2017 (4) TMI 1428 - HC - Indian Laws

Entitlement to Special Incentive Package Scheme - the petitioner falls under the category of other eco system products provided under para 2.3 of the Notification dated 21.03.2007 - threshold value of the scheme - Net Present Value (NPV) of investments - the discrepancy in the calculation of NPV was on account of the claim of the respondent No.1 that the discount on the investment shall be applied to the base year, i.e. 2008-09 also. The specific case of the respondents is that the period of first 10 years shall be reckoned from the start of the project as provided by Para 3.2 of the Scheme and therefore the base year shall also be included for calculation of threshold value and the investment made during the base year shall also be discounted. Held that - After examining the provisions of the Scheme and the calculation of the NPV as set out in the Guidelines, the learned Single Judge was of the view that since the Scheme by itself had neither set out the definitions nor the formulae for calculation of the NPV and the operability of the Scheme was dependent on the Guidelines, the Guidelines in fact added to the conditions stipulated in the Scheme - Single Judge was also of the view that issue involved is not to be examined only from the point of view as to how NPV is ordinarily calculated but it is to be contextualized in the setting of the Scheme. On a reading of the provisions of the Scheme as well as the Guidelines we are of the view that the Guidelines have merely supplemented the Scheme and there is no conflict as such between the Scheme and the Guidelines. Hence, the question of Guidelines overriding the Scheme dated 21.03.2007 does not arise at all. Having regard to the fact that the definition of i in the formula in Clause 2.4 of the Guidelines indicates number of completed years from base year , we are also of the view that the learned Single Judge was right in holding that discounting of the value of capital expenditure is to take place from the year subsequent to the base year. This is made further clear from the language of Clause 2.7(b) of the Guidelines. Thus, the learned Single Judge was fully justified in concluding that in the light of Clause 2.4 and Clause 2.7 of the Guidelines, the investments made in the base year are not to be discounted. The said interpretation given by the learned Single Judge, in our considered opinion, does not suffer from any legal infirmity warranting interference in an intra court appeal. Appeal dismissed.

Summary

Issues Involved:
1. Calculation of Net Present Value (NPV) of eligible capital expenditure.
2. Interpretation of the base year for calculating the threshold limit under the Special Incentive Package Scheme (SIPS).
3. Discounting of investments made in the base year.
4. Applicability and interpretation of the Guidelines in relation to the Scheme.

Issue-wise Detailed Analysis:

1. Calculation of Net Present Value (NPV) of eligible capital expenditure:
The core issue revolves around the method of calculating the NPV of eligible capital expenditure under the SIPS. The petitioner claimed an NPV of ?1183 crores, asserting eligibility for a subsidy of ?300 crores. However, the respondents calculated the NPV as ?923 crores, falling short of the ?1000 crore threshold. The discrepancy arose from whether investments made in the base year should be discounted.

2. Interpretation of the base year for calculating the threshold limit under the Special Incentive Package Scheme (SIPS):
The Scheme and the Guidelines define the base year as the financial year in which the application is made. For the petitioner, the base year was 2008-09. The controversy was whether the base year should be included in the calculation of the first ten years of the project life for NPV purposes. The petitioner argued that only investments made in the years following the base year should be discounted, while the respondents contended that the base year should also be included in the discounting process.

3. Discounting of investments made in the base year:
The learned Single Judge ruled that eligible capital expenditure incurred in the base year should not be discounted to arrive at the threshold limit. This decision was based on the interpretation of Clause 2.4 and 2.7 of the Guidelines, which indicated that the discounting should apply to investments made in the years following the base year. The Court emphasized that the base year should be excluded from discounting, aligning with the intent of the Scheme to incentivize investments reaching or crossing the threshold limit.

4. Applicability and interpretation of the Guidelines in relation to the Scheme:
The respondents argued that the Guidelines should not override the Scheme and that any conflict should be resolved in favor of the Scheme. However, the Court found that the Guidelines merely supplemented the Scheme and did not conflict with it. The Court upheld that the definition of "i" in the formula for calculating NPV (number of completed years from the base year) supported the interpretation that investments in the base year should not be discounted. This interpretation was further supported by Clause 2.7(b) of the Guidelines.

Conclusion:
The Court upheld the learned Single Judge's order, agreeing that the investments made in the base year should not be discounted for calculating the NPV. The interpretation provided by the learned Single Judge was found to be consistent with the Scheme and the Guidelines. Consequently, the appeal was dismissed, and the respondents were directed to re-calculate the threshold limit under the Scheme without discounting the base year's investments.