Holding

A power producer cannot claim the tariff fixed under the second tariff order; the PPA does not grant a right to a separate tariff and the Income‑Tax‑Act depreciation option does not relieve the contractual tariff obligations.

Summary

Gujarat Urja Vikas Nigam Ltd (GUVNL) entered into a Power Purchase Agreement (PPA) with EMCO Ltd for a 5 MW solar project, the tariff being fixed by the Gujarat Electricity Regulatory Commission (GERC) in its first tariff order of 29 Jan 2010, which assumed the benefit of accelerated depreciation under Section 32 of the Income Tax Act. The project was not commissioned within the control period and the producer did not claim accelerated depreciation, so it sought to have the tariff fixed under GERC’s second tariff order of 27 Jan 2012 applied. The State Commission and the Appellate Tribunal allowed this, but the Supreme Court held that the PPA does not give the producer a right to a separate tariff and that the option to claim accelerated depreciation under the Income Tax Act cannot be exercised to alter contractual obligations. Consequently, the appeal was allowed and the order granting the second‑tariff rate was set aside.

Issues considered

The power producer’s entitlement to the tariff fixed under the second tariff order despite the PPA referencing the first tariff order.
Whether the option to claim accelerated depreciation under Section 32 of the Income Tax Act can be exercised after the PPA and affect the tariff payable.
Whether the PPA confers a right on the power producer to opt out of its tariff terms and seek a separate tariff.
The applicability of the principle of promissory estoppel to the PPA’s tariff provisions.
The maintainability of the appeal under Section 125 of the Electricity Act (requirement of a substantial question of law).

Legislation cited

Electricity Act, 2003s. 110, s. 111, s. 125, s. 61(h), s. 62(l)(a), s. 86(1)(e), s. 86(1)(f)
Income Tax Act, 1961s. 32(1)(i)
Income Tax Rules, 1962s. Rule 5(1A)

Subjects

electricitytariff determinationpower purchase agreementaccelerated depreciationIncome Tax Actpromissory estoppelcontrol periodappellate jurisdictionSection 125solar photovoltaic

Judgment

[2016] 1 S.C.R. 857

GUJARAT URJA VIKAS NIGAM LIMITED A
V.

EMCO LIMITED & OTHERS
(Civil Appeal No. 1220 of2015)
FEBRUARY 02, 2016 B

[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
c
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 ofelectricity
with the respondent-power producer for the project to be established D
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
E
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 F
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.
G
·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.
H
857
858 SUPREME COURT REPORTS [2016] I S.C.R.

A 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
B 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.
c 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]
D 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
E 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
F 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.,
G 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
H
GUJARAT URJA VIKAS NIGAM LIMITED v. EMCO LIMITED 859
& OTHERS

could be exercised. The right to exercise such option at a point A
of time specified in the 2'' 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". It simply specified the price to be
paid by the appellant for the power purchased by it from the 1"
B
respoudeut. The appellant determined the said price after taking
into consideration various factors. One of them happened to be
that the Power Producers are entitled to certain 'benefits' under
the Income Tax Act. The availability of such 'benefit' is dependent
upon the option of the power producers. Though the 1" Tariff
Order employs the expression 'benefit' in the context of the AD c
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. It is for the power producer to make an
D
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. 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 E
the 1" 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.[Paras 28 and 29)
[875-G-H; 876-A-D]
F
6. The 1" respondent knowing fully well entered into the
PPA in question which expressly stipulated under Article 5.2 that
"the tariff is determined by the Commission vide tariff order for
solar based power project dated 29.1.2010. Apart from that both
the respondent No. 2 and the appellate tribunal failed to notice
and the 1" respondent conveniently ignored one crucial condition G
of the PPA contained in the last sentence of para 5.2 of the PPA.
The said stipulation clearly envisaged a situation where
notwithstanding the contract between the parties (the PPA), there
is a possibility of the first respondent not being able to commence
the generation of electricity within the "control period" stipulated H
860 SUPREME COURT REPORTS [2016) l S.C.R.

