[See Chapter III and VIII, paragraphs 85 and 189]

Inter-departmental transfers and adjustments between Governments

The following directions have been issued by the Auditor-General under section 168 of the Government of India Act, 1935, to regulate the conditions under which a department of a Government may make charges for services rendered or articles supplied by it and the procedure to be observed in recording such charges in the accounts of the Government concerned.

In these directions—

"Government" means the Central Government (or when Part II of the Government of India Act, 1935, comes into force, the Federal Government) or the Government of a Governor’s State as the circumstances may require, and includes the Government of Coorg : and "Act" means the Government of India Act, 1935.

(a) His Majesty’s Representative for the exercise of the function of the Government in its relations with Indian States and (b) the Federal Railway Authority when it is constituted, are to be regarded as separate governments for the purpose of these directions. The department controlled by His Majesty’s Representative for the exercise of the functions of the Government in its relations with Indian States shall be referred to herein as the Government Representative’s Department.

I—Adjustment between Governments

2. In the case of transactions, between two Governments, adjustment shall always be made if required by or under the provisions of the Act; and otherwise, in such manner and to such extent as may be mutually agreed upon by the Governments concerned.

Instructions of the State Government

The following convention has been adopted, on a mutual basis, between the Uttar Pradesh Government and the Governments of Bengal, Punjab and Orissa :

(1) When an officer serving under one Government is summoned to give evidence in a court of justice under another Government regarding facts of which he has official knowledge in cases in which Government is a party, the charge on account of his travelling allowance will be borne by the employing Government at its own rates and will not be passed on to the Government under whose jurisdiction the court is situated. But in cases in which Government is not a party, the officer will be paid by the Court according to its rules and draw no other travelling allowance from the employing Government.

(2) Where a Government requisitions the services of an officer of a Commercial Department as a witness, or any other officer as a technical or expert witness, the pay of the officer concerned for the period of his absence from his headquarters and the travelling allowance and other expenses due to him will be borne by the requisitioning Government. The travelling allowance in such a case will be regulated by the rules of the Government to which the officer belongs. The charges will, in the first instance, be borne by the latter Government and will be passed on, after necessary audit, to the requisitioning Government. For the purpose of this convention the expert and technical witnesses referred to above will be those mentioned in section 45 of the Indian Evidence Act.

2. The following arrangement has been agreed upon between the Government of India and the State Government, with the concurrence of the Auditor General regarding incidence of losses :

In general, any losses sustained by the Central Government through the negligence or culpability of the staff paid for by the State Government, and vice versa, must be borne as they occur, that is, by the Central Government if the loss occurs in connexion with Central transactions and by the State Government, if it is on arrangement, would bear the loss. For this purpose recoveries made indirectly, e.g., by deduction of pay or otherwise, from the persons responsible for a loss, the entire amount recovered should be credited to the Government who, under the above arrangement, would bear the loss. For this purpose recoveries made indirectly, e.g., by stoppage of increment or promotion as a measure of punishment, should not be treated as recoveries made in cash. A copy of the orders regarding the action taken against the persons responsible for the loss should be communicated by the Government which pays for the staff to the Government which bears the loss.


Substitute the following for the Rule 2 under sub-head I—Adjustment between Governments.

2. In the case of transaction between two Governments, the following procedure shall be adopted—

(1) In all cases of claims for an amount not exceeding Rs. 1,000, in each case, no monetary settlement will be resorted to. However, in respect of the following claims monetary settlement should be made irrespective of the amount :–

(i) claims relating to commercial departments/undertakings of Government, which are require to work to a financial result, for services rendered or supplies made to or by them; and

(ii) Incidence of charges, viz. leave salary, pension, etc. arising out of inter-Governmental deputations of Individual Governments servants, which will continue to be regulated by the Rules laid down in Appendix C-B to Account Code, Volume 1.

(2) For transactions above the limit of Rs. 1,000 and where, the supplies/services are to be for irrespective of any monetary limit, the settlement will be made through cheques Bank drafts by the supplied Government. The procedure to be followed for making the monetary settlement in these cases, (i) between the State Governments inter-se the, (ii) in respect of supplies services to a Central Government Department will be as indicated below :–

(i) Between the State Governments inter-se, the concerned officer of the Government in respect of the supplies or services will present a bill at the Treasury for the cost of services or supplies, along with the accepted invoice and requisition for a bank draft in favour of the officer concerned in the supplying Government and remit the bank draft so obtained to the latter who will present it at the Treasury for encashment and crediting to the proper head or account.

