The Telangana Government has termed RBI’s decision to deduct ₹1,274 crore from its account towards payment of IT dues of a State agency as illegal, arbitrary and unauthorised.

Telangana IT Minister K Taraka Rama Rao met Union Finance Minister Arun Jaitley on Saturday and brought to his notice how the deduction was in contravention of the AP Re-organisation Act.

The deduction was in connection with a tax demand raised by the Income Tax Department on the IT liability by AP Beverages Corporation (APBCL). The department argued the agency is liable to pay ₹2,939 crore for the assessment years 2012-13 and 2013-14.

The Minister argued that a similar assessment made by the department for previous years was pending in the High Court.

The agency carries out wholesale trading of IMFL (Indian-made foreign liquor) in the State.

The Telangana government protested that the department had deducted the entire liability from its account, while the Act specifically mentions that assets and liabilities were to be bifurcated according to the set norms.

“We have moved the High Court making an appeal to declare the tax recovery proceedings as illegal. The court made an observation that the dues could be recovered from the successor governments (Telangana and Andhra Pradesh) for 2012-13,” he said.

Meanwhile, the department approached the RBI seeking recovery of tax dues from the corporation early this month. “Recoveries must be made from both the governments. But they deducted only from us,” Rama Rao said in the memorandum submitted to the Union Finance Minister.

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