TaxTMI 
TaxTMI 
2016 (2) TMI 1284
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.... the project and Rs. 5 per kWh from the 13th year to 25th year. The said order was declared to have had come into force w.e.f. 29.01.2010. Various financial and operational parameters taken into consideration for determining the tariff are mentioned at para 4 of the said Order[2]. One of the factors taken into consideration is the 'Rate of Depreciation'. It is specified at para 5 of the Order that the tariff fixed under the said Order "took into account the benefit of accelerated depreciation under the Income Tax Act and Rules". It is further declared that "for a project that does not get such benefit, the Commission would, on a petition in that respect, determine a separate tariff taking into account all the relevant facts." 2. The 1st respondent produces electric energy (power) from one of the PROJECTS. The appellant and 1st respondent[3] entered into a Power Purchase Agreement (PPA) dated 09.12.2010 for sale and purchase of electricity from the 5 MW project to be established by the 1st respondent in Surendra Nagar district of Gujarat. The provisions relevant for the dispute in the present appeal are Clauses 5.1 & 5.2, "Article 5: Rates and Charges 5.1 Monthly Energy Charges....
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....e Commission invoking Section 86(1)(f) of the Act praying "(A) This Hon'ble Commission be pleased to hold and declare that the Petitioner is entitled to claim the tariff applicable to megawatt scale solar photovoltaic projects not availing of accelerated depreciation as per tariff order dated 27.1.2012; and (B) This Hon'ble Commission be pleased to quash and set aside the decision of the Respondent taken in letters dated 20.4.2012, 22.6.2012 and 20.11.2012 for denying the tariff applicable to megawatt scale solar photovoltaic projects not availing of accelerated depreciation as per tariff order dated 27.1.2012 to the Petitioner and direct the Respondent to forthwith make payment of a sum of Rs. 59,50,260/- to the Petitioner being the differential amount of invoices which is unpaid by the Respondent;" 7. The 2nd respondent by its order dated 08.08.2013 held that the 1st respondent is entitled for the benefit of the tariff specified in the 2nd Tariff Order dated 27.01.2012[7]. The 2nd respondent also held that the benefit of its adjudicatory order should not only go to the 1st respondent but also to others who have commissioned their PROJECTS subsequent to the 2nd Tariff Order. Pa....
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.... has not availed the accelerated depreciation, the tariff determined without accelerated depreciation in the order dated 27.1.2012 will be applicable in terms of the PPA and the tariff order of the State Commission dated 27.1.2012. Complete reading of the Tariff Order dated 27.1.2012 clearly indicates that the State Commission has determined tariff for both, the projects availing accelerated depreciation and those not availing accelerated depreciation. The order gives a choice to the Solar Developer to avail or not to avail the benefit of accelerated depreciation." Hence, the instant appeal under Section 125 of the Act. 10. Both the 1st Tariff Order and the 2nd Tariff Order issued by the 2nd respondent deal with the tariff payable to the producers of power. The distinction between both the tariff orders insofar as it is relevant for the purpose of the present case is that: (I) 1st Tariff Order fixed the tariff for the PROJECTS which get the "benefit of accelerated depreciation" under Section 32 of the Income Tax Act. "Based on the various parameters as discussed above, the levelised tariff including RoE of Solar PV power generation, using a discounting rate of 10.19% works ....
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....trol period" specified in the 1st tariff order, it is not obliged to sell power to the appellant for the price specified in Article 5.2 of the PPA and is legally entitled to seek (from the 2nd respondent) fixation of a separate tariff. It is the further case of the 1st respondent that under the PPA, the appellant is under an obligation to procure the power from the 1st respondent for a period of 25 years if the 1st respondent commences the generation of power within the "control period" and is also obliged to pay for the power procured by it at the rates specified in Article 5.2 of the PPA. But the obligation of the 1st respondent to sell power generated by it to the appellant at the rates specified in Article 5.2 of the PPA comes into existence only on the happening of the two contingencies, i.e., the 1st respondent (i) commencing the generation of power within the "control period" stipulated under the 1st Tariff Order; and (ii) choosing to avail the "benefit of accelerated depreciation" under the Income Tax Act. According to the 1st respondent, the stipulation under the 1st Tariff Order that the tariff fixed thereunder is not applicable to those PROJECTS which "does not get such ....
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....s shall be allowed - (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed." The prescription contemplated is found in Rule 5(1A) of the Income Tax Rules, 1962 which reads as follows:- "(1A) The allowance under clause (i) of sub-section (1) of section 32 of the Act in respect of depreciation of assets acquired on or after 1st day of April, 1997 shall be calculated at the percentage specified in the second column of the Table in Appendix IA of these rules on the actual cost thereof to the assessee as are used for the purposes of the business of the assessee at any time during the previous year:" Under the second proviso to the said Rule, it is further provided; "Provided further that the undertaking specified in clause (i) of sub- section (1) of section 32 of the Act may, instead of the depreciation specified in Appendix IA, at its option, be allowed depreciation under sub- rule (1) read with Appendix I, if such option is exercised before the due date for furnishing the return of income under sub-section (1) of section 139 of the Act, * for t....