A in the 1" tari.ff order. H also visualised that for the subsequent
control period, the tariffs payable to a PROJECTS/power
producers (similarly situated as the first respondent) could be
different. In recognition of the said two factors, the PPA clearly
stipulated that in such a situation, the 1" respondent would be
entitled only for lower of the two tariffs. The said stipulation is
B
totally overlooked by the second respondent and the appellate
tribunal. [Paras 30 and 31)[876-E-H; 877-A-B]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1220
of2015
c From the Judgment and Order dated 20.11.2014 of the Appellate
Tribunal for Electricity, New Delhi in Appeal No. 252of2013
C. A. Sundaram, MG Ramachandran, Hemantika Wahi, Anand
Ganeshan, Shubham Arya for the Appellant.
Vikas Singh, Heman! Sahai, Puja Priyadarshini, Saoloni Tangri,
D Nar Hari Singh, Sakya Singha Chaudhuri, Shekhar Prit Jha, Dr. Richa
Dubey for the Respondents.
The Judgment of the Court was delivered by
CHELAMESWAR, J. 1. The 2"' respondent herein, the Gujarat
Electricity Regulatory Commission is a body constituted under Section
E
82 of the Electricity Act, 2003 (hereinafter referred to as "the Act"). In
exercise of its statutory powers under Sections 61(h), 62(l)(a) and
86( l)(e) of the Act the 2"' respondent issued Order No.2 of 20 I 0 dated
29.01.2010 (hereinafter referred to as the "l" Tariff Order") determining
the tariff for procurement of power by the Distribution Licensees in
F Gujarat from Solar Energy Projects 1• The said order was issued after
an elaborate consideration of the various relevant factors including the
policy guidelines of the State of Gujarat and Union oflndia. Under the
said order, tariff for procurement ofelectricity generated by PROJECTS
employing Solar Photovoltaic (SPY) Technology was fixed at Rs.15 per
G kWh for the initial 12 years starting from the date ofcommercial operation
of the project and Rs.5 per kWh from the l 3'h year to 25'h year. The
said order was declared to have had come into force w.e.f. 29.01.2010.

' The Tariff Order uses the term 'Solar Energy Projects ' and the PPA uses the term
'Solar Power Projects•. The terms 'Solar Power Projects' and 'Solar Energy Projects
H 'are identical. Hereinafter, 're use the term ·PROJECTS 'to denote them.
I

GUJARAT URJA VIKAS NIGAM LIMITED v. EMCO LIMITED 861
& OTHERS [CHELAMESWAR, J.]

Various financial and operational parameters taken into consideration A
for determining the tariff are mentioned at para 4 of the said Order'.
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
B
that does not get such benefit, the Commission would, on a. petition in
that respect, determine a separate tarifftaking into account all the relevant
facts."
2. The l" respondent produces electric energy (power) from one
of the PROJECTS. The appellant and l" respondent' entered into a
Power Purchase Agreement (PPA) dated 09.12.2010 for sale and
c
purchase of electricity from the 5 MW project to be established by the
l" 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
D
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 E
the period of25 years for all the Scheduled Energy/Energy injected

2
· Para 4. Components of Tariff
The follo\ring financial and operational parameters have been considered \rhile
determining the tariff. F
I. Capital cost
2. £,·acuation cost
3. Operations & Maintenance charges
4. Debt - Equity Ratio
5. Loan Tenure
6. Interest rate on loan
7. Return on ~qqity G
8. Rate of Depreciation
9. Interest on Working Capital
10. Capacity Utilization Factor
1I. Duration of Tariff
12. Auxiliary Consumption
3 Described as power producer in the PPA H
862 SUPREME COURT REPORTS [2016] I S.C.R.

A as certified in the monthly SEA by SLDC. The tariff is determined
by Hon 'ble Commission vide Tariff Order for Solar based power
project dated 29.01.20 l 0.
Tariff for Photovoltaic Project: Rs.15/kWh for First 12 years
and
B Thereafter Rs.5/kWh from 13" Year
To 25'h Year.
Above tariff shall apply for solar projects commissioned on or
before 31" December 20 I I. In case, commissioning of Solar
C Power Pro.ject is delayed beyond 31" December 2011,
GUVNL shall pay the tariff as determined by Hon'ble GERC
for Solar Projects effective on the date of commissioning of
solar power project or above mentioned tariff, whichever
is lower."
and Clauses 12.8' & 12.1 O; of the said PPA.
D
3. However, after entering into the abovementioned PPA,
respondent no. I decided to change the PROJECT'S location. Therefore,
a Supplemental Agreement was entered into between the appellant and
respondent no.I on 07.05.2011 making appropriate and necessary
E ~ 12.8 Amendments:
This Agreement shall not be amended. changed. altered. or modified except
by a \vritten instrument duly executed by an authorized representative of both Parties.
Ho\vever. GUVNL may consider any amendment or change that the Lenders may
require to be made to this Agreement.

