1 Litigation — Public Sector undertakings —
Clearance of Committee on Disputes — Time for reference within a period of one
month is not rigid — Delay in approaching the Committee does not make it
illegal but the delay should not be due to lethargy.
[CIT v. Oriental Insurance Co. Ltd.,
(2008) 304 ITR 55 (SC)]
The assessee, an insurance company was covered by
the Insurance Act, 1938. According to the appellant, every insurance company
has to be assessed u/s.44 of the Income-tax Act, 1961 as per Rule 5 of the
First Schedule. An assessment was made and the same was upheld by the
Commissioner of Income-tax (Appeals). The Income-tax Appellate Tribunal
deleted the addition made. The Tribunal accepted the stand of the
respondent-insurance company. The question arose as to whether the Department
would prefer appeals and/or file petitions without obtaining necessary
clearance from the Committee of Disputes (in short ‘the COD’) constituted in
terms of order of the Supreme Court. According to the High Court, it was
necessary to refer the matter to the said Committee. The High Court held that
the same was to be done within a period of one month in terms of the order of
the Supreme Court in Oil and Natural Gas Commission v. Collector of Central
Excise, (2004) 6 SCC 437. The High Court dismissed the appeal. The High
Court held that since this Court had set the time frame, there was no scope
for any deviation therefrom.
On an appeal to the Supreme Court, it was
clarified that there was actually no rigid time frame indicated by it. 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 the action
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 concerned authorities take
urgent action, otherwise the intended objective would be frustrated. There is
no scope for lethargy. It is to be tested by the Court as to whether there was
any indifference and lethargy and in appropriate cases refuse to interfere. In
the instant case the Supreme Court found that factual position was not that.
The Supreme Court therefore, set aside the order of the High Court and
directed consideration of the question of desirability to proceed in the
matter before it on receipt of the report from the concerned Committee.
Learned counsel for the Department submitted to
the Supreme Court that even if the Committee has declined to grant permission,
it was still open to raise the issues in appropriate proceedings. The Supreme
Court expressed no opinion in that regard, but observed that where the
Committee has declined to deal with the matter on the ground of belated
approach, the same cannot be sustained. The Committee has to consider the
matter on merits.
The Supreme Court further observed that where
permission has been granted by the Committee, there is no impediment on the
Court to examine the matter and take a decision on merits. But where there is
no belated approach, the matter has to be decided. The Court has to decide
whether because of unexplained delay and lethargic action it would decline to
entertain the matters. That would depend on the factual scenario in each case,
and no straitjacket formula can be adopted.
