The assessingofficer made an addition on account of the reimbursement due fromthe Government towards provision of free and concessional studentpasses, although the assessee had not included the same in the totalincome as it had not been received during the year. 3. Aggrieved by the said order, the assessee carried the matteron appeal to the Commissioner of Income Tax (Appeals), who allowedthe appeal and deleted the addition with regard to contributionsto Institute of Road Transport on the ground that althoughpayments have been made after end of the accounting year, thepayments were made before filing of returns and the additions onaccount of reimbursement of free/concessional student passes.However, the Commissioner of Income Tax (Appeals) dismissed theappeall regarding the issue of ex-gratia amount claimed in excess. 4. As against the said order, the assessee and the Revenueboth went on appeal to the Income Tax Appellate Tribunal. TheTribunal held that since the assessee had disbursed the additionalex-gratia amount during the assessment year, although it was afterthe end of the relevant assessment year, they are entitled to thededuction. Regarding the issue of contribution to the Instituteof Road Transport, the Tribunal held that the contribution fellunder Section 35(i)(ii) and that "paid" should be read as "payable"and as the assessee was following the mercantile system ofaccounting the fact that the actual payment was made beyond theaccounting year has no relevance. Regarding reimbursement claimsfor free/concession student passes, the Tribunal held that sincereimbursement was an uncertainty, the transport companies haddecided to account for this alone on a cash basis, althoughotherwise following a mercantile system. Accordingly, the Tribunalheld that this amount could not be added. 5. Aggrieved by the order of Income Tax Appellate Tribunal,the present tax case appeal is filed by formulating the followingsubstantial questions of law:- 5. Aggrieved by the order of Income Tax Appellate Tribunal,the present tax case appeal is filed by formulating the followingsubstantial questions of law:- 1. Whether in the facts and circumstances of thecase, the Tribunal was right in allowing deduction ofex-gratia payment made after the end of theaccounting year contrary to the provisions of Section43B of the Income Tax Act ? https://hcservices.ecourts.gov.in/hcservices/ 2. Whether in the facts and circumstances ofthe case, the Tribunal was right in allowingdeduction in respect of contributions to Instituteof Road Transport that were not actually paid duringthe relevant previous year ?3. Whether in the facts and circumstances ofthe case, the Tribunal was right in holding that theassessee is entitled to accounting reimbursementclaims in respect of student concession passes on acash basis , while it was generally following amercantile system of accounting ? 6. We heard the arguments of the learned counsel for theappellant and perused the materials available on record. 7. The Revenue before filing an appeal against the assessee,the State owned Corporation, has to obtain clearance from theCommittee of Disputes (CoD). The apex Court, in the case of ONGC v.City and Industrial Development Corporation, Maharashtra Ltd.,(2007) 7 SCC 39, after referring to the earlier cases in ONGC (I) v.CCE, 1992 Supp (2) SCC 432; ONGC (II) v. CCE, 1995 Supp (4) SCC541; ONGC (III) v. CCE, (2004) 6 SCC 437; in which directions havebeen issued to set up governmental committee to resolve the disputebetween the intra-governmental or intergovernmental disputesinvolving Government Departments or Government owned companies ofthe Central and State Governments, rather than adjudicating thesame before Courts of law, and having regard to the fact of theparticular case, that the matter was pending since 1990 andconsidering the nature of the controversy, which is a recurringfeature, directed that a Committee be formed to sort out thedifferences between the Central Government and the State Governmententities. The composition of such committee is also stated to be asfollows : 1. The Cabinet Secretary of the Union; 2. Chief Secretary of the State; 3. Secretaries of the departments concerned of the Union and theStates; and 4. Chief Executive Officers of the undertakings concerned. 8. The Supreme Court in the case of Chief Conservator ofForests, Govt. Of A.P. vs. Collector and Others reported in (2003)3Supreme Court Cases 472 has held as follows:-"Disputes between Government Departments cannot becontested in Court. States/Union of India must evolve amechanism for resolving interdepartmental controversies.Constitution of Committees suggested which should consistof Chief Secretary, Secretaries of the departmentsconcerned, Secretary of Law and Secretary of Finance https://hcservices.ecourts.gov.in/hcservices/ (where financial commitments are involved) whose decisionshould be binding on all departments concerned". 9. The apex Court also held that it shall be the obligation ofevery Court and every Tribunal where such a dispute is raisedhereafter to demand a clearance from the committee in case it hasnot been so pleaded and in the absence of the clearance, theproceedings would not be proceeded with. The same has beenreiterated in the latest decision of the Supreme Court in the caseof CIT, Delhi VI v. M/s. Oriental Insurance Co. Ltd., in CivilAppeals Nos.4529 of 2008 etc., decided on July 18, 2008. 10. In order to discharge that obligation, when we posed aquestion to the learned counsel as to whether such a clearance hasbeen obtained from the CoD, he admitted that such a certificate fromCOD has not been obtained. Hence, the appeal is dismissed as notentertainable in the absence of the clearance, however, by givingliberty to the appellant to move this Court after obtainingclearance from CoD. 10. In order to discharge that obligation, when we posed aquestion to the learned counsel as to whether such a clearance hasbeen obtained from the CoD, he admitted that such a certificate fromCOD has not been obtained. Hence, the appeal is dismissed as notentertainable in the absence of the clearance, however, by givingliberty to the appellant to move this Court after obtainingclearance from CoD. Sd/- Asst.Registrar. /true copy/ Sub Asst.Registrar.krr/To 1. The Income Tax Appellate Tribunal, Chennai 'C' Bench, Chennai.-90 2. The Commissioner of Income Tax (Appeals-I)Madurai 3. The Deputy Commissioner of Income Tax, Special Range- II, Madurai-2 KA (CO)kk 18/1