F ' 12. l 0 Entire Agreement. Appendices:
This Agreement constitutes the entire agreement behveen GUVNL and the
Power Producer, concerning the subject matter hereof. All previous documents.
undertakings, and agreements, whether oral, written. or otherwise, between the Parties
concerning the subject matter hereof are hereby cancelled and shall be of no further
force or effect and shall not affect or modify any of the terms or obligations set forth in
this Agreement, except as the same may be made part of this Agree1nent in accordance
G \Yith its tenns, including the terms of any of the appendices, attachments or exhibits.
The appendices, attachments and exhibits are hereby made an integral part of this
Agreement and shall be fully binding upon the Parties.
In the event of any inconsistency between the text of the Articles of this
Agreement and the appendices, attachments 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
H · Producer shall consult to resolve the inconsistency.
GUJARAT URJA VIKAS NIGAM LIMITED v. EMCO LIMITED 863
& OTHERS [CHELAMESWAR, J.]

modifications to the PPA dated 09.12.2010. However, Articles 5. land A
5.2 of the original PPA remained unaltered.
4. 2"' respondent passed another order dated 27.01.2012
(hereinafter referred to as the "2"' Tariff Order'') determining the tariff
applicable to the PROJECTS to be commissioned on or after 29.01.2012.
The tariff fixed under the said order for the PROJECTS generating B
electrical Energy through Solar Photovoltaic (SPY) Technology "availing
the benefit of accelerated depreciation under the Income Tax Act" is
less favourable to the power producers and the tariff payable by the
appellant to the power producers which do not avail "the benefit of
accelerated depreciation" under the Income-tax Act is more favourable
to such power producers.
c
5. The 1" respondent commissioned its PROJECT only on
2.3.2012, i.e., beyond the "control period'.. Para 7.2 Control Period "of
tariff specified under the l" Tariff Order. The said "control period"
ended on 28.01.2012. The 1" respondent admittedly did not avail the
accelerated depreciation under Section 32 of the Income-tax Act. D

6. The l" respondent, therefore, filed a petition no.1270 of20!2
before the State Commission invoking Section 86( l )(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 E
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 F
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;"

6
· Para 7.2 Control Period
The Commission had proposed a control period for this order as the period from the
G
date of final order of the Commission to 31.12.20 I I.
Commission) Ruling·.
"It has been observed that the capital cost of the solar power project might reduce
drastically as time elapses. Ho\vever, 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." H
864 SUPREME COURT REPORTS (2016] 1 S.C.R.

A 7. The 2"' respondent by its order dated 08.08.2013 held that the
l" respondent is entitled for the benefit of the tariff specified in the 2"'
Tariff Order dated 27.01.2012 7 • The 2"' respondent also held that the
benefit of its adjudicatory order should not only go to the l" respondent
but also to others who have commissioned their PROJECTS subsequent
to the 2"' Tariff Order.
B
8. Aggrieved by the order dated 08.08.2013, the appellant herein
preferred an appeal before the Appellate Tribunal for Electricity
(hereinafter referred to as "the Appellate Tribunal"), constituted under
Section 110 of the Act invoking its jurisdiction under Section 111 of the
Act.
c
9. By the impugned order dated 20.11.2014, the Appellate Tribunal
confirmed the order of the 2"' respondent.
"Para 62. Summary of Findings:
(a) The PPA dated 19.12.2010 entered into between the Appellant
D and the Respondent No. I provided for tariff as determined by the
State Commission vide order dated 30.1.2010, viz. Rs.15 per kWh
for first 12 years and thereafter Rs.5 per kWh from J3•h year to
25'h year, provided the Solar Project is commissioned on or before

E
1
Para 7. Considering the above, we decide that the petition succeeds. We decide that
the petitioner's project, \vhich is not availing the benefit ofAccelerated 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 invoices so far
raised by the petitioner and payment of which have already been made by the respondent.
F The respondent is further directed that he shall pay the above tariff now onward also
to the petitioner for energy supplied by him.

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 \Vho have either commissioned or are likely to commission
G their projects within the control period of the said order. Some of such developers
might not avail the benefits of accelerated depreciation and it \vould be unfair if all of
them arc required to file separate petitions to seek justice, especially when we have
already decided that in the Order No. I of2012. the Commission has determined separate
tariff for such projects. We, therefore, in the interest ofjustice and fairness, decide that
the present order shall be applicable in all such cases. The onus of proofregarding non-
H availing of accelerated depreciation shall. ho,vever. be on such developers.
GUJARAT URJA VIKAS NIGAM LIMITED v. EMCO LIMITED 865
& OTHERS [CHELAMESWAR, J.]

