A major Foreign liquor arm of the Andhra Pradesh government is caught in a row with the Income Tax Department.

The Income Tax Department, which recently served a demand notice for payment of Rs 69 crore in tax for the 2011-12 financial year on the Andhra Pradesh Beverages Corporation Limited (APBCL), froze the bank accounts of the corporation two days ago.

APBCL is an arm of the state government that has exclusive wholesale license to sell Indian-Made Foreign Liquor and Foreign Liquor to retail traders across the state. It is the second largest revenue generator for the state government after Commercial Taxes Department, and earns over Rs 12,000 crore per annum.

For the 2011-12 fiscal, the IT Department assessed the tax demand at Rs 69 crore. The APBCL, however, contends that its income could not be taxed as it belongs to the state.

In the previous financial years, when the IT Department issued similar notices for payment of tax, the APBCL approached the High Court and obtained stay. For the 2011-12 fiscal, however, it could not get any stay order from the court, following which the IT Department froze the APBCL’s bank accounts.

Earlier, it was the Hyderabad Metropolitan Development Authority that found itself at the receiving end of the IT Department’s tax stick. The HMDA was asked to cough up over Rs 400 crore as income tax on the revenue it earned through sale of vast tracts of government land. The HMDA too contended that it was the revenue earned by the government, which could not be taxed and the dispute was pending in the court.

APBCL too plans to approach the High Court afresh. “We will soon file a petition before the vacation bench of the High Court against the IT Department’s order,” APBCL managing director M Jagadeeshwar told PTI.

The government is now worried about the fall-out of the litigation with the IT Department, and is searching for ways to escape the tax dragnet.

** Source : Economic Times