01 May 2009
Electric Power sellers/traders use the transmission lines of powergrid corporation of india ltd (PCIL) for transmitting power. For this PCIL levies application fee, transmission charges, operating charges [which includes fee for scheduling, system operation and disbursement of charges (among various agencies involved)]. These charges are generally referred to to as wheeling charges or open access charges.
Of late the income tax department issued notices to discoms/State Electricity Boards (SEBs)asking them why were not they deducting tax on the wheeling charges.
The wheeling charges are first billed by the PCIL to the power seller and the power seller in turn bills the same amount (similar to the case of reimbursements)to its buyer. These power traders operate on very thin margins and if TDS is deducted it will be much higher than their tax liability and surely results in cash blockage. In one case the assessing officer (TDS) is insisting that the charges are covered by the provisions of 194J of the IT Act. I am not in agreement with his views following the case of Barti Cellular Ltd., (Delhi High court). I would like to know whether at all the wheeling charges or open access charges are subjected to TDS. If so under what reasoning and what provisions of IT Act? I strongly believe that unless specifically covered by the provisions of the Act, no TDS is to be made on payments. Also I draw the attention of experts to the judgement of Madras High Court in the case of Skycell communications wherein it observed that either liability to TDS exists or does not exist. There is no scope for thoughts of "abundant caution".
07 December 2009
The Jaipur Bench of ITAT in the case of Rajasthan Rastriya Vidyut Prasaran Nigam Ltd has held that TDS provisions under section 194J cannot be invoked in respect of transmission charges. The judgment resolves the issues of TDS on transmission charges
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