On 19.03.2024, the Hon’ble Appellate Tribunal for Electricity (‘Appellate Tribunal’) allowed an appeal filed by the Punjab Utilities (‘PSPCL’) setting aside Order dated 05.09.2023 passed by the Punjab State Electricity Regulatory Commission (‘PSERC’).
BACKGROUND
A Long-Term Power Purchase Agreement (‘PPA’) was executed between PSPCL, a distribution company owned by the State Government in the State of Punjab, and Chandigarh Distillers and Bottlers Ltd. (‘CDBL’) for the supply of upto 5 MW of surplus power. The PPA specifically deals with the contingency wherein Accelerated Depreciation has been availed by a generating company, namely that same would amount to a reduction of 8 paisa per unit in the tariff.
PSPCL issued a recovery notice on account of reduction of tariff by 8 paisa per unit as a result of Accelerated Depreciation availed by CDBL in terms of Income Tax Act, 1961. CDBL then, approached the PSERC challenging the recovery notices issued by PSPCL. PSERC vide its Order dated 05.09.2024, on the issue of reduction of tariff on account of availing Accelerated Depreciation held that the demand notice is not in accordance with the PPA as Article 2.1 specifies ‘Section 80(1)(A) of the Income Tax Act’, whereas, CDBL has availed Accelerated Depreciation under Section 32 of the Income Tax Act and directed PSPCL to refund the amount along with the applicable late payment surcharge. The Review Petition filed by PSPCL on the ground that there is no ‘Section 80 (1) (A)’ under the Income Tax Act, 1961 was also dismissed by the PSERC.
The only question for deliberation before the Appellate Tribunal was whether mentioning of a wrong section in the PPA would disentitle PSPCL, in recovering the benefits of Accelerated Depreciation being availed by CDBL.
SUBMISSIONS OF PSPCL BEFORE THE APPELLATE TRIBUNAL
The reference to ‘Section 80 (1) (A)’ in Article 2.1.1 (ii) of the PPA is clearly an inadvertent clerical error as there exists no such provision in the Income Tax Act, 1961. Accelerated Depreciation has been provided in Section 32 of the Income Tax Act, 1961.
The mere use of the nomenclature ’80 (1) A’ of the Income Tax Act, 1961 does not dilute or take away from the intent of the PPA, namely, to pass on the benefits of the Accelerated Depreciation onto the procurer and consequently the consumers of the State of Punjab.
The PSERC has neither given a finding on the merits of the case as to whether CDBL had availed the benefit of Acceleration Depreciation nor has examined the documents such Income Tax Records, Chartered Accounts Certificates etc placed on record by PSPCL.
ANALYSIS AND CONCLUSION
The Appellate Tribunal observed that Chapter VI of the Income Tax Act relates to deductions to be made in computing the total income of an assessee. ‘Section 80A’, thereunder, relates to deductions to be made in computing the total income. Neither Chapter VI nor any other Chapter of the Income Tax Act contains any provision numbered as ‘Section 80(1)(A)’ at all. Accelerated depreciation is provided for under Section 32 of the Income Tax Act, 1961.
Further, the Appellate Tribunal held that if the construction placed by the PSERC is accepted that would mean that CDBL is entitled to higher tariff even if they are availing accelerated depreciation as it can never be said to have availed the benefit under the non existent ‘Section 80(1)(A)’ of the Income Tax Act. Consequently, PPA must be read after deleting the term ‘Section 80(1)(A)’ of the Income Tax Act.
The Appellate Tribunal rejected the view taken by the PSERC and remanded the matter to the PSERC to examine whether, on facts, CDBL has availed Accelerated Depreciation after deleting the term ‘Section 80(1)(A)’ of the Income Tax Act therefrom.
