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TMI Blog2016 (2) TMI 1284X X X X Extracts X X X X X X X X Extracts X X X X ..... xercised at the relevant point of time as indicated in the said proviso. What is the point of time at which the power producer can exercise such right to seek the determination of a separate tariff? - HELD THAT:- The Income Tax Act gives an option to the producers of power either to avail the benefit of the accelerated depreciation or not. It also specifies the point of time at which such an option could be exercised. The right to exercise such option at a point of time specified in the 2nd proviso to Rule 5(1A) is limited only for the purpose of availing the benefits flowing from the Income Tax Act. The PPA does not make any reference to the benefits of accelerated depreciation - 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. The 1st respondent created enough confusion. While on one hand the 1st respondent asserted a right to seek determination of a separ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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: GUVNL shall pay to the Power Producer every month for Scheduled Energy/Energy injected as certified in the monthly SEA by SLDC the amounts (the Tariff ) set forth in Article 5.2. 5.2 GUVNL shall pay the fixed tariff mentioned hereunder for the period of 25 years for all the Scheduled Energy/Energy injected as certified in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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. Para 8. Before parting with the judgment, we would like to observe that the issue raised in the present petition is in fact on interpretation of the Order No.1 of 2012 dated 27.01.2012; and hence the decision in this case would impact not only the petitioner, but also other developers who have eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 out to ₹ 12.54 per kWh and levelised tariff using the same discounting factor for Solar Thermal Power generation works out to ₹ 9.29 per kWh. However, the Commission feels that it would be appropriate to determine tariff for two sub-periods: 12 years and 13 years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate 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 benefit, the Commission would on a petition in that respect determine a separate tariff taking into account all the relevant facts from not would only imply that tariff fixed under the 1st Tariff Order is not applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessment year 1998-99, in the case of an undertaking which began to generate power prior to 1st day of April, 1997; and for the assessment year relevant to the previous year in which it begins to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 exercise the choice not to avail the benefit of accelerated depreciation after signing the PPA? (ii) Whether the 1st respondent s right under the Income Tax Act to make such a choice could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the submissions of the 1st respondent which was accepted by the Tribunal is that the issue is covered by an earlier judgment of the Tribunal in Appeal No.111 of 2012 dated 30th April, 2013[ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the terms of the PPA. It only visualises a possibility of the producer not commissioning its PROJECT within the control period stipulated under the 1st Tariff Order and provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 PPA in question which expressly stipulated under Article 5.2 that the tariff is determined by Hon ble Commission vide tariff order for solar based power project dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 judgment revolved around more than one substantial question of law justifying the exercise of the appellate jurisdiction of this Court. The appeal is allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 11.25/Unit for the first 12 years of the project and ₹ 7.50/Unit for the subsequent 13 years. The respondent is directed to pay the amount of difference of ₹ 11.25 ₹ 9.98 = 1.27/KWh to the petitioner for the invoices so far raised by the petitioner and payment of which have already been made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and such a petition could be entertained by the State Commission only before the signing of the PPAs and Rasna Marketing Services Ltd. R-2 having preferred to sign the PPA as per the tariff order dated 29.1.2010 fixing the generic tariff cannot take a different stand and maintain the petition for determination of project specific tariff on the pretext of not availing the accelerated depreciation benefits. [13] 22.(ii) It can not be contended that the subsequent execution of PPA would in any manner put an embargo on the jurisdiction of the State Commission for such a specific tariff determination especially when the PPA itself recognised the fact that the tariff shall be as per the order No.2 of 2010 dated 29.01.2010 and particularly when the said order also recognised the right of the developers who are not willing to get the benefit of accelerated depreciation to approach the State Commission for determining the specific tariff for those projects. (iii) According to the Appellants, if Rasna Marketing Services LL (R-2) did not want to avail accelerated depreciation benefits, the same should have been intimated to the Appellants even before signing of the PPAs. This co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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