A move by the Income-Tax Department to levy additional tax on ONGC for giving huge subsidies to the oil marketing companies (OMCs) has been shelved.

Last year, ONGC paid a subsidy of Rs 22,000 crore. During the last two quarters in the current fiscal, it has already paid a whopping subsidy of Rs 22,474 crore to the OMCs.

We are not going to tax the subsidy part of the ONGC, a top official of the Income-Tax Department said here today. The move follows an appeal made by ONGC to the department that it should not be taxed on the subsidy.

ONGC, which pays its tax in Dehra Dun where its headquarters are located, said in its plea that subsidy discounts reflect heavily on the companys revenue, reducing the corporate tax paid. On the other hand, subsidy reduces input material cost of OMCs profit and in turn increases corporate tax there. As such, the whole exercise is tax neutral and revenue of the Income-Tax Department is not affected, the plea said.

ONGC is the biggest taxpayer in Uttarakhand. This year, it paid a tax of over Rs 8,000 crore. Nearly 90 per cent of the tax revenue collected in Uttarakhand comes from ONGC, an I-T official said.