Rs 85,000 crore tax arrears may be written off

The government may have to write off a whopping Rs 85,000 crore tax arrears out of the total arrears accumulated over the past several years as these have been found "non-recoverable" by Income Tax department.

Out of the outstanding Rs 1,19,000 crore tax arrears up to 2003-04, about Rs 85,000 crore is "non-recoverable".

This includes Rs 28,400 crore outstanding against Harshad Mehta Group of companies, banks and stock brokers involved in 1992 Securities Scam, sources in the finance ministry said.

The department, which has so far recovered about Rs 10,000 crore tax arrears against the target of Rs 11,000 crore for 2006-07, has expressed helplessness in recovering the "non-recoverable" tax arrears.

"In fact, about Rs 85,000 crore arrears are outstanding only on paper, and are mounting every year due to interest addition," a senior Income Tax official said.

The "non-recoverable" dues also include about Rs 12,000 crore against those companies and assesses, whose assets have declined due to closure of the units or fall in share values.

In many cases, the companies had vanished from the market, or funds had already been transferred elsewhere before the recovery of tax arrears, the sources said.

In the Harshad Mehta case, the custodian appointed by the Supreme Court is in possession of Rs 1,700 crore funds, which could be distributed only among various stakeholders after the decision of the case, sources said.

The department has also expressed doubts about recovery of tax arrears from companies and persons involved in various scams like Telgi Scam and Fodder Scam in Bihar.

I-T sources maintained that in some cases, funds have been transferred by assesses abroad through Hawala route, and there was nothing to recover.

Despite shortage of manpower for recovery of tax arrears, the department was focusing on recovery of high-value tax arrears from corporate entities, an official said.

During the current fiscal, it has so far recovered Rs 738 crore from ICICI Bank as against Rs 1,616 crore tax arrears and Rs 2,107 crore from public sector power generating company NTPC Ltd as against tax arrears of Rs 2,814 crore.

Finance Minister P Chidambaram had assured the Parliament during his last Budget that the government would make all efforts to recover tax arrears through legislative and administrative measures.

Tax authorities maintained that government should take a "realistic view" regarding tax arrears on the pattern of non-performing assets (NPAs) in public sector banks. The banks had earlier written-off a substantial amount of NPAs, where recovery seemed impossible.

In some cases, the I-T department has lost cases against assesses in appellate tribunals and High Courts, but arrears of Rs 8,900 crore are still outstanding as cases are pending in Supreme Court for final disposal, the official added.