Income Tax department has slapped a Rs 1,768.49 crore (Rs 17.68 billion) tax claim on Oil and Natural Gas Corporation mainly for the price discount it gives to refiners for subsidising cooking and auto fuels.
ONGC gives discount on the crude oil it sells to Indian Oil, Bharat Petroleum and Hindustan Petroleum after the Cabinet asked to bear 28.5 per cent of revenue loss on sale of petrol, diesel, domestic LPG and PDS kerosene.
The Dehradun range of I-T Department treated Rs 17,023.87 crore (Rs 170.23 billion) worth of subsidy discounts ONGC gave in 2007-08 as income and imposed a tax penalty of Rs 1,548.54 crore (Rs 15.48 billion), industry sources said. Subsidy discounts are expenditure and the firm never receives those revenues.
The department also disallowed deduction of Rs 5,016.57 crore (Rs 50.16 billion) under section 80-IB that provides tax holiday on production of mineral oil and imposed a tax claim of Rs 1,688.58 crore (Rs 16.88 billion).
Further, Rs 752.6 crore (Rs 7.52 billion) of prior period expenditure was disallowed and a tax demand of Rs 253.33 crore (Rs 2.53 billion) placed, they said, adding that the total tax demand placed on ONGC after including other smaller amounts was Rs 4,213.36 crore (Rs 42.13 billion).
And after adjusting Rs 2,634.34 crore (Rs 26.34 billion) tax refund claimed by the company, the IT department placed a demand of Rs 1,579.02 crore (Rs 15.79 billion) plus an interest of Rs 189.47 crore (Rs 1.89 billion).
Bending its own rules, the IT department on March 25, asked ONGC to pay Rs 1,000 crore (Rs 10 billion) within five days and the balance 768.49 crore (Rs 7.68 billion) within 30 days.
ONGC, sources said, had appealed against the tax claims in the Nainital bench of the Uttarakhand High Court which has reportedly stayed IT department's March 25 demand order. The court is likely to hear the matter this week.
ONGC in its appeal said discount on crude oil price given to IOC, BPCL and HPCL constituted expense and not income.
On deductions under section 80-IB, ONGC claimed that each well constitutes a separate undertaking and income from sale of oil produced from it was eligible for exemption under the 80-IB(9) tax holiday.
The oil major also claimed that the I-T department overlooked the over two decade old understanding it had with the company for allowing prior period expenditure that had not been accounted for in the previous tax returns.
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