The committee to solve tax disputes among PSUs and the government isn’t helping much.
The Constitution of India is one of the longest and most comprehensive ones, but the founding fathers seem to have left out one odd eventuality. The good old men did not expect one arm of the government passionately litigating against the other. Governments and their agencies admittedly form the largest number of litigants in the court. Apart from taking citizens there, they also drag each other for legal bouts. Some public sector undertakings and insurance firms, for instance, would not pay tax without testing their skill in avoiding it, though the money goes from one pocket of the government to the other.
Exasperated by this unseemly and recurrent strife, the Supreme Court in 1995 asked the government to set up a “committee of disputes” in its judgement in Oil & Natural Gas Commission vs Collector of Central Excise. It should consist of representatives from the Ministry of Industries, the Bureau of Public Enterprises and the Ministry of Law. It shall monitor disputes between ministries, the government and public sector undertakings, and PSUs between themselves. The committee shall ensure that no litigation comes to the court or a tribunal without the matter having been first examined by the committee and it permits the litigation. Further, it shall be the obligation of every court to demand the clearance from the committee before starting the proceedings.
Thirteen years have gone by, and still such disputes are coming to the Supreme Court. In the latest instance, the Commissioner of Income Tax appealed in over 10 cases against public sector insurance firms. According to the taxmen, every insurance company has to be assessed under Section 44 of the Income Tax Act. Assessments were made in each of these cases. The firms appealed to the tax appellate tribunal where they succeeded. Then the argument shifted to the sanction required from the committee of disputes and the time-frame within which it should be obtained. The Delhi High Court ruled that sanction was mandatory and it should be obtained within a month. It was not done so in these cases. So the tax authorities appealed to the Supreme Court, arguing that there was no such strict time limit.
Though this is a contention which could have been easily settled by reading the original ONGC judgement of 1995 and subsequent clarification in another ONGC case in 2004, it has taken quite a few years to get a “final” clarification. The latest decision of the Supreme Court explained that there was actually no rigid time frame indicated in any of its earlier judgements. It said: “The emphasis on one month’s time was to show the urgency needed. Merely because there is some delay in approaching the committee, that does not make it illegal. The committee is required to deal with the matter expeditiously so that there is no unnecessary backlog of appeals which ultimately may not be pursued. In that sense, it is imperative that the authorities concerned take urgent action; otherwise the intended objective would be frustrated. There is no scope for lethargy.” If there is unexplained delay the court could decline to entertain the matter. That would depend upon the factual scenario in each case, and no strait-jacket formula can be laid down, according to the court.
Two relatively recent Supreme Court decisions lamented the waste of time and human resources in fighting intra-government lawsuits. In MTNL vs Chairman, CBDT (2004), the court emphasised that “the legal system is overburdened with a large number of cases, the majority of which pertained to government departments and/or public sector undertakings. Some of them are frivolous. If the committee refuses permission to take an issue to the court, its decision should be followed. It is expected that a committee consisting of highly placed officers who do not have any axe to grind will take a fair and honest decision.”
In Chief Conservator vs Collector (2003), the court said: “It is neither appropriate nor permissible for two departments of the state or the Union to fight litigation in a court of law. Such a course cannot but be detrimental to public interest as it also entails avoidable wastage of public money and time.”
Despite all these wise words, the Uttar Pradesh Forest Corporation carried its tax dispute for 30 years, arguing first that it was a local authority exempted from tax and then that it was a charitable institution entitled to similar benefit. The last word has not yet been spoken. The authorities still seem to be examining whether it is a charitable institution. This, indeed, is fratricidal litigation.