(ii) Between a State Government and Central Government Department (including Defence, Railway and Posts and Telegraphs Departments, besides Civil).

The Department of the Central Government which receive the supplies/services will present a bill alongwith the accepted invoice to its own Accounts Officer concerned, who will make the payment by cheques/bank drafts drawn in favour of the officer concerned of the supplying Government in settlement of its claims.

In the reverse case of supplies/services rendered by a Central Government Department, the cheques/bank drafts received by it from the supplied Government will be presented by it to its Accounts Officer for encashment and credit to the proper head of account. In case the departmental officer is himself in account with a branch of the bank, the cheque/bank draft will be remitted by him to the bank with Chalan showing particulars of the Head of Account, for credit to Government account.

3. The Union Territory Governments will also allow the procedure indicated above as may be applicable to them for settlement of their inter-Government transactions arising out of services rendered or supplies made by/to them.

C. S. No. 94 File No. 15(5)-79

Vitta (Lekha) Anubhag-1, Dated Lucknow, January 11, 1990.

3. Subject to any subsequent arrangement that may be settled between the Governor General in Council (or Federal Government), and the Government Representative, a Service Department of the Central (or Federal) Government shall not ordinarily charge the Government Representative for any supplies or services for which under the rules on the subject it would not charge another Service Department of that Government nor shall a Service Department be charged by the Government Representative for such supplies or services, provided that adjustments may be made between the accounts of the Government Representative and the Central (or Federal) Government in cases in which demand of the Government Representative under section 145 provides for the payment of sums to the Central Government or for recovery of sums there from in connexion with charges which are common but not separable. The amount of any charge to be regulated by the agreement reached between the Government Representative and the Central Government will be communicated to the Accounts Officers concerned. Departmental charges shall not be recovered in respect of works executed by the Central Public Works Department for the Government Representative and included in the demand under section 145.

Rule 3 above deleted vide C. S. no. 94 dated 11-01-1990

II—Adjustments with outside bodies

4. Payment shall be required in all cases where a department of a Government renders service or makes supplies to a non-Government body or institution or to a separate fund constituted as such inside or outside the Government account, unless the Government by general or special order gives directions to the contrary. Relief in respect of payment for services or supplies given to any body or fund, should ordinarily be given through a grant-in-aid rather than by remission of dues.

Orders of the State Government

Claims for petty amounts should not ordinarily be raised—see also the note under ruling no. (2) in Appendix X and rule (8) of Appendix V of the Public Works Account Rules, Volume VI of the Handbook.

III—Inter-departmental adjustments

5. For purposes of inter-departmental payments, the departments of a Government shall be divided into service departments and commercial departments according to the following principles :

A—ServiceDepartments—These are constituted for the discharge of the function which either (a) are inseparable from and form part of the idea of Government, or (b) are necessary to, and form part of, the general conduct of the business of Government—

Examples of the first class are :

The departments of Administration of Justice, Jails and Convict Settlements, Police, Education, Medical, Public Health, Forest, Defence.

Examples of the second class are :

The departments of Survey, Government Printing and Stationery, Public Works, Indian Stores.

B—Commercial Departments or Undertakings—These are maintained mainly for the purposes of rendering services or providing supplies of certain special kinds, on payment for the services rendered or for the articles supplied. They perform functions which are not necessarily Government functions. They are required to work to a financial result determined through accounts maintained on commercial principles.

NOTE—Government has the power in respect of these directions to decide whether a particular department or particular activities of a department shall be regarded as a commercial department or under-taking. A list of departments and undertaking at present recognized by Government as commercial is given in the annexure to these directions.

Orders of the State Government

The Government Press is a commercial department for the purpose of printing work done and for the supply of calendar pads and date cases and should raise debits against other departments of the Government therefor.

Irrigation Department is a commercial department for the purpose of levying percentage charges at the rates approved for the purpose on all works undertaken by it on behalf of other departments of Government or vice-versa.

6. Save as expressly provided by these directions a service department shall not make charges against another department for services or supplies which fall within the class of duties for which the former department is constituted.

The following exceptions to the above direction have been authorized :

(a) The Forest Department may charge any other department for vegetable, animal or mineral products extracted from a forest area.

(b) Payment must ordinarily be made for convict labour as in the case of that supplied to the Public Works and other departments of Government but no charge is made for convict labour in the case of works undertaken by the Public Works Department which are treated as Jail Works.

