- (1.) THE representative of the petitioner, Power System Operation Corporation Limited, submitted that in compliance with the Central Electricity Regulatory Commission (Unscheduled Interchange Charges and related matters) Regulations, 2009, Central Electricity Regulatory Commission (Measures to relieve congestion in real Time operation) Regulations, 2009, Central Electricity Regulatory Commission (Power Market) Regulations, 2010 and the Central Electricity Regulatory Commission (Indian Electricity Grid Code) Regulations, 2010, NLDC/RLDCs have been maintaining and operating the Regulatory Pool Accounts under the respective regulations and the surpluses from these accounts are transferred to Power System Development Fund account in accordance with the Central Electricity Regulatory Commission (Power System Development Fund) Regulations, 2010 (PSDF Regulations). The representative of the petitioner further submitted that necessary exemptions have been obtained for PSDF account under Section 12A of the Income Tax Act, 1961. The representative of the petitioner further submitted that on 31.1.2014, the petitioner has been served with a demand notice of about Rs. 879.29 crore by the Income Tax Department (IT Department) for the assessment year 2011 -12. In the demand notice, IT Department has considered the surplus in the regulatory pool accounts as income of POSOCO for the six month period from 1.10.2010 to 31.3.2011 and has directed to deposit the same within thirty days from the date of the notice. IT department has further stated in the said notice that if the amount is not paid within the specified period, a simple interest at the rate of 1% for every month or part of a month from the date commencing after end of aforesaid period would be payable in accordance with Section 220(2) of the Income Tax Act, 1961 failing which POSOCO will be liable to pay penalty.
(2.) THE representative of the petitioner submitted that POSOCO (NLDC/RLDCs) have a limited role in the management and operation of the regulatory pool accounts as the same is governed as per the provisions of the various Regulations and even the utilization of funds from these accounts is also subject to approval by the Central Commission. Since PSDF has been created as a consolidation of the surpluses obtained from the various regulatory pool accounts and PSDF has been exempted from Income Tax under section 12A of the Income Tax Act, 1961, the same exemption also applies to the surpluses arising out of the various regulatory accounts. The representative of the petitioner submitted that in the above background, the present petition has been filed with the following prayers: (i) The Hon'ble Commission may declare that the surplus in the Regulatory Pool Accounts is not the income of POSOCO (POWERGRID for the period up to 30.9.2010) and further declare that NLDC/RLDCs are only nodal agency operating and maintaining the Regulatory Pool Account as an agent on behalf of the Hon'ble Commission. The money collected under these functions be considered as a part of income exempted under Section 10(46) of the Income Tax Act, 1961; (ii) Without prejudice to the relief prayed above in the event that the petitioner is required to make the payment of Rs. 879.29 crore or any other sum as levied by the Revenue Department on the money collected under regulatory function, the same may be paid from the PSDF; (iii) The Hon'ble Commission may also consider evolving a comprehensive framework for the removal of the difficulty, by formation of a separate entity with a new PAN number to deal with all the Regulatory Funds already created and to be created in future and settlement thereof, or any other such mechanism as may be considered appropriate in the opinion of the Hon'ble Commission; (iv) Pass any such order/s that the Hon'ble Commission may deem fit in the circumstances of the case.
(3.) WE have heard the representative of the petitioner. In Prayer (iii) as quoted above, the petitioner has requested for formation of a separate entity with new PAN number to deal with the existing regulatory funds and the regulatory fund that may be created in future. The prayer involves policy issues and needs to be decided in consultation with the concerned entities. Accordingly, we direct issue of notice to the respondents. We also direct issue of notice to the Ministry of Power which has been vested with the responsibility of maintenance and operation of the PSDF funds as part of public account pursuant to the decision of the Union Cabinet. We have dealt with the prayers (i) and (ii) above in order to enable the petitioner to take up the matter at the appropriate forum for relief from the demand notice received by it from the IT Department.;