2007 (8) TMI 244 - HC - Income Tax

Appeal by non-gov entity with gov rep not needing COD clearance. Tribunal order set aside.

The court held that COD clearance was not necessary for entertaining an appeal filed by a non-government entity represented by a government department. It ... To file an appeal, clearance form COD (Committee on dispute) is not necessary for them who are not govt. dept. – assessee is a foreign company (non-resident) and Indian PSU (public sector undertaking) is only an agent so assessee cannot be considered as PSU – tribunal was not justified in holding that assessee requires clearance from COD Issues Involved:1. Whether COD clearance is necessary for entertaining an appeal filed by a non-government entity represented by a government department.2. Whether the representative assessee (BHEL) needs COD clearance when the principal assessee is not a government department.3. Whether COD clearance is required when the agent (BHEL) only represents the foreign collaborator.Detailed Analysis:Issue 1: COD Clearance for Non-Government EntityThe primary question was whether the Income Tax Tribunal was correct in holding that COD clearance is necessary for an appeal filed by M/s. Combustion Engineering Inc. (USA), which is not a government department. The court clarified that the assessee, M/s. Combustion Engineering Inc. (USA), is a non-resident company, and Bharat Heavy Electricals Limited (BHEL), a public sector undertaking, is merely its agent. According to Section 160(1)(i) and Section 163(1) of the Income-tax Act, the agent of a non-resident is treated as a representative assessee. The court concluded that the Tribunal should have considered the issue on merits without requiring COD clearance, as the dispute did not involve a government department directly.Issue 2: COD Clearance for Representative AssesseeThe second issue was whether BHEL, as a representative assessee, needed COD clearance despite the principal assessee being a non-government entity. The court emphasized that the requirement for COD clearance applies to disputes between government entities and public sector undertakings. The court cited the Supreme Court's direction in the ONGC case, which mandates COD clearance for disputes involving government departments and public sector undertakings but not for non-resident entities represented by public sector undertakings. Therefore, COD clearance was not necessary for BHEL acting as a representative assessee for M/s. Combustion Engineering Inc. (USA).Issue 3: COD Clearance for Agent Representing Foreign CollaboratorThe third issue was whether COD clearance is required when the agent, BHEL, only represents the foreign collaborator, M/s. Combustion Engineering Inc. (USA). The court reiterated that the Tribunal's dismissal of the appeal for lack of COD clearance was a misconception of the Supreme Court's direction. The court noted that the requirement for COD clearance does not extend to cases where a public sector undertaking acts merely as an agent for a non-resident entity. The court referenced several precedents, including the Mahanagar Telephone Nigam Limited case, which supported the view that COD clearance is not necessary in such scenarios.Conclusion:The court concluded that all the questions of law were answered in favor of the revenue. The Tribunal's order dismissing the appeal for want of COD clearance was set aside. The court directed the Tribunal to restore the appeal on file and dispose of it on merits, thereby allowing the revenue to prosecute the case without the need for COD clearance.