(c) The cost of additional Police Guards supplied to an irrigation or other project while under construction may be charged to the project concerned.

7. A commercial department or undertaking shall ordinarily charge and be charged for any supplies and services made or rendered, to or by other departments of Government.

This direction may be applied to particular units or particular activities of any department even though the department as a whole may not be a commercial department. Such a unit or activity shall ordinarily charge for its services or its supplies to, and may likewise be charged by, either the department of which it forms part or any other department.

NOTES—(1) Save as otherwise provided in these directions, service rendered by a Service Department falling under clause A(a) of paragraph 5 in the normal discharge of its function shall not be regarded as service rendered for the purpose of the above direction.

(2) The supply of residential accommodation by one department to the employees of another shall not for the purposes of these directions be held to constitute a service rendered. In all such cases, the rent charged for residential accommodations will be the rent recoverable under the rules for the time being in force from the persons actually using such accommodation.

(3) (A) In the case of transfer to or from a Commercial Department other than the Defence Department, the following charges shall be made—

(a) no charge where the land is borne in the books at no value, and

(b) book value or market value, whichever is less, where the land is valued in the books.

(B) In the case of transfers to or from the Defence Department, the following charges shall be made—

(a) half market value where the land is borne on the books at no value, and

(b) book value or market value, whichever is less, subject to a minimum of half market value, where the land is valued in the books.

(4) When a Government building is let out to a commercial department or undertaking for official purposes rent will be charged under the rules for the time being in force except that the following addition will be made for department charges :

(a) If the building has been purchased through the agency of the Public Works Department, 3 per cent of the capital value of the building or space occupied plus full departmental charges on any subsequent additions and alterations to the building.

(b) If the building has been erected by the Public Works Department, full departmental charges.

8. Where one department makes payment or renders service as an agent of another department of the same Government the principal department may, subject to such monetary limit as may be fixed by Government in this behalf, be charged with the expenditure incurred on its behalf by the agent department.

NOTES—(1) The cost of land acquired by a Civil Department on behalf of the Public Works Department is chargeable in the accounts of the latter as part of the cost of the work for which the land is taken up; but when land is taken up for two or more service departments conjointly, the cost is wholly debitable to the department for which the major portion of expenditure was incurred, unless there are special reasons to the contrary.

(2) When a special officer is employed for the acquisition of land for any department, the expenditure on pay, allowances, etc. of the special officer and his establishment and any expenditure on contingencies is chargeable to that department as part of the cost of land, When the land taken up by a civil officer, not specially employed for the work only special charges incurred in connexion with the acquisition of the land on establishment contingencies, etc. are borne by the department for which the land is acquired.

Orders of the State Government

The Government have fixed Rs. 50 as the monetary limit up to which no debits should be raised by one department of the Government against the order under the above direction.

"Orders of the State Government" below Rule 8 deleted vide C. S. no. 94 dated 11-01-1990

9. Without prejudice to the general principle contained in paragraph 6, the Defence Services shall in respect of inter-departmental transactions charge and be charged for services rendered and supplies made to or by other departments, unless in particular cases or classes of cases Government in consultation with the Auditor-General have decided that the inter-departmental adjustment would be unsuitable and undesirable.

NOTE—The Defence Services are not required to pay rent for office accommodation supplied by the Public Works Department in Central buildings in any station in India, nor is rent charged for buildings of the Defence Services in any station in India occupied by departments of the Central Government other than those falling Under clause B of paragraph 5.

Rule 9 and Note below Rule 9 deleted vide C. S. no. 94 dated 11-01-1990

10. A branch of a service department performing duties supplementary to the main function of the department and intended to render particular services on payment, may levy charges in respect of the work for which it has been constituted.

Examples—Jail Manufacture, Survey map-publishing, Printing, (Publishing Department), Mint (Miscellaneous service other than coinage).

11. A branch of a department constituted for the subsidiary service of that department but employed to render similar service to another department, may charge that other department, e.g.—

Work Shops of a department, Mathematical Instrument office, Dock-yards.

Orders of the State Government

The cost of lymph supplied from the Government Vaccine Depot, Patwa Dangar, to other departments of the Government is charged for under this rule.

12. A regularly organized store branch of a department should ordinarily charge any other department for supplies made but petty and casual supplies of stores may, if the supplying department consents, be made without payment.