'31" December 2011. However, in case commissioning of the A
project is delayed beyond 31" December, 2011, the Appellant has
to pay the tariff as determined by the State Commission effective
on the date of commissioning of Solar Power Project. The Solar
Project of the Respondent No. I was commissioned on 2.3.2012.
Therefore, the tariff as determined by the State Commission by
B
the Order dated 27.1.2012 for the next control period from 29.1.2012
to 31.3.2015 will be applicable to the Respondent No. I.
(b) In order dated 27.1.2012, the State Commission has determined
the tariff for Solar Project availing accelerated depreciation and
without availing the accelerated depreciation. As the Respondent
No. I has not availed the accelerated depreciation, the tariff
c
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.
(c) Complete reading of the Tariff Order dated 27.1.2012 clearly
indicates that the State Commission has determined tarifffor both, D
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. E

10. Both the 1" Tariff Order and the 2"' Tariff Order issued by
the 2"' respondent deal with the tariffpayable 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:
F
(I) 1" 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
G
discounting rate of I 0.19% works out to Rs. 12.54 per kWh and
levelised tariff using the same discounting factor for Solar Thermal
Power generation works out to Rs. 9.29 ·per kWh. However, the
Commission feels that it would be appropriate to determine tariff
for two sub-periods: 12 years· and l3 years instead of the same
tarifffor 25 years. Hence, the Commission determines the tariff H
866 SUPREME COURT REPORTS [2016] 1 S.C.R.

A for generation of electricity from Solar PY Power Project at Rs.
15 per kWh for the initial 12 (twelve) years starting from the date
of Commercial operation of the project and Rs. 5 per kWh from
the IJ'h (Thirteenth) year to 25'" (twenty fifth) year. The
Commission also determines the tariff for generation of electricity
from Solar Thermal Power project at Rs. 11 per kWh for the
B
initial 12 (twelve) years starting from the date of Commercial
operation of the project and Rs. 4.00 per kWh from the l J'h
(Thirteenth) year to 25'" (twenty fifth) year.
The above tariffs take into account the benefit of accelerated
depreciation under the Income Tax Act and Rules. For a project
c that does not get such benefit, the Commission would, on a petition
in that respect, determine a separate tarifftaking into account all
the relevant facts."
(II) 2"' Tariff Order, on the other hand, fixed the tariff for both
the classes of PROJECTS' i.e. those which "avail" the ·'benefit of
D accelerated depreciation" (under Section 32 of the Income Tax Act)
and those which do not "avail" the "benefit of accelerated depreciation".
"Based on these technical and financial parameters, the levelized
tariff including return on equity for megawatt-scale solar
photovoltaic power projects availing accelerated depreciation
E is calculated to be Rs. 9.28 per kWh, while the tariff for similar
projects not availing accelerated depreciation is calculated to be
Rs. 10.37 per kWh. The Commission also decides to determine
the tarifffor two sub-periods. For megawatt-scale photovoltaic
projects availing accelerated depreciation, the tariff for the first
F 12 years shall be Rs. 9.98 per kWh and for the subsequent 13
years shall be Rs. 7 per kWh. Similarly, for megawatt-scale
photovoltaic projects not availing accelerated depreciation,

8
There is some dispute between the parties in this regard and the Appellate Tribunal
G recorded:~
"36. . The Tariff Order 2012 determines both the tariffs i.e. with or without
accelerated depreciation."
In our opinion, the conclusion of the Tribunal in this regard is right. The Tenor of the
two tariff orders (relevant portions of,vhich are extracted above) is too obvious and
does not call for any further explanation to justify the abO\e conclusion of the Appellate
H Tribunal.
GUJARAT URJA VIKAS NIGAM LIMITED v. EMCO LIMITED 867
& OTHERS [CHELAMESWAR, J.]

the tariff for the first 12 years shall be Rs. 11.25 per kWh and A
for the subsequent 13 years shall be Rs. 7.50 per kWh."
11. The case of the I" respondent is that notwithstanding the fact
that it entered into a PPA during the "control period" specified in the I"
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 B
the 2"' respondent) fixation of a separate tariff. It is the further case of
the I" respondent that under the PPA, the appellant is under an obligation
to procure the power from the I" respondent for a period of 25 years if
the I" 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 I" c
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 I" respondent (i)
commencing the generation of power within the "control period" stipulated
under the I" Tariff Order; and (ii) choosing to avail the "benefit of D
accelerated depreciation" under the Income Tax Act. According to the
I" respondent, the stipulation under the I" 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 I" Tariff Order is E
not applicable to those PROJECTS/power producers which do not avail
the "benefit of accelerated depreciation" under the Income Tax Act.
12. On the other hand, the case of the appellants throughout has
been that the I" respondent clearly knew when it entered into the PPA
that the tariff propounded under the 1" Tariff Order is applicable only F
for those PROJECTS which avail the "benefit of accelerated
depreciation" under the Income Tax Act. If the first respondent did not
intend to avail the "benefit of the accelerated depreciation" under the
Income Tax Act, it ought not to have entered into the PPA without first
seeking the determination of the tariff by the 2"' respondent. Having
G
chosen to enter into a PPA, the I" respondent cannot decide not to avail
the "benefit of accelerated depredation" at a later point of time i.e.
beyond the control period prescribed under the I" Tariff Order and claim
the benefit ofa more advantageous tariff fixed in the 2"' Tariff Order in
favour of the PROJECTS which do not avail the "benefit of accelerated
depreciation". H
868 SUPREME COURT REPORTS [20 l 6] l S.C.R.

