Government agencies are no less when it comes to income-tax evasion. The I-T department found that the Karnataka Power Transmission Corporation (KPTC) had not remitted to the government a part of the tax it deducted at source in 2008. The tax deducted at source (TDS) default and interest on it amounts to around Rs 2.5 crore.

Consequently, the TDS wing of the I-T department (Bangalore circle) has now started a survey into accounts of all government agencies.

During the survey, the I-T department found that KPTC has entered into contract agreements on total turnkey basis with various contractors, including ABB Ltd, Siddharth Engineering, Bharat Electrical and BNA Technology to set up its sub-stations. These are built to segregate the load of one station or to improve reliability of power supply.

When these agreements were checked, it was noticed that KPTC had entered into composite contract with contractors to supply material and perform civil work, among others.

While 2% tax was being deducted at source on civil work and erection work, the same was not so in the case of supply portion.

According to officials, income-tax rules clearly insist that tax should be deducted on supply portion since KPTC had awarded work on turnkey basis, which amounts to composite contract.

"KPTC should have deducted tax on supply portion of the composite contract. Since the organization had defaulted by not deducting tax on supply portion, the I-T department held KPTC as assessee in default and took steps to compute the tax and interest liability,'' KPTC sources said.

KPTC, a state government organization, is involved in transmission and distribution of power. It also manages five distribution companies viz Bangalore Electricity Supply Company (Bescom), Mangalore Electricity Supply Company, Hubli Electricity Supply Company, Gulbarga Electricity Supply Company and Chamundeshwari Electricity Supply Company.