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Rs 158 cr income tax relief for debt trapped Gridco
November, 21st 2011

The Cuttack bench of Income Tax Appellate Tribunal (ITAT) has struck down an Income Tax department order for collection of Rs 158 crore from the state-run power trader Grid Corporation of Orissa (Gridco) for the amount paid to Orissa Power Transmission Corporation (OPTCL) towards power transmission charges during 2008-09.

Gridco has not availed any services from the Orissa Power Transmission Corporation Ltd (OPTCL) and it is a merely debit and credit entry without any claim of expenditure, the ITAT order said.

The appellate authority maintained that the Rs 367 crore paid by Gridco to OPTCL during 2008-09 for transmission charges were collected from four power distribution companies (discoms) as there was no direct payment mechanism established between the discoms and OPTCL at that point of time.
The IATA order is a reprieve for us since we are a loss making company. Further, the order limits the scope for Income Tax department which might have pointed out similar type of payments made in 2009-10 and 2010-11, said B P Mahapatra, director (finance) of Gridco.

From 2011-12, the discoms are paying power transmission charges to OPTCL directly.

Similarly, the tribunal also rejected the tax departments consideration of Rs 145.4 crore payment made to Power Grid Corporation of India Ltd (PGCIL) by Gridco as rent, saying power transmission does not come under the purview of rent or sub-lease.

The Income Tax department had slapped Rs 158 crore tax notice to Gridco, saying since the company had not shown payment of transmission charges of Rs 367 crore to OPTCL and Rs 145.4 crore to PGCIL in its balance sheet, under section 40 A (IA) of income tax, the entire amount should be treated as income of the entity and is taxable.

The bulk power supplier has already paid Rs 51 crore, out of the Rs 158 crore tax penalty charges.

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