A 13. We have already noticed that the l" respondent did not
commence generation of power within "control period" stipulated under
the l" Tariff Order and also did not avail the "benefit of the accelerated
depreciation" under the Income Tax Act.
14. It is admitted on all hands that the "benefit of accelerated
B depreciation" mentioned in the l" Tariff Order and the PPA is the
stipulation contained in Section 32 ( 1)(i) of the Income Tax Act read
with Rule 5(1A) of the Income Tax Rules. They provide for the method
and manner in which depreciation of the assets of an assessee is to be
calculated. Section 32 of the Income Tax Act (insofar as relevant)
stipulates as follows:-
c
"32( 1) in respect of depreciation of-
(i) buildings, machinery, plant or furniture, being tangible assets;
(ii) know-how, patents, copyrights, trade marks, licences,
franchises or any other business or commercial rights of similar
D nature, being intangible assets acquired on or after the l" day
of April, l 998.
owned, wholly or partly, by the assessee and used
for the purposes of the business or profession, the following
deductions shall be allowed -
E
(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(1 A) of the Income
F
Tax Rules, 1962 which reads as follows:-
"(! A) The allowance under clause (i) of sub-section (I) of section
32 of the Act in respect of depreciation of assets acquired on or
after l" day of April, 1997 shall be calculated at the percentage
specified in the second column of the Table in Appendix IA of
G 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;
H "Provided further thatthe undertaking specified in clause (i) of
GUJARAT URJA VIKAS NIGAM LIMITED v. EMCO LIMITED 869
& OTHERS [CHELAMESWAR, J.]

sub-section (I) of section 32 of the Act may, instead cifthe A
depreciation specified in Appendix IA, at its option, be allowed
depreciation under sub-rule (I) read with Appendix I, if such option ~
I
is exercised before the due date for furnishing the return ofincome
under sub-section (I) of section 139 of the Act,
i
I

(a) for the assessment year 1998-99, in the case of an B
undertaking which began to generate power prior to I• day of .
April, 1997;and
(b) for the assessment year relevant to the previous year in
I'
which it begins to generate power, in case of any other
I undertaking:" c
l' I 5. It can be seen from the above extracted proviso, an undertaking
engaged in generation of power has an option to claim depreciation on
·its assets in accordance with the scheme under Section 32(I)(i) of the
· Income Tax Act. Such an optiori could be exercised at the relevant
point oftime as indicated in the said proviso. D
.•
. 1.6. The argument of the first respondent throughout has been
that the stipulation fn the J• Tariff Order that "a project that does not
get such a benefit ...." only means that the tariff propounded under the
said order does not apply to PROJECTS w)lich do not choose to exercise
the option to be governed by the scheme under Section 32 of the Income
• • oJ • E
Tax Act:~ On the other hand, the argument by the appellant throughout
has been that such a clause only implies that the tariff under the I•
· ·Tariff Order is not applicable to those power generating PROJECTS
which by operation of law (but not because of the violation of the
assessees) are not entitled to claim the benefit of the scheme under
Sectio~ ~2(l)(i) of the Income Tax Act. F

I 7. We do not wish to examine the question whether there is a
possibility under the Income Tax Act for any PROJECT/ undertaking
engaged in the generation of power' not to fall within the operation of
Section 32( I Xi) apart from those css~ 'INl.otthe "undertaking" chooses
not to be governed by ~Vi rr. i.,.e.. tleliher of the parties made the G
1 ·· . . 0

•·The relevant portion of Section 32 of the Income Tax Act reads as under:
• ..... undertaking engaged in generation .... ofpower ...•...."
The said Section covers not only Solar Power Projects but also all kinds of Power
Projects.·. H
870 SUPREME COURT REPORTS (20 l 6] l S.C.R.