13. Notwithstanding anything contained in these directions, a Government may, for special reasons which shall be recorded and communicated to the Accountant General, permit inter-departmental adjustment in any case where such adjustment may be considered necessary in the interests of economy or of Departmental control of expenditure.

NOTE—Accountant General means the head of an office of accounts keeping the accounts of the Central (or Federal) Government or of a State, by whatever designation he may be called.

Section IV—General

14. Where under these directions payment is required to be made by one department of a Government to another, such payment may, if the case so requires or if otherwise deemed necessary, include adequate charges for supervision or other indirect expenditure connected with the service or supply for which payment is made.

Orders of the State Government

1. In the case of supplies made by one jail to another situated in Uttar Pradesh the cost of prison labour and profit will not be charged but only of raw materials.

2. In calculating the issue price of goods manufactured or fees for services rendered, account should be taken of pansionery charges of the establishment directly or indirectly concerned. In the case of departments which are not debited in the regular accounts with the pensionary charges, a proforma debit of pensionary charges should be made in the estimate of over head charges and manufacturing cost. The follwoing charges should be taken into account :

(a) (i) Cost of pensionable establishment directly charged on manufacture or rendering service.

(ii) Share of cost of pensionable establishment indirectly engaged on same.

(b) Cost of non-pensionable establishment.

(c) For cost of pensions, a percentage in (a) above at the following rates:

(i) Officers of the I.C.S.—25 per cent;

(ii) Officers of All-India services (other than the I.C.S. and corresponding centre service)—3/16th;

(iii) Other Officers in superior service—1/6th.

(iv) Menials—1/16th.

15. Payment of amounts due by one department of Government to another shall ordinary be made by book transfer except when such transfers do not suit the methods of accounts or of business adopted by the receiving department.

Substitute the following for Rule 15–

15. Payment of amounts due by one department to another shall be made by transfer credit and the following procedure shall be followed –

Inter-Departmental adjustments (which the same Government) –

(a) The practice of commercial departments or commercial undertakings which work to financial result, charging or being charged for supplies made or services rendered, will continue. Such of the Commercial departments or undertakings as are authorised to draw cheques would settle the claims in respect of the services rendered or supplies made to it through cheques. The amounts due to such commercial departments or undertaking from other departments should be settled through bank drafts.

(b) Where the commercial departments or undertakings are not vested with cheque drawing powers, the departmental officer of the supplied department will present a Bill at the Treasury for the cost of supplies or services a long with the accepted invoice of challans in quadruplicate indicating the designation of the supplying officer, invoice number and the heads of account to which the amount claimed is to be paid by transfer credit. The Treasury Officer will check the head of classification noted in the challans with that noted by the Supplying Officer in the invoice and pass the bill for payment by transfer credit to the above head of account, debiting the amount to the head indicated in the bill by the supplied officer. After the adjustment the Treasury Officer will retain the original copy of the challan and send the duplicate and triplicate copy to the supplied officer who will keep one for his office record and send the other to the supplying officer. The fourth copy will be sent by the Treasury Officer to the Accountant-General along-with the paid bill.

(i) The first copy of the challan-should bear the word "Treasury Copy" the second copy "Supplied Officer’s Copy" the third copy "Supplying Officer’s Copy" and fourth copy "Accountant-General’s Copy". The words "By Transfer Adjustment" should also be indicated in each of the copies of the challan. The adjustment bill will be in a green colour so as to immediately distinguish it from a bill presented for payment of cash.

(ii) The departmental officer should present the adjustment bill in the treasury without any delay. The supplying department will be responsible for realising the credit by ensuring that the supplied Officer presents the bill for adjustment without any delay. Any delay in presenting the bill for adjustment should be brought to the notice of Government in Finance Department by the supplying department. The supplied department will be responsible for getting the adequate appropriation in time to make payment to the supplying department. It will be the responsibility of the supplied departments to reconcile the departmental figures with the figures in the treasury accounts every month to ensure that all adjustment bills prepared by the department have been included in the Treasury accounts.

(iii) The Treasury Officers should treat the adjustment bills on par with bills for cash payment and take prompt action to carry out adjustments in the accounts within seven days of their receipt of the adjustment bills in the Treasuries.

(c) In case of transactions between two service departments of the Government where manufacturing or production or supply of articles or repair operations are involved and where existing principles require monetary settlement, no claim shall be raised if the cost of the service rendered or supplies made is Rs. 250 or less in each case. However, if the cost of the service or supplies exceeds Rs. 250 in each case, the transaction should be settled in the manner indicated(b) above.

