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Power grid operator knocks HC over ‘unjust’ tax demand

POSOCO is a subsidiary of the Power Grid Corporation and is responsible for managing the load despatch centres (LDCs).

New Delhi |
March 3, 2014 1:10:30 am

The Delhi High court on Monday is set to hear a dispute between two Central government departments over the legal status of a fund which is monitored by the power ministry.

The Power System Operation Corporation Ltd (POSOCO), which is responsible for managing the national and regional load despatch centres of the National Power Grid has approached the Delhi High court against a demand by the income tax department for over Rs 879 crore in tax for FY12.

The I-T department in its notice has asked POSOCO to pay tax for the surplus funds accumulated in the ‘reserve pool accounts’ kept by the national load despatch centre and regional load despatch centres of the National Power Grid.

POSOCO is a subsidiary of the Power Grid Corporation and is responsible for managing the load despatch centres (LDCs).

According to the plea, the funds in the LDCs come from various penalties imposed on the states by the power regulator Central Electricity Regulatory Commission for violating provisions of the ‘Grid Code’ by over drawing or underdrawing power from the national power grid.

The plea, which was filed before the court of Justice S Ravindra Bhat and Justice RV Easwar on Friday, will be heard on Monday.

POSOCO in the plea has claimed that the money accumulated by the LDCs through fines is kept in the ‘regulatory pool accounts’ and used for the upkeep of the power grid.

The surplus funds are transferred to the Power System Development Fund.

The plea further states that the department of economic affairs of the finance ministry had in 2013, issued guidelines to regulate the operations of the fund, and withdrawal of funds from the reserve was possible only through appropriations cleared by Parliament.

Further, POSOCO has said that the demand for income tax on such income is “not justified” since it is not the income of the POSOCO but a ‘public fund’.

The company has asked the high court to quash the I-T department notice for tax, and sought directions to the department to not charge income tax on surplus from the regulatory pool accounts.

According to sources, the power ministry has also written to the I-T department on the issue.

THE PETITION

* The Power System Operation Corporation (POSOCO) has been slapped with a Rs 879 crore tax demand for FY12
* The demand is for surplus funds in the reserve pool accounts kept by load despatch centres
* POSOCO says the funds in these accounts come from penalties levied by the power regulator
* The company, in its petition, has said that the funds are not income but public funds meant for upkeep of the power grid and whose use needs Parliament approval.

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