A submission that in law there is a possibility of a power project not getting
the benefit o.fthe accelerated depreciation.
l 8. Assuming for the sake of argument that in law such a possibility
exists, the construction such as the one sought to be placed on the relevant
portion of para 5 of the l" Tariff Order by the appellant cannot be
B accepted because it would be inherently illogical. At the cost of repetition,
we reproduce that portion of the para 5 of the I" Tariff Order:
The above tariffs take into account the benefit of accelerated
depreciation under the Income Tax Act and Rules. For a project
that does not get such benefit, the Commission would, on a
c petition in that respect, determine a separate tariff taking into
account all the relevant facts."
It is not the case of either the appellant or the 2"' 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 2"' respondent
D 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 oflncome Tax Act. The 2"' respondent
must be presumed to have known at the time of propounding the l"
·tariff order that the lnconie Tax Act and the Rules thereunder provide
an option to the assessee (producer of power) either to claim or not the
E 'benefit .of accelerated depreciation'. Hence, the stipulation. The
submission 'of the appellant regarding the construction of the above
. extracted clause of the l" Tariff Order is rejected.
19. However, that does not solve the problem on hand. Two
questions still remain to be examined, (i) Even ifthe interpretation placed
F by the 1" respondent ·on the above extracted portion of para 5 of the I"
Tariff Order is correct (in fact it would be the logical consequence of
the rejection of the submission of the appellant), would the I" respondent
. have a right to exercise the choice not to avail the 'benefit of accelerated
·depreciation' after signing the PPA? (ii) Whether the I" respondent's
G right under the Income Tax Act to make. such a choice could be so
exercised which would result in a situation whi:reby the appeilant would
be obliged under the PPA to purchase the power generated by the l"
respondent for a period of25 years without knowing the price at wliich
the I" respondent would be obliged to supply the power?
20. These questions were raised and' argued before the 2"'
H·
GUJARAT URJA VIK.AS NIGAM LIMITED v. EMCO LIMITED 871
& OTHERS [CHELAMESWAR, J.]

respondent but unfortunately the issue was unnecessarily complicated A
by the arguments based on promissory estoppel' 0 • After noticing the
issue, the appellate tribunal elaborately extracted from the order of the
2•' respondent dated 8.8.2013. The relevant part of which reads as
under:
"6. I 6. However, it is also a fact that the parties to·the above PPA B
agreed in the second para of the Article 5.2 of the PPA that ifthe
project of the Petitioner is not commissioned during the control
period of the Order No.2 of2010 dated 29.1.2010, either the
tariff that was agreed in Article 5.2 of the PPA or the tariff
determined by the Commission as on the date of
commissioning of the project, whichever is lower, will be c
applicable. Thus, the aforesaid PPA recognizes the two
tariffs applicable to the Petitioner case. As the Petitioner's
project was commissioned on 2.3.2012, it falls under the control
period of Order No.I of2012 dated 27.01.2012, for tariff purposes,
relevant para of which is reproduced below: D
xxx xxx xxx xxx
The above table reveals that both the tariffs i.e. one for the project
availing the benefit of Accelerated Depreciation and another for
the project not availing the benefit of accelerated Depreciation_ is
allowed by the Commission for the projects commissioned during E
the control period of 29.01.2012 to 31.03.2015. Such being the
case, on the cogent reading of the Article 5.2 of the PPA and the
tariff Order No. I of 2012 dated 27.01.2012, we are of the view
that the Principle of Promissory Estoppel is not applicable in the.
present case." F
[Extracted portion of the order of the 2"'
respondent in the impugned order]
It can be seen from the above that the 2"' respondent noticed the
stipulation in the PPA that if the I" respondent does not commission the
PROJECT doring the control period specified under the 1" Tariff Order G .
' .

"· 18, 0.ne .other.issue raised by the Appellant before the State Commission is that the
choice to sell electriciiy at the tariffwithur without accelerated depreciation was to be
exercised by the Developer only a\ the.relevant time and such a clajm made subsequently
is barred by the principies of estoppel, · H
872 SUPREME COURT REPORTS [2016] I S.C.R.

A " .... either the tariffthat 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. I of2012 dated 27.01.2012, we are of the view that
the Principle of Promissory Estoppel is not applicable in the present
case." The 2"d respondent noticed the stipulation of the PPA regarding
B
the applicable tariff in the event of the I" respondent not commissioning
the PROJECT would be the lowerof the two tariffs. Without examining
the legal effect of such stipulation, the 2"d respondent went into the
analysis of the 2"d Tariff Order which is neither necessary (nor called
for) for determining the legal effect of the stipulation of the PPA.
c 21. The appellate Tribunal after noticing the issue and the elaborate .
consideration bestowed on it by the 2'' respondent did not record in the
impugned order its view regarding the correctness of the above extracted
conclusion of the 2"' respondent. We can only presume that the appellate
tribunal approved the reasoning and the conclusion of the 2"" respondent
D since it did not reverse the 2"' respondent's order.
22. One of the submissions of the l" respondent which was
accepted by the Tribunal is thatthe issue is covered by an earlier judgment
of the Tribunal in Appeal No. I I I of 2012 dated 30" April, 2013 11
pertaining to Rasna Marketing Services LLP 1: Gujarat Urja Vikas
E Nigam Limited & Another (hereinafter referred to as "RASNA case").
23. The facts of RASNA case are: that Rasna, a power producer,
entered into a power purchase agreement on 1!.12.2010 with the appellant
(GUVNL) herein. Under the said PPA, Rasna agreed to sell power at
the rate prescribed by the I" Tariff Order. Eventually, Rasna
F
1
1. 29. According to the Respondent, the issue has already been decided in favour of
the Developer in judgment dated 30.4.2013 in Appeal No.I I I of2012.

