Facts of the Case

  1. Several Income Tax Appeals were filed before the Delhi High Court.
  2. The disputes involved the Central Government, represented by the Revenue Department, and public sector undertakings/entities of the State Government.
  3. The appellants sought clearance from the Committee on Disputes (COD) before proceeding with the appeals.
  4. The Cabinet Secretariat returned the applications for clearance by communication dated 23.05.2008.
  5. The communication stated that, in view of earlier Supreme Court directions, the Committee on Disputes had jurisdiction over disputes involving Central Government departments and their own PSUs and that its mandate did not extend to disputes involving State Governments or State Government undertakings.
  6. The matter therefore came before the Delhi High Court for appropriate directions regarding the requirement of clearance before continuation of litigation.

Issues Involved

  1. Whether disputes between a Central Government department and a State Government undertaking require prior clearance before litigation can proceed.
  2. Whether the Revenue Department could maintain the appeals without obtaining approval from the committee contemplated by the Supreme Court.
  3. What procedure should be followed in disputes involving Central Government entities and State Government undertakings.

Petitioner’s Arguments

  1. The Revenue Department sought to pursue the Income Tax Appeals before the High Court.
  2. The appellant had already approached the concerned authorities for obtaining clearance.
  3. Since the applications were returned by the Cabinet Secretariat, the appellant required clarification regarding the proper mechanism for obtaining approval and continuing the litigation.

Respondent’s Arguments

  1. The State Government undertakings were parties to disputes involving a Central Government department.
  2. Such disputes fell within the category of inter-governmental disputes for which a mechanism of prior scrutiny and approval had been recognized by the Supreme Court.
  3. Litigation should not proceed unless the prescribed procedure for committee clearance was followed.

Court Findings

  1. The Delhi High Court noted that the Supreme Court had specifically directed that disputes between Central Government entities and State Government entities should be referred to a committee before litigation is pursued.
  2. The Court held that matters involving such inter-governmental disputes must receive clearance from the committee contemplated by the Supreme Court.
  3. The Court clarified that the requirement was applicable even where the dispute involved a Central Government department and a State Government undertaking.
  4. The Court emphasized adherence to the dispute-resolution mechanism established by the Supreme Court before invoking judicial proceedings.

Court Order

  1. The Court directed the appellant to approach the Cabinet Secretary, who would act as the head of the committee constituted in accordance with the Supreme Court's directions.
  2. The appellant was required to obtain the necessary clearance before pursuing the appeals.
  3. The Court further directed that if such clearance was granted, the Revenue Department would be at liberty to file fresh appeals within fifteen days from the date of receiving the clearance.
  4. Accordingly, the appeals were disposed of.

Important Clarification

The judgment clarifies that disputes between Central Government departments and State Government entities are also required to undergo the committee-clearance mechanism contemplated by the Supreme Court. Such disputes should first be examined by the designated committee before courts are approached, thereby promoting administrative resolution and reducing avoidable litigation among government bodies.

Sections Involved

Income-tax Act, 1961

  • Section 260A – Appeal to the High Court.

Link to download the order -

Delhi High Court Judgment PDF: https://delhihighcourt.nic.in/app/case_number_pdf/2008:DHC:12216-DB/BDA07112008ITA12622008_160723.pdf

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