HC stays IT dept order against MTNL

BANGALORE: The Delhi High Court has stayed the Income Tax Department order

freezing all bank accounts of Mahanagar Telephone Nigam Ltd. (MTNL) while asking

it to pay Rs 200 crore towards its income tax arrears by March 30.

A High Court Division Bench comprising Justice Arun Kumar and Justice D K

Jain, which heard the case posted further hearing to April 26. The IT Department

has attached all the 14 bank accounts of MTNL in Delhi and Mumbai bringing to a

standstill its entire financial transactions, following MTNL's refusal to fork

out Rs 219 crore towards income tax dues for the year 1996-97. The IT Department

had assessed the total tax liability for this period at Rs 209 crore and the

interest on this amount had been rounded off to Rs 10 crore.

MTNL, in slew of appeals made to the department, had maintained that licence

fee paid or revenue shared with the Department of Telecommunications was not

taxable. On the contrary, the IT Department held the view that the entire

revenue realized by MTNL was taxable barring standard deductions available to

any corporate entity. MTNL director finance S. Sundaresan said, the 1994 Cabinet

order made it clear that when the reference was made by any public sector

undertaking to the Committee of Dispute (CoD), the operation of the order of the

proceedings under challenge should be suspended till a final disposal by it. The

case is expected come up before the CoD again on March 30.

MTNL`s another contention was that as per the new telecom policy implemented

by the government last year, the facility of relaxation in the income tax on the

licence fee was available to MTNL, a view opposed by the IT Department. The IT

seuths swung into action after Commissioner (Appeals) rejected MTNL`s appeal

seeking withdrawal of the claim for tax arrears. The Commissioner held that the

claim raised by the assessing officer in IT Department earlier this month.

Subsequently, MTNL chairman and managing director S Rajagopalan, appealed to the

Central Board of Direct Taxes (CBDT) chief D. Ravikant, who while rejecting the

appeal ordered immediate compliance by MTNL.