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....the relevant facts." It is not the case of either the appellant or the 2nd respondent that Section 32(1)(i) of the Income Tax Act does not apply to some PROJECTS. The tenor of the statement is clear. The 2nd respondent proposed the tariff for all classes of PROJECTS taking into account that all of them would be entitled to claim the 'benefit of accelerated depreciation' under Section 32 of Income Tax Act. The 2nd respondent must be presumed to have known at the time of propounding the 1st tariff order that the Income Tax Act and the Rules thereunder provide an option to the assessee (producer of power) either to claim or not the 'benefit of accelerated depreciation'. Hence, the stipulation. The submission of the appellant regarding the construction of the above extracted clause of the 1st Tariff Order is rejected. 19. However, that does not solve the problem on hand. Two questions still remain to be examined, (i) Even if the interpretation placed by the 1st respondent on the above extracted portion of para 5 of the 1st Tariff Order is correct (in fact it would be the logical consequence of the rejection of the submission of the appellant), would the 1st respondent have a right to....
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.... the tariff that was agreed ... or the tariff determined by the Commission ... whichever is lower will be applicable but reached a conclusion that ....... on a cogent reading of the Article 5.2 ....... and the tariff order No.1 of 2012 dated 27.01.2012, we are of the view that the Principle of Promissory Estoppel is not applicable in the present case." The 2nd respondent noticed the stipulation of the PPA regarding the applicable tariff in the event of the 1st respondent not commissioning the PROJECT would be the lower of the two tariffs. Without examining the legal effect of such stipulation, the 2nd respondent went into the analysis of the 2nd Tariff Order which is neither necessary (nor called for) for determining the legal effect of the stipulation of the PPA. 21. The appellate Tribunal after noticing the issue and the elaborate consideration bestowed on it by the 2nd respondent did not record in the impugned order its view regarding the correctness of the above extracted conclusion of the 2nd respondent. We can only presume that the appellate tribunal approved the reasoning and the conclusion of the 2nd respondent since it did not reverse the 2nd respondent's order. 22. One ....
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....t of accelerated depreciation. 25. Relying on the judgment of the RASNA case, the Tribunal recorded a conclusion in the impugned order: "32. In the present case, the Solar Project could not be commissioned during the control period specified in the State Commission's Order dated 29.1.2010. Therefore, in terms of the PPA, the Respondent No.1 is entitled to tariff as determined by the State Commission in the subsequent order dated 27.1.2012." We do not wish to make any comment on the correctness of the order of the tribunal in RASNA case. We are not sure whether the order has become final. But we are of the opinion that the reliance by the tribunal in the instant case on RASNA case order is clearly wrong. In RASNA case, the prayer was for the determination of a separate tariff applicable to it. In the instant case, the prayer of the 1st respondent is not for fixation of separate tariff but for a declaration that the 1st respondent is entitled for claiming the benefits of the tariff determined under the 2nd Tariff Order. 26. Apart from that, the conclusion of the Tribunal in the instant case is wrong. First of all the PPA does not give any option to the respondent to opt out of t....
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....t. The availability of such 'benefit' is dependent upon the option of the power producers. Though the 1st Tariff Order employs the expression 'benefit' in the context of the AD Scheme under Section 32 of the IT Act, the applicability of the provision to a power producer depends upon the choice of the power producer. Whether the availability of the AD Scheme is beneficial to the power producer or not in a given case depends on various factors the details of which we do not propose to examine. It is for the power producer to make an assessment whether the availing of the AD is beneficial or not will take a decision if the scheme under Section 32 IT Act should be availed or not. 29. But the availability of such an option to the power producer for the purpose of the assessment of income under the IT Act does not relieve the power producer of the contractual obligations incurred under the PPA. No doubt that the 1st respondent as a power producer has the freedom of contract either to accept the price offered by the appellant or not before the PPA was entered into. But such freedom is extinguished after the PPA is entered into. 30. The 1st respondent knowing fully well entered into the ....
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....such a determination, on a consideration of "all the relevant facts" but not by virtue of the operation of the 2nd Tariff Order. 33. For all the above-mentioned reasons, we are of the opinion that the impugned order cannot be sustained and the same is therefore set aside. As a consequence, the order of the 2nd respondent dated 8.8.2013, which was the subject matter of appeal in the impugned order, is also set aside. 34. At this juncture, we need to mention that the learned counsel for the respondents very vehemently argued that the instant appeal is not maintainable because Section 125 of the Electricity Act mandates that an appeal to this Court under the said provision is maintainable only where there is a substantial question of law and the parties seeking to invoke the appellate jurisdiction of this Court must clearly indicate as to what is the substantial question of law that arises for consideration of this Court. According to the respondents, the memorandum of appeal does not disclose any substantial question of law which arises for the consideration of this Court 35. We do not find any substance in the submission. We believe that debate in the foregoing paragraphs of this....
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.... or exhibits hereto or in the event of any inconsistency between the provisions and particulars of one appendix, attachment or exhibit and those of any other appendix, attachment or exhibit GUVNL and the Power Producer shall consult to resolve the inconsistency. [6] Para 7.2 Control Period The Commission had proposed a control period for this order as the period from the date of final order of the Commission to 31.12.2011. Commission's Ruling- "It has been observed that the capital cost of the solar power project might reduce drastically as time elapses. However, since the gestation period for Solar PV projects is about 6 months and that for Solar Thermal Projects is 18-24 months, the Commission decides that the control period for this order will be 2 years." [7] Para 7. Considering the above, we decide that the petition succeeds. We decide that the petitioner's project, which is not availing the benefit of Accelerated Depreciation is entitled to the tariff of Rs. 11.25/Unit for the first 12 years of the project and Rs. 7.50/Unit for the subsequent 13 years. The respondent is directed to pay the amount of difference of Rs. 11.25 - Rs. 9.98 = 1.27/KWh to the petitioner for the in....