I-T dept attaches MSEB's deposits worth Rs 157 cr

I-T dept attaches MSEB's deposits worth Rs 157 cr
Pranati Mehra

Mumbai, Mar 2: It seems like the Maharashtra State Electricity Board (MSEB)'s cup of woes is oveflowing. The Income Tax department on Thursday attached fixed deposits worth Rs 157 crore held by MSEB towards recovery of minimum alternate tax (MAT) for the last three years. Another FD of Rs 25 crore was also attached but recovery has not been made as yet.

MSEB today moved the Income Tax Appellate Tribunal (ITAT), Mumbai to challenge the decision. The bench has now directed the I-T department to file copies of the pay orders of the banks and copies of challans by which the amounts were remitted to the treasury.

The tax demand was raised by the department in respect of assessment years 97-98, 98-99 and 99-2000. MAT is applicable under section 115 JA of the Income Tax Act in respect of income apart from business of distribution and generation of electricity, like receipts by way of interest, subsidy etc.

The assessing officer had rejected MSEB's stay petition on the tax demand raised for the AY 1997-98 which was Rs 98 cr. A proposal from the department in October 2000 for payment in graded instalments was also not followed by the MSEB. It was therefore asked to pay the tax during the pendency of its appeal before the commissioner (appeals).

MSEB then moved the Bombay High Court, in December 2000, which granted them a limited stay for six weeks. That period expired on 28 February this year. The department also rejected the board's stay application this time too. Meanwhile, the commissioner (appeals) had confirmed the demand, but struck down the interest payable under section 234 B. The demand then stood at Rs 50.59 cr.

The demands for AY 98-99 and 99-2000 (including interest under section 234-B) are Rs 67.96 cr and Rs 87.65 cr, totalling (for the three years) to Rs 206 cr.

It seems the I-T department has taken the rather extreme step due to the apprehensions over the DPC-MSEB payment problems. After agreeing to pay in instalments the tax demand towards AY 97-98, MSEB seems to have failed to honour that commitment too. The department's action yesterday comes out of a perception that MSEB may not be able to pay its dues and therefore does not deserve futher latitude. The I-T department is covered by guidelines entailed in instruction number 1914 which allows enforcement of recovery if the department thinks it has a good case.

Meanwhile, a senior MSEB official claimed that the dispute was over whether MAT is applicable or not. ``We have made our submissions before the Income Tax Appellate Tribunal. We hope the result will be in our favour, since the case of the department is legally weak,'' the official asserted.

The MSEB official said the amount arrived at by the Income Tax department was also incorrect, since it has included even such items which do not constitute the income of the board.

In elaboration he said, the income tax department has treated subsidy as income, which was wrong. ``Subsidy is not our income. In fact, it is the compensation being paid by the government towards power given by the board to a section of consumers at subsidised rates,'' the official added.

Even on the interest on the house building advance given to employees, while I-T department avers it is additional income, the board has contested that view.