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Deferring to the Gujarat High Court verdict in CIT (TDS) v. Krishak Bharati Co-operative Ltd, the CBDT has vide its circular dated 17th October 2012 spared the gas sold to consumers through pipelines from the TDS (tax deducted at source) burden to the extent the sale price includes transportation charges. However, if gas is transported through independent carriers who are paid for their transportation services by the gas producer, the latter would have to deduct tax at source.
The Gujarat High Court had held that when gas is moved through pipelines maintained by the gas producer, there is no way his sale price of gas can be bifurcated into amount enuring for gas and transportation charges, inasmuch as the sale of gas is one integrated transaction, subsuming the transportation function. Section 194C of the Income-tax Act targets for TDS only works contracts whereas this is purely a case of supply of gas, the Court had held.
(The author is a New Delhi-based chartered accountant)
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