(d) In other cases, no monetary or accounting settlement should be resorted to for services rendered or supplies made as between two service departments where manufacturing or production or supply of articles or repair operations are not involved except where some fees are levied under a particular enactment. In the latter case settlement should be made other in cash or through bank draft.

(e) The works and Forest Departments and other Departments, if any, vested with cheque drawing powers will settle the claim through cheques.

C. S. No. 94 File No. 15(5)-79

Vitta (Lekha) Anubhag-1, Dated Lucknow, January 11, 1990.

Orders of the State Government

1. The Cost of articles supplied by the engineering branch of the Agriculture Department is payable in Cash or by Bank Draft.

2. Fees for inspection Government boilers up to Rs. 100 are payable by Treasury chalans; while amounts exceeding this sum should be adjusted by book transfer.

3. Payments for Reuter’s and India News Agency telegrams should be made by cheques drawn on the Reserve Bank of India, Calcutta, in favour of the Accounts Officer, Telegraph Check Office, or by demand draft at par marked ‘On Government Account."

4. Payments for the cost of inland service telegram from books should be made in cash or by cheque drawn on the Reserve Bank of India, Calcutta,, in favour of the Accounts Officer, Telegraph Check office, or by demand draft at par marked "On Government Account."

5. Claims on account of rents and maintenance of telegraph wires leased to the Public Works Department and of telegraph instruments, etc., supplied to that department are not adjusted by book transfer. Half-yearly bills for the periods ending on the 30th June and 31st December, supported by details such as the total amount of the pensionary bill and particulars of the fresh charges working up to the total of the new bill, are presented to the Accounts Officer concerned, by the Deputy Accountant General, Indian Posts and Telegraphs Department (Telegraph Branch). The amount of these bills should be accepted in full, subject to readjustment later, if necessary on verification of the details in correspondence with the Officers of the Public Works Department concerened, and should be paid by means of non-negotiable bank draft on the Reserve Bank of India in favour of the Deputy Accountant General, Indian Posts and Telegraphs Department (Telegraph Branch), Calcutta.

The debits appearing in the Bank account should be treated as Public Works Remittances and adjusted in the manner laid down in Article 692, Audit Code. Where the payment has to be made by an accounts officer he will have the option of paying by cheque or bank draft as may appear to him convenient.

6. The use of Railway Credit Note and Warrant Forms being premissible only on payment of the prescribed commission, it is now open to departmental authorities to tender payment for railway freights and fares in cash.

7. The price of the cement supplied by the Government Cement Factory, Churk, Mirzapur, to the various departments of the State Government shall be paid by cheque or by Bank Draft.

Orders of the State Government

16. These directions have received the concurrence of the Government Representative in so far as the transactions affect his department.

17. Any question of doubt or dispute arising in connexion with the interpretation of these directions may be decided by the Comptroller and Auditor General of India, with the approval of the President.


List departments and undertakings at present recognized by Government as Commercial (vide note under Direction 5)

(The list does not purport to be exhaustive and may be modified by Government where necessary in consultation with the Accountant General).

Uttar Pradesh Government

1. Irrigation, Navigation, Embankment, and Drainage Works for which capital and revenue accounts are kept, including Hydro-Electric Schemes.

2. The Uttar Pradesh Arts and Crafts Emporium.

3. (Deleted).

4. Government Roadways.

5. Government Roadways Central Workshop, Kanpur.

6. Kanpur Electric Supply Administration.

7. Other Thermal and Diesel Electric Supply Schemes.

8. Central Dairy Farm, Aligarh.

9. Tailoring Factory at the Criminal Tribes Settlement, Kalyanpur, District Kanpur.

10. Government Precision Instrument Factory, Lucknow.

11. Government Cement Factory, Churk, Mirzapur.

12. Government Workshops of the Irrigation Department at Roorkee, Bareilly, Meerut and Jhansi.

13. Fruit Processing Factory, Ramgarh.

14. Vibhuti Glass Factory, Ramnagar, Varanasi.

15. The following activities of all the State Live-stock-cum-Agricultural Farms :

(i) Production of all agricultural crops;

(ii) Poultry sections at Babugarh, Bharari and Manjhara Farms;

(iii) Sheep sections at Babugarh, Madhuri-Kund and Bharai Farms.