BENEFITS UNDER SECTION 80 IA OF INCOME TAX ACT
Bharat Forge submitted that the benefits under Section 80IA of the Income tax Act would not be available for projects commissioned after March 31, 2012 and hence, requested the Commission to modify the calculation of Tariff by not considering the benefits under Section 80 IA.
As per the recent Finance Bill, benefits under Section 80IA of Income Tax Act have been further extended. Thus, the premise of the objection is no longer valid. Moreover, Regulation 22 of MERC RE Tariff Regulations, 2010 specifies the provision related to any subsidy or incentive from Central and State Government while Regulation 23 provides the treatment of Taxes and Duties, according to which the Commission has determined the tariff under this Order. The issue raised by the stakeholder is not a subject matter of this regulatory process the scope of which is limited to determination of Generic Tariff for the third year of the first Control Period under Regulation 8 of the Maharashtra Electricity Regulatory Commission (Terms and Conditions for Determination of Renewable Energy Tariff) Regulations, 2010.
ASSESSMENT OF BENEFITS UNDER ACCELERATED DEPRECIATION
GRPL requested to modify the calculation for levelisation of Accelerated Depreciation benefits upto useful life of 25 years instead of 20 years for wind energy projects.
Further, GRPL submitted that under the Income Tax Act, projects not availing accelerated depreciation are allowed to claim depreciation at 7.69% on the actual cost of the project (i.e., on straight line method (SLM)). Hence, according to GRPL, additional benefits while claiming the accelerated depreciation (i.e., 80% under Written Down Value method) will be over and above depreciation at 7.69% on SLM allowed as per Income Tax Act and not over and above the depreciation at 5.28% allowed as per the Companies Act.
In view of this, GRPL requested that while working out the net depreciation benefit, the
MERC RE Tariff Order for FY 2012-13 (Case 10 of 2012) Page 28 of 90
Commission may consider depreciation at 7.69% on SLM as per Income Tax Act as against depreciation @ 5.28% as per Straight Line Method (Book depreciation as per Companies Act, 1956) which may then be compared with depreciation as per Income Tax Act, i.e., 80% under Written Down Value method.
The Commission has noted the observation made by the stakeholder regarding calculation of levelisation of accelerated benefits upto useful life of 25 years instead of 20 years for wind energy projects and the same has been incorporated in calculation of levelisation of accelerated depreciation.
Further, as regards the observation on calculation of net depreciation benefits, the Commission notes that the net depreciation benefits have been calculated considering the projects, which are availing benefit of accelerated depreciation. The purpose of calculating the levelised accelerated depreciation benefits as explained in Paragraph 2.7 of this Order is to estimate the absolute value of depreciation benefits any developer is entitled to avail under accelerated depreciation option and hence, the benefits under Income Tax Act (i.e., 80% under Written Down Value method) needs to be compared with book depreciation (i.e., 5.28% as per Straight Line method) under Companies Act, 1956 to calculate absolute value of benefits such projects would avail under Accelerated Depreciation benefits. The methodology suggested by the objector compares the relative benefits for a project developer between availing accelerated depreciation and not availing accelerated depreciation, which is not the purpose for estimating per unit benefit of accelerated depreciation. It may be noted that in both the cases, the depreciation benefit is to be ascertained in terms of accelerated depreciation under I.Tax Act, 1961 vis-a-vis book depreciation claimed under Companies Act 1956. The Commission has correctly estimated the levelised accelerated depreciation in line with Regulation 22.1 of MERC RE Tariff Regulations, which then needs to be deducted to estimate the tariff for RE projects availing accelerated depreciation and hence, the Commission retains the methodology mentioned in the draft Order, which has also been explained in Paragraph 2.7 of this Order.
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