Revenue appeal dismissed for lack of clearance from Committee on Disputes

The High Court dismissed the appeal filed by the Revenue against the Income-tax Appellate Tribunal's order disallowing depreciation, citing the need for clearance from the Committee on Disputes before appealing against a State-owned corporation. The court emphasized the importance of resolving disputes between governmental entities through committees rather than courts, as mandated by previous Supreme Court decisions. Without the required clearance, the appeal was deemed not entertainable, although the appellant was granted the liberty to approach the court again after obtaining the necessary clearance from the Committee on Disputes.

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Issues:
1. Appeal against the order of the Income-tax Appellate Tribunal.
2. Disallowance of claim on investment and depreciation.
3. Validity of canceling the order of the Commissioner of Income-tax under section 263.

Analysis:
1. The appeal was filed by the Revenue against the order of the Income-tax Appellate Tribunal regarding the assessment year 1997-98. The Assessing Officer initially determined a total loss, which was later reduced after disallowing a claim on investment. Subsequently, the Assessing Officer disallowed depreciation based on the order of the Commissioner of Income-tax under section 263 of the Act. The Commissioner of Income-tax (Appeals) held that the order under section 263 cannot be contested in appeal. The assessee then appealed to the Tribunal, which allowed the appeal, leading to the Revenue's appeal before the High Court.

2. The High Court highlighted that before filing an appeal against a State-owned corporation, the Income-tax Department should have obtained clearance from the Committee on Disputes (CoD). Citing the Supreme Court's decision in the case of Oil and Natural Gas Corpn. Ltd. v. City and Industrial Development Corporation, the court emphasized the need for resolving disputes between governmental entities through a committee rather than adjudicating them in courts. The court also referred to the requirement for clearance from the committee in cases of interdepartmental controversies, as established in the case of Chief Conservator of Forests v. Collector.

3. The High Court reiterated the Supreme Court's stance that it is mandatory for every court and Tribunal to demand clearance from the committee in cases involving disputes between government departments or entities. In the absence of such clearance, proceedings cannot proceed. In this case, the court found that the Income-tax Department had not obtained clearance from the CoD before filing the appeal against the State-owned corporation. As a result, the appeal was dismissed for not being entertainable without the required clearance. However, the appellant was granted liberty to move the court after obtaining the necessary clearance from the CoD.

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