The finance ministry is considering the proposal to set up a high-level body with judicial expertise for settling disputes between the Income-Tax Department and public sector undertakings (PSUs).
At present, disputes between two government bodies are first considered by the Committee on Disputes (CoD), which decides whether a particular case is just a petty issue or it needs legal intervention.
The argument against CoD is that it takes lot of time to ponder over a case and, even after that, it does not come up with a resolution and just tries to resolve disputes through mutual understanding between the parties. It has been proposed that a new body with judicial and technical expertise be formed on the lines of the Authority of Advanced Rulings (AAR) to give decisions in a time-bound manner.
“There should be a mechanism for faster settlement of disputes between state-run companies and the I-T department. On an average, CoD takes a year to decide whether a case is fit to be recommended to the appellate tribunal. Moreover, proper adjudication does not happen if the two parties do not go to court in a serious matter,” said a finance ministry official who did not want to be quoted.
The proposal has been moved internally in the finance ministry. A decision in this regard will be taken at the highest level.
CoD, which functions under the Cabinet Secretariat, was constituted in 1994 after the Supreme Court, deciding on a case between ONGC and Collector of Central Excise, observed that two arms of the government should not get into litigation unnecessarily.
A taxpayer can challenge an order of a tax officer before the first appellate authority — commissioner (appeals). Unsatisfied by the judgment of the commissioner, he can approach the Income Tax Appellate Tribunal (ITAT) and then high court and Supreme Court. PSUs, however, cannot approach ITAT directly. They have to take CoD opinion on whether the case can be taken to higher judicial bodies.
Section 245 N (b) (III) of the I-T Act provides for resolution of disputes between a PSU and the I-T department before AAR. This is, however, optional and that is why very few cases go to AAR, whose decision is binding and final. Under AAR, an applicant can avoid expensive and time-consuming litigation on any question of law or fact that might arise from normal income-tax assessment proceedings. AAR consists of a chairman, who is a retired judge of the Supreme Court, and two members of the rank of additional secretary, one each from the Indian Revenue Service and the Indian Legal Service.
Another official said an alternative solution could be to go to the Disputes Resolution Panel, which were set up recently in eight cities.
