Oil and Natural Gas Corporation (ONGC) wants to challenge the government's decision to withdraw the seven-year tax holiday on production of natural gas in a High Court as the economics of its deep-sea projects will be severely hit because of the decision.
The then Finance Minister P Chidambaram, had in 2008, modified the definition of mineral oil to mean that it does not include production of gas for the purpose of grant of the seven-year break from payment of income tax. The amendment was made applicable retrospectively to all blocks awarded since 1999.
ONGC, which is in the process of firming up investment plans to bring to production gas fields in the Krishna Godavari basin, wanted to appeal against the decision in either Delhi or Gujarat High Court, a company official said.
The company was, however, vetoed by Committee on Disputes (COD) in the Cabinet Secretariat, which said as a state-owned firm it had no business to challenge government decisions.
ONGC, like Gujarat State Petroleum Corp (GSPC) and Niko Resources, wanted to file writ petition to challenge the constitutional validity of retrospective amendment made to section 80-IB (9) of the Income Tax Act.
GSPC and Niko have got interim relief from the Gujarat High Court, which stayed operation of the amendments in respect of their blocks.
ONGC feels that unless tax breaks are restored for gas produced from areas awarded in the past, it stands to incur large monetary loss in terms of enhanced tax liability.
The official said ONGC had submitted an application seeking approval of the government for filing a writ petition in either Delhi or Gujarat High Court.
In reply, ONGC was told that it had no business to question the legal validity of any Central enactment. It was also told that if it was aggrieved by any amendment to the Income Tax Act, the matter should be taken up with the Finance Minister through the Petroleum Minister.
He said Petroleum Minister Murli Deora had protested against the move with first Chidambaram and then with the current Finance Minister Pranab Mukherjee saying the change was against the assurance given to parties who invested in New Exploration Licensing Policy (NELP) since its advent in 1999.
Mukherjee restored the concession in the Finance Bill for 2010-11, but with prospective effect.
ONGC has written to the Oil Ministry saying the retrospective amendments in the law undermine the confidence of tax payers in the fairness of tax administration.
"Such retrospective amendments also cause hardships to the taxpayers who have acted according to the pre-amended provisions of the Act," it wrote.
