The Hindu Business Line : ONGC asked to pay tax on discount extended to refiners

Taxing times
Income-Tax Department has served notice on ONGC claiming Rs 1,768.49 crore as taxes.
ONGC has appealed against the claims at the Nainital Bench of the Uttarakhand High Court.

Our Bureau

New Delhi, April 21

The Income-Tax Department wants ONGC to pay tax on the subsidies it extends on sale of crude oil to public sector refineries as part of the Government’s subsidy sharing formula to keep fuel prices low in the country.

The Income-Tax Department had served notice on ONGC claiming Rs 1,768.49 crore as taxes for certain issues including the price discount ONGC gives to the refiners for subsidising petroleum products – petrol, diesel, kerosene and cooking gas.

Since the notice has been issued at ONGC’s Dehradun headquarters, the Uttarakhand High Court is likely to hear the company’s appeal against the income-tax claims this week, sources told Business Line.

ONGC had appealed against the claims at the Nainital Bench of the Uttarakhand High Court. The Bench had stayed the I-T demand order. The Department is said to have, on March 25, asked ONGC to pay Rs 1,000 crore within five days and the balance Rs 768.49 crore within 30 days.

The company, in its appeal before the High Court, said discount on crude oil price given to public sector refiners – Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation – constituted expense and not income.

As part of the Government’s policy, the upstream oil major extends discount on the crude oil it sells to the public sector refiners. The I-T Department has reportedly treated the subsidy discount of Rs 17,023.87 crore which ONGC gave in 2007-08 as income and imposed a tax demand of Rs 1,548.54 crore.

It has also disallowed Rs 752.6 crore of prior period expenditure and imposed a tax demand of Rs 253.33 crore. The total tax demand placed on ONGC was Rs 4,213.36 crore. After adjusting Rs 2,634.34 crore tax refund claimed by the company, the Department has placed a demand of Rs 1,579.02 crore with an interest of Rs 189.47 crore.

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