The revenue department believes that the public sector oil companies, including Indian Oil Corporation (IOC), are among several corporates which have deferred their tax liabilities for 1996-97 to the next fiscal year.
The department estimates lost revenues owing to deferment of tax liabilities at Rs 1,000 crore. The estimates have been arrived at on the basis of the advance tax collections received till December 1996. Corporates are required to pay up three-quarters of their advance tax instalments by December.
Top department officials revealed that the oil companies had exploited the accounting loopholes relating to fund transfers from the oil pool account. The practice pursued by the oil companies earlier was to report cash receipts on an estimated basis as the transfers were effected at the end of the fiscal year from the oil pool account. The advance tax payments by these companies was made on the basis of these estimated receipts.
However, the oil companies reverted to a system of cash basis (announcing receipts only after receiving cash) after finance minister P Chidambaram announced major cuts in corporate and income-tax rates in the 1997-98 budget. Consequently, the receipts for 1996-97 will now accrue to the oil companies in 1997-98. Since the corporate tax rates are now down to 35 per cent from the earlier rate of 40 per cent