section 10(46) of Income tax Act

## Policy Analysis Report: Notification Regarding Odisha Electricity Regulatory Commission's Income Tax Exemption **1. Executive Summary:** This report analyzes Notification No. 85/2022/F. No. 300196172022ITAI, issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes on July 21, 2022. This notification grants income tax exemption to the Odisha Electricity Regulatory Commission (OERC) under Section 10(46) of the Income-tax Act, 1961, for specific income sources. The key findings indicate that the exemption applies to license fees, application processing fees, and interest earned on government grants and these fees. The notification is subject to conditions regarding commercial activity, unchanging income sources, and filing of income tax returns. It is deemed to be applied for the financial year 2021-2022 and shall be applicable with respect to the financial years 2022-2023, 2023-2024, 2024-2025 and 2025-2026. **2. Introduction:** This report provides an informative analysis of Notification No. 85/2022, focusing on its provisions and implications for the Odisha Electricity Regulatory Commission (OERC) and related stakeholders. The analysis is based solely on the content of the provided policy text. **3. Policy Overview:** This is a *new* policy notification. * **Core Objective(s):** The core objective, as derived from the text, is to grant income tax exemption to the Odisha Electricity Regulatory Commission (OERC) on specified income sources, as authorized under clause 46 of section 10 of the Income-tax Act, 1961. **4. Background and Rationale:** As a *new* policy, the notification likely aims to clarify the tax status of the OERC and its specific income streams. The exemption likely seeks to reduce the financial burden on the OERC, potentially enabling it to more effectively fulfill its regulatory responsibilities in the Odisha electricity sector. By providing this exemption, the government may be aiming to support the financial stability and operational efficiency of the OERC. **5. Key Provisions / Changes:** As this is a new policy notification, this section details the main components and rules established by the text: * **Income Tax Exemption:** The notification grants income tax exemption to the Odisha Electricity Regulatory Commission (OERC) for the following specified income: * Amount received as license fee from the licensees. * Amount received as application processing fee. * Interest earned on Government Grants and on the aforementioned license and application processing fees. * **Conditions for Exemption:** The exemption is subject to the following conditions: * The OERC shall not engage in any commercial activity. * The OERC's activities and the nature of the specified income must remain unchanged throughout the financial years for which the exemption applies. * The OERC must file returns of income in accordance with clause (g) of subsection (4C) of section 139 of the Income-tax Act, 1961. * **Applicability Period:** The notification applies retrospectively to the financial year 2021-2022 and is applicable to the financial years 2022-2023, 2023-2024, 2024-2025 and 2025-2026. **6. Target Audience and Stakeholders:** The primary target audience is the Odisha Electricity Regulatory Commission (OERC). Secondary stakeholders include: * **Licensees under the OERC:** They are affected as the license fees they pay are a source of income for OERC, now tax-exempt. * **The Central Board of Direct Taxes (CBDT):** Responsible for administering the Income-tax Act, 1961. * **The State Government of Odisha:** The constituting authority of the OERC. **7. Implementation Aspects (Inferred):** * **Responsible Agency:** The Central Board of Direct Taxes (CBDT) is responsible for implementing and overseeing the application of this notification. The OERC is responsible for adhering to the conditions specified in the notification to maintain its tax-exempt status. * **Timelines:** The notification is effective retrospectively for the financial year 2021-2022 and will continue to be applicable until the end of the financial year 2025-2026. * **Procedures:** The OERC is required to file income tax returns as per clause (g) of subsection (4C) of section 139 of the Income-tax Act, 1961, to demonstrate compliance with the conditions of the exemption. **8. Expected Outcomes / Impact of Changes:** The intended outcomes of this notification are likely to: * Reduce the tax burden on the OERC, freeing up resources for its regulatory functions. * Provide financial stability to the OERC, enabling it to operate more efficiently. * Encourage compliance from OERC by requiring filing of income tax returns. **9. Conclusion:** Notification No. 85/2022 grants income tax exemption to the Odisha Electricity Regulatory Commission (OERC) for specified income sources, subject to certain conditions. This exemption aims to support the OERC's financial stability and operational efficiency, enabling it to effectively fulfill its regulatory role in the Odisha electricity sector. The notification will affect licensees under the OERC, the CBDT, and the State Government of Odisha.

Key Entities Referenced