31. In the above judgment in Rasna case, the Tribunal decided that there is no infirmity
in the State Commission detennining the tariff for the Solar Po\'.rer Projects of Rasna
Marketing Services Ltd. without considering the benefit of accelerated depreciation in
G terms of the Order No.2 of2010 dated 29.1.2010. In that case, Rasna Marketing
Services Ltd. had commissioned its project within the Control Period specified in the
State Commission's order dated 29.1.20 IO. The order dated 29.1.20 I 0 determined the
tariff for Solar Projects with accelerated depreciation but provided that for a P.roject
that does QOt get the accelerated depreciation benefit, the Commission on a Petition
fi~ed by the Developer \vould determine a separate tariff \Yithout accelerated

H depreciation.
GUJARAT URJA VIKAS NIGAM LIMITED v. EMCO LIMITED 873
& OTHERS [CHELAMESWAR, J.)

commissioned its power plant on 3I.I2.2011 within the control period A
stipulated in the I" Tariff Order. How.ever, Rasna filed a petition before
the 2"' respondent praying for determination of specific tariff for the
sale ofpoweron the ground that Rasna would not be availing accelerated
depreciation benefits. The said application ofRasna was resisted by the
GUVNL. A preliminary objection that such an application is not
B
maintainable was raised by GUVNL on the ground that Rasna having
received the benefit of the PPA and also the payment pursuant thereto
is debarred from seeking the relief such as the one sought by it. The 2"'
respondent overruled the preliminary objection. Therefore, GUVNL
went before the appellate tribunal. Dealing with the said appeal, the
Tribunal took note of the categoric objection raised by the GUVNL that c
the application for determination of a separate tariff by Rasna could not
be entertained after Rasna had signed the PPA."
24. The Tribunal rejected the said obj'ection of GUVNL." In
substance, the conclusion of the Tribunal in RASNA case was that the
execution of the PPAdoes not put any embargo on the right ofRasna to D
seek the determination of a specific tariff. The tribunal's reasons for
such a conclusion are that (i) the]" Tariff Order recognises the right of

" 2 I. The main ground of objection raised by the Appellants before the State
Commission was that Rasna Marketing Services Limited, R-2 could not be permitted E
to file the said application after having signed the PPAs both on 08.12.2010 and
8.6.2011 with the Appellants 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, 1.20 I 0 fixing the
generic tariff cannot take a different stand and maintain the petition for detennination
of project specific tariff on the pretext of not availing the accelerated depreciation
benefits. F

" 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 G
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 contention is not tenable because
there is no su.ch reservation either in the tariff order No.2 of2010 or in the PPA entered
into bet\veen the parties. H
874 SUPREME COURT REPORTS [2016) I S.C.R.

A the power producers like Rasna either to opt for or not to opt for the
benefit of accelerated depreciation; (ii) there is no specific stipulation in
the Tariff Order that the power producers like Rasna which do not wish
to avail the benefit of accelerated depreciation should intimate the same
to the appellant before entering into the PPA; (iii) nor there is any
obligation under any law by which Rasna is bound to disclose the fact
B
before signing the PPA that it would not avail the benefit of accelerated
depreciation.
25. Relying on the judgment of the RASNA case, the Tribunal
recorded a conclusion in the impugned order:
c "32. In the present case, the Solar Project could not be
commissioned during the control period specified in the State
Commission's Order dated 29.1.20 I 0. 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."
D
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
E tariff applicable to it. In the instant case, the prayer of the l" respondent
is not for fixation of separate tariff but for a declaration that the l"
respondent is entitled for claiming the ben.efits of the tariff determined
under the 2"' Tariff Order.
26. Apart from that, the conclusion of the Tribunal in the instant
F

(iv) Rasna Marketing Services LLP (R-2) is not mandated under any provision oflaw
to disclose to the Appellants that it would not be availing the benefit of accelerated
depreciation before signing the PPA. It is the discretion of the project developer not
availing the benefit of accelerated depreciation to move the State Commission in a
G separate petition for determination of project specific tariff as permitted by the State
Commission in the tariff order No.2 of2010 dated 29.1.2010. The said tariff order is
a statutory order binding on the project developers and licensees such as the Appellants
and the developers.
v) lfthe option of signing or not signing the PPA was contingent on the developers in
exercise of option, then that option should have been specifically sought for by the
Appellant and ensured that the same was incorporated in the PPA. This admittedly has
H not been done.
GUJARAT URJA VIKAS NIGAM LIMITED v. EMCO LIMITED 875
& OTHERS [CHELAMESWAR; J.]

