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Power sector regulator Central Electricity Regulatory Commission (CERC) has served notices to the power ministry and the five load dispatch centers in a case related to a recent Rs 894-crore income tax notice to PowerGrid subsidiary Power System Operation Corporation (POSOCO).
POSOCO was in January served a demand notice of Rs 894 crore by the Income Tax (I-T) Department, which considered the surplus generated in the regulatory pool accounts as income for POSOCO.
POSOCO's constituents, the five Regional Load Dispatch Centers (RLDCs), operate the pool accounts formed by levying various fees and charges on generation and transmission companies including the Unscheduled Interchange (UI) charge and congestion charge.
Surplus collection in the accounts is transferred to the Power System Development Fund (PSDF) used for upkeep of the national grid.
According to POSOCO, since PSDF has been created as a consolidation of the surplus in various pool accounts and PSDF is exempted from income tax, the same exemption also applies to surplus in pool accounts - a view rejected by the tax authorities.
The I-T Department served the Rs 894 crore notice for a period of six months in 2011-12, asked for submission of the amount within 30 days, failing which POSOCO would be liable to pay penalty.
In a petition filed before the commission, POSOCO made three prayers -- declaration that the surplus in pool accounts does not constitute its income, the money be deposited from PSDF in case it is to be paid and creation of a separate entity to manage the regulatory accounts.
"The (third) prayer involves policy issues and needs to be decided in consultation with concerned authorities. We direct issue of notice to the ministry of power vested with the responsibility of operating PSDF funds as part of the public account," CERC said in its order.
The regulator clarified that the funds accruing in different regulatory accounts are never intended to income of RLDCs and expenditure from the funds is to be made strictly for the defined purpose (grid maintenance). RLDCs are mere custodians of these funds.
CERC asked POSOCO to take up the issue with the tax authorities and seek, if required, any legal remedy for withdrawal of the demand notice.
The commission also asked the power ministry to file its response on creation of a separate entity for managing funds by March 25.
