GUJARAT URJA VIKAS NIGAM LIMITED versus EMCO LIMITED & OTHERS

Citation: [2016] 1 S.C.R. 857 · Decided: 02-02-2016 · Supreme Court of India · Bench: JASTI CHELAMESWAR · Disposal: Appeal(s) allowed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

[2016] 1 S.C.R. 857 
GUJARAT URJA VIKAS NIGAM LIMITED 
V. 
EMCO LIMITED & OTHERS 
(Civil Appeal No. 1220 of2015) 
FEBRUARY 02, 2016 
[J. CHELAMESWAR AND ABHAY MANOHAR SAPRE, JJ.] 
Electricity - Tariff determination - For procurement of power 
by Distribution Licensees in Gujarat from Solar Energy Projects -
Tariff determination by order dated 29.1.2010 (first tariff order) 
taking into account the benefit of accelerated depreciation under 
s.32 of the Income Tax Act and Rules - The order also.provided for 
determination of separate tariff for the project which did not get 
the benefit of accelerated depreciation - Appellant entered into 
Power Purchase Agreement (PPA) for sale and purchase of electricity 
with the respondent-power producer for the project to be established 
by it - However, could not commence generation of power within 
control period stipulated under first tariff order - Another order 
dated 27.1.2012 (second tariff order) determining the tariff 
applicable to the projects to be commissioned on or after 29.1.2012 
- The power producer commenced generation of power subsequent 
to second tariff order - The power producers petition to State 
Commission for permission to. claim tariff as per second tariff order, 
allowed - Order of State Commission confirmed by the Appellate 
Tribunal - On appeal, held: The terms of the PPA does not entitle 
the power producer to the tariff as determined by the Second tariff 
order - 'The benefit of accelerated promotion 'flows from the Income 
Tax Act which was dependent on the option of the power producer 
- PPA does not make any reference to such benefit - The availability 
of the option does not relieve the power producer of the contractual 
obligations incurred under the PPA - Therefore.the power producer 
is not entitled to tariff as per second tariff order. 
·Allowing the appeal, the Court 
HELD: 1. An undertaking engaged in generation of power 
has an option to claim depreciation on its assets in accordance 
with the scheme under Section 32(1 )(i) of the Income Tax Act. 
857 
A 
B 
c 
D 
E 
F 
G 
H 
858 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] I S.C.R. 
Such an option could be exercised at the relevant point of time 
as indicated in the second proviso to Role 5(1) of Income Tax 
Roles, 1962.(Para 15)(869-C-D) 
2. The 2°• 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 2•• respondent must be presumed to 
have known at the time of propounding the 1" 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. 
Therefore, it cannot be said that the tariff under the 1" Tariff 
Order is not applicable to those power generating PROJECTS 
which by operation of law are not entitled to claim.the benefit of 
the scheme under Section 32(1 )(i) of the Income Tax Act. [Paras 
18 and 16)(869-E-F; 870-D-E] 
3. The PPA does not giv~ 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 1" Tariff Order and provides that in 
such an eventuality what should be the tariff applicable to the 
sale of power by the 1" respondent. 
Secondly, the PPA does not 
'entitle' the 1" respondent to the "tariff as determined by the" 
2°• respondent by the 2"' Tariff Order. [Para 26][875-A-B] 
4. The right of the 1" respondent not to avail the "benefit 
of accelerated depreciation" flows from the Income Tax Act. It 
is only the 1" Tariff Order which gives an option to the 1" 
respondent (for that matter to all the power producers who are 
similarly situated as the 1" respondent) not to sell the power 
produced by it at the price specified in the 1" Tariff Order but 
seek the determination of a separate tariff. Such a right and option 
is available to the power producers only in one contingency i.e., 
that they are not inclined to avail the 'benefit of accelerated 
depreciation'. [Para 26][875-D-E] 
5. 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 whith such an option 
GUJARAT URJA VIKAS NIGAM LIMITED v. EMCO LIMITED 
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