Telangana wants back Rs. 1274 crores taken away from RBI by Income Tax Department
THIS case has all the intaxication that a dispute involving two States of the union, the Income Tax Department and the RBI, can provide.
It all started with the bifurcation of the Andhra Pradesh State last year into Andhra Pradesh and Telangana. And like in all States, in Andhra Pradesh, the State Government was seriously into the noble business of selling liquor, for which it had created the AP Beverages Corporation (APBCL). And when the family gets divided and the property is shared, the liquor business also had to be shared. So, a new Corporation called the Telangana State Beverage Corporation came into existence. The Beverages Corporation had huge Income Tax arrears and the Income Tax Department had calculated the share of Telangana Beverages Corporation in the arrears as Rs. 1469 crores. To recover this amount, the Income Tax Department on 27.2.2015 attached the properties of the Telangana Beverage Corporation and restrained them from selling the liquor stock.
The Telangana State Beverage Corporation filed a writ in the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh - that is how the High Court in Hyderabad is known as now.
The High Court noted that as per the Bifurcation Act, the assets, rights and liabilities of APBCL stand apportioned between the State of Andhra Pradesh and State of Telangana. The Telangana State Beverage Corporation has not acquired nor can acquire any property from APBCL nor the liability thereof. The State of Telangana has acquired these assets and properties and liability of APBCL.
"Therefore", the High Court observed, "it is absurd to contend that the writ petitioner is the successor in interest of APBCL. It is absolutely separate legal entity, that it has not started business nor any income has been derived. It does not appear from object clause of Memorandum of Association that it has acquired any rights, assets and properties of APBCL. Thus, the question of shouldering liability by the writ petitioner also does not arise."
The High Court held that the actions taken by the Revenue against the writ petitioner are without jurisdiction and wholly illegal. So, the orders and notices issued against Telangana State Beverage Corporation were quashed.
However the High Court granted liberty to the Income Tax officials to recover the dues from the State of Telangana, if it is not paid, and that can only be done after issuance of notice under Section 226 of the Act, 1961.
The Income Tax Department went ahead and recovered the dues from the State of Telangana through the Reserve Bank of India. Obviously RBI like any other Bank obliged the Revenue Department and transferred the money to the Income Tax Department.
Understandably the State is worried; 1200 crores is big money even for a State. The State Chief Secretary and Finance Minister met the Union Finance Minister and urged him to ask the RBI to re-credit that amount to the State coffers. The State argues that RBI had transferred the money illegally and suddenly without any notice or court order.
What will the FM do? Will Telangana get its money back?
We reported the High Court order in
Please also see Ahead of Holi, AP and Telangana go dry as Income Tax seizes Liquor Depots in DDT 2551 04 03 2015