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.482 of 2004 Commissioner of Income Tax,Madurai. ... Appellant/ Assessor Vs. M/s. Pandian Roadways Corpn. Ltd., Madurai. ... Respondent/ Assessee 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.2389/Mds/95 for the assessmentyear 1991-92 against the order dated 21.7.95 on the file ofCommissioner of Income Tax (Appeals-I) Madurai in I.T.A.No.808/93-94against the order dated 6.12.93 in PAN 47-027-CX-5395/DC SR II/Mduon the file of Deputy Commissioner of Income Tax, Special 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 ofthe Income Tax Appellate Tribunal, 'B' Bench, Chennai dated24.6.2003 made in ITA.No.2389 /Mds/95. The relevant assessmentyear is 1991-92. 2. The facts as culled out from the statement of facts statedin the memorandum of appeals are as follows:- https://hcservices.ecourts.gov.in/hcservices/ The assessee is engaged in the business of bus transport.For the assessment year 1991-92, the assessee inter alia claimeddeduction of contribution to the Institute of Road Transport andalso claimed that reimbursement towards student concessional passesshould not be treated as part of the income, as it was not yetreceived. The assessee also claimed Rs.1.01 crores towards insuranceclaims. The assessing officer disallowed the claim for deduction ofcontribution to Institute of Road Transport as it was not paidduring the year. He also added the reimbursement claimed on theground that since the assessee was following a mercantile system itought to be accounted in the year in which it was claimed. Theassessing officer disallowed the claim for insurance payments forwant of particulars. 3. Aggrieved by the said order, the assessee carried thematter on appeal to the Commissioner of Income Tax (Appeals), whoallowed the appeal and deleted the addition with regard tocontributions to Institute of Road Transport on the ground thatalthough payments have been made after end of the accounting year,the payments were made before filing of returns and the additions onaccount of reimbursement of free/concessional student passes. TheCommissioner of Income Tax (Appeals) also held that the assesseehad only claimed the actual amount paid towards insurance claims. 4. As against the said order, the Revenue went on appeal to theIncome Tax Appellate Tribunal. The Tribunal held that since theassessee had disbursed the additional ex-gratia amount during theassessment year, although it was after the end of the relevantassessment year, they are entitled to the deduction. Regarding theissue of contribution to the Institute of Road Transport, theTribunal held that the contribution fell under Section 35(i)(ii)and that "paid" should be read as "payable" and as the assessee wasfollowing the mercantile system of accounting the fact that theactual payment was made beyond the accounting year has norelevance. Regarding reimbursement claims for free/concessionstudent passes, the Tribunal held that since reimbursement was anuncertainty, the transport companies had decided to account forthis alone on a cash basis, although otherwise following amercantile system. Accordingly, the Tribunal held that thisamount could not be added. The Tribunal also held that theCommissioner of Appeals had come to factual conclusion regardingpayment of insurance claims. 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 ofthe case, the Tribunal was right in allowingdeduction in respect of contributions to Institute https://hcservices.ecourts.gov.in/hcservices/ of 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 thatthe assessee is entitled to accounting reimbursementclaims in respect of student concession passes on acash basis, while it was generally following amercantile system of accounting ? 3. Whether in the facts and circumstances ofthe case, the Tribunal was right in allowing theamounts transferred towards insurance claims as adeduction ? 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. Sd/- Asst.Registrar. /true copy/ krr/To Sub Asst.Registrar. 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/ krr/To Sub Asst.Registrar. 1. The Income Tax Appellate Tribunal, Chennai 'B' Bench, Chennai. 2. The Commissioner of Income Tax (Appeals-I)Madurai. 3. The Deputy Commissioner of Income TaxSpecial Range II, Madurai