KSRTC, BMTC feel the heat

Anil Kumar Sastry
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I-T Department freezes their bank accounts; services may be hit

The State government has requested the Union Ministries concerned to withdraw the declassification order.— File Photo
The State government has requested the Union Ministries concerned to withdraw the declassification order.— File Photo

With the Income Tax (I-T) Department freezing the bank accounts of the Karnataka State Road Transport Corporation (KSRTC) and the Bangalore Metropolitan Transport Corporation (BMTC), bus services in the State are likely to be hit in the next two or three days.

“Bank accounts of the KSRTC and the BMTC have been frozen as they failed to pay Rs. 23 crore and Rs. 39.77 crore income tax respectively for the assessment year 2009-10,” said sources in the I-T Department. The corporations, which earlier had the status of ‘charitable institutions' were declassified by the I-T Department on the grounds that they were engaged in commercial activities, leading to the present crisis.

Sources in the corporations, acknowledging that the bank accounts were frozen on Friday, said weekly advance payments towards fuel, made every Saturday to Indian Oil Corporation Ltd., had already been affected. “If we do not make the advance payment, IOCL may stop supplying fuel in two or three days, and that will affect services,” sources said. The corporations are also in a bind over depositing daily operational revenue collections. While the KSRTC earns nearly Rs. 5.5 crore, the BMTC earns about Rs. 3 crore. The freeze also affects hundreds of other financial transactions, including payment to vendors and the like, sources said.

The complete restriction on bank transactions has come at a time when appeals challenging the demand notice as well as the declassification are pending before the appellate authority of the I-T Department.

The I-T Department, in its order cancelling their registration as charitable institutions, said a new provision in Section 2 (15) of the Finance Act makes commercial activities non-charitable if income from commercial activities in the previous year exceeds Rs. 10 lakh.

The road transport corporations, the department said, were also hiring out buses, leasing commercial spaces and charging for displaying advertisements on buses. The activities are purely commercial and the exemption granted under Section 11 was liable to be cancelled, it said.

While the KSRTC declared a profit of Rs. 57 crore, the BMTC declared a profit of Rs. 55 crore for the assessment year 2009-10.

The department also disallowed depreciation claims of Rs. 162 crore and Rs. 32.76 crore by these corporations.

‘Regressive move'

Terming the department's move regressive, sources in the corporation said they were compelled to undertake commercial activities to sustain operations and augment services.

The State government has also stepped in to resolve the crisis. The Chief Secretary and the Chief Minister are learnt to have written to the Union Ministries concerned to withdraw the notices and the declassification order.

Sources said the department was wrong in removing the ‘charitable institution' status of these corporations. Besides, the calculation of taxable income too was wrong as depreciation was disallowed. The value of buses depreciated every year and the department should have taken note of this aspect.

  • Corporations lose ‘charitable institution' status

  • They have not paid income tax for 2009-10

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