case is wrong. First of all the PPA does not give any option to the A
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 I ''Tariff Order and provides that in
such an eventuality what should be the tariff applicable to the sale of
power by the t • respondent. Secondly, the PPA does not 'entitle'
B
the t • respondent to the "tariff as determined by the" 2"d respondent by
the 2"' Tariff Order. On the other hand, the PPA clearly stipulates that
in such an eventuality;
"Above tariff shall apply for solar projects commissioned on or
before 31" December 2011. In case, commissioning of Solar
Power Pro.iect is delayed beyond 31" December 2011, c
GUVNL shall pay the tariff as determined by Hon 'hie GERC
for Solar Projects effective on the date of commissioning of
solar power project or above mentioned tariff, whichever
is lower."
The right of the t • respondent not to avail the "benefit of D
accelerated depreciation" flows from the Income Tax Act. It is only
the J •Tariff Order which gives an option to the t •respondent (for that
matter to all the power producers who are similarly situated as the I"
respondent) not to sell the power produced by it at the price specified in
the I" Tariff Order but seek the determination of a separate tariff. Such E
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 aepreciation,.
27. The real question is: what is the point of time at which the
power producer can exercise such right to seek the determination of a F
separate tariff.
28. 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 2"d G
proviso to Rule S(IA) 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". It simply
specified the price to be paid by the appellant for the power purchased .
. by it from the I" respondent. The appellant determined the said price
H
876 SUPREME COURT REPORTS [2016] I S.C.R.

A after taking into consideration various factors. One of them happened
to be that the Power Producers are entitled to certain 'benefits' under
the Income Tax Act. The availability of such 'benefit' is dependent
upon the option of the power producers. Though the I" Tariff Order
employs the expression 'benefit' in the context oftheAD Scheme under
Section 32 of the IT Act, the applicability of the provision to a power
B
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
c 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
D the PPA. No doubt that the l" 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 l" respondent knowing fully well entered into the PPA in
E 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 29.1.2010"
31. Apart from that both the respondent No. 2 and the appellate
tribunal failed to notice and the I" respondent conveniently ignored one
F crucial condition of the PPAcontained in the last sentence of para 5.2 of
the PPA:-
"In case, commissioning of Solar Power Project is delayed beyond
31" December201 l, GUVNL shall pay the tariff as determined
by Hon 'ble GERC for Solar Projects effective on ttie date of
G commissioning of solar power project or above mentioned tariff,
whichever is lower."
The said stipulation clearly envisaged a situation where
notwithstanding the contract between the parties (the PPA), there is a
possibility of the first respondent not being able to commence the
H generation of electricity within the "control period" stipulated in the l"
GUJARAT URJA VIKAS NIGAM LIMITED v. EMCO LIMITED 877
& OTHERS [CHELAMESWAR, J.]

tariff order. It also visualised that for the subsequent control period, the A
tariffs payable to a PROJECTS/power producers (similarly situated as
the first respondent) could be different. In recognition of the said two
factors, the PPA clearly stipulated that in such a situation, the 1"
respondent would be entitled only for lower of the two tariffs.
Unfortunately, the said stipulation is totally overlooked by the second
respondent and the appellate tribunal. There is no whisper about the
B
said stipulation in either of the orders.
32. The I" respondent created enough confusion. While on one
hand the I" respondent asserted a right to seek detennination of a separate
tariff independent of the tariff fixed under the l" Tariff Order in view of
the stipulation contained in the l" Tariff Order that "for a project that c
does not get such benefit, the Commission would, on a petition in that
respect, detennine a separate tarifftaking into account all the relevant
facts" did not seek a relief before the 2"' respondent to determine a
separate tariff but claimed the benefit of the 2"' Tariff Order. Assuming
for the sake of argument that the petition filed by the l" respondent D
(1270/2012) is to be treated as an application for detennination of separate
tariff which would be identical with the tariff fixed under the 2"' Tariff
Order, whether the l" respondent would be entitled for such a relief
depends, if at all he is entitled to seek such a determination, on a
consideration of"all the relevant facts" but not by virtue of the operation
of the 2"' Tariff Order. E

'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 2"' respondent dated
8.8.2013, which was the subject matterof appeal in the impugned order,
is also set aside. F

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 G
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. H
878 SUPREME COURT REPORTS (2016] 1 S.C.R.

A 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 oflaw justifying the exercise of the
appellate jurisdiction of this Court. The appeal is allowed with costs
quantified at Rs. 2 lakhs payable by the l" respondent herein. The interim
B orders granted earlier stand dissolved. The amounts, if any, paid by the
appellant pursuant to the interim orders of this Court shall be adjusted
towards the payments due to the l" respondent for future procurement
of power by the appellant in such manner as the appellant deems fit and
proper.
C Kalpana K. Tripathy Appeal allowed.