Facts of the Case

The appeal was filed by the Commissioner of Income Tax (Revenue), representing the Central Government, against Delhi Tourism & Transportation Development Corporation Ltd. (DTTDC), a State Government Public Sector Undertaking.

The matter came before the Delhi High Court in Income Tax Appeal No. 444 of 2010.

At the threshold stage, the Court noted that the dispute was essentially between:

  • The Department of Revenue of the Central Government; and
  • A State Government Public Sector Undertaking.

The Court examined whether such litigation could proceed without obtaining prior approval from the committee mechanism mandated by the Supreme Court for resolving disputes between Central Government entities and State Government entities.

Issues Involved

  1. Whether a dispute between a Central Government department and a State Government Public Sector Undertaking can be directly entertained by the Court without prior committee clearance.
  2. Whether the Revenue was required to obtain approval from the committee contemplated by the Supreme Court before pursuing litigation.
  3. Whether the appeal was maintainable in the absence of such clearance.

Petitioner's Arguments (Revenue)

  • The Revenue sought adjudication of its appeal against the respondent Public Sector Undertaking.
  • The appeal was presented before the High Court without placing on record any prior clearance from the committee prescribed by the Supreme Court for disputes involving Central Government and State Government entities.

Respondent's Arguments

  • The judgment does not record any detailed submissions on behalf of the respondent concerning the merits of the tax dispute.
  • The issue before the Court was confined to the procedural requirement of obtaining committee clearance before the matter could proceed.

Court Findings / Order

The Delhi High Court observed that the present dispute was between:

  • The Central Government through the Department of Revenue; and
  • A State Government Public Sector Undertaking.

The Court referred to the decision of the Supreme Court in:

ONGC Ltd. v. City and Industrial Development Corporation Maharashtra & Another, (2007) 7 SCC 39

where the Supreme Court directed that disputes and differences between Central Government entities and State Government entities should first be examined by a specially constituted committee before litigation is pursued before courts.

The Supreme Court had prescribed a committee comprising:

  1. The Cabinet Secretary of the Union Government;
  2. The Chief Secretary of the concerned State Government;
  3. Secretaries of the concerned departments of the Union and State Governments; and
  4. Chief Executive Officers of the concerned undertakings.

The Delhi High Court held that disputes of the present nature were also required to be placed before the said committee for clearance before approaching the Court.

Accordingly, the Court directed the Revenue to approach the Cabinet Secretary, who heads the committee, and obtain the requisite clearance.

The Court further clarified that:

  • If clearance is granted by the committee, the Revenue would be at liberty to file a fresh appeal.
  • Such fresh appeal could be filed within fifteen days from the date of receiving the committee’s clearance.

Final Order

The appeal was disposed of with a direction to the Revenue to obtain clearance from the committee constituted in terms of the Supreme Court's directions before pursuing litigation.

The Revenue was granted liberty to institute a fresh appeal upon obtaining such approval.

Important Clarification

This judgment reiterates the principle that:

Disputes between Central Government departments and State Government entities are required to undergo the prescribed inter-governmental dispute resolution mechanism before judicial proceedings are pursued.

The objective is to avoid unnecessary litigation between governmental bodies and public sector entities and to encourage resolution through an institutional mechanism established by the Supreme Court.

The judgment does not decide the substantive tax controversy between the parties and is confined to the procedural requirement of obtaining committee clearance.

Sections Involved

Income-tax Act, 1961

  • Section 260A – Appeal to the High Court

Relevant Judicial Directions

  • Supreme Court directions in ONGC Ltd. v. City and Industrial Development Corporation Maharashtra & Another (2007) 7 SCC 39 concerning disputes between Central Government and State Government entities.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2010:DHC:12063-DB/BDA09042010ITA4442010_114356.pdf

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