(1) Return on equity shall be computed on the equity determined in accordance with regulation 0 and on pre-tax basis at the base rate of 15.5% to be grossed up as per sub-regulation Error! Reference source not found. of this regulation:
1 [(2) The rate of return on equity shall be computed by grossing up the base rate with the normal tax rate as per latest available audited accounts of the concerned transmission licensee:
Provided that in line with the provisions of the relevant Finance Acts of the respective year, the return on equity with respect to the actual tax rate applicable to the transmission licensee during the years of the control period shall be trued up separately for each year during the mid-term performance review and at the end of the control period along with the tariff petition filed for the next control period; and]
(3) Rate of return on equity shall be rounded off to three decimal points and be computed as per the formula given below:-
(a) Rate of pre-tax return on equity = Base rate / (1-t)
(b) Where t is the applicable tax rate in accordance with sub-regulation Error!
Reference source not found. of this regulation.
Illustration.-
(i) In case of the transmission licensee paying Minimum Alternate Tax (MAT) @ 19.93% including surcharge and cess:
Rate of return on equity = 15.50/ (1-0.1993) = 19.358%
(ii) In case of transmission licensee company paying normal corporate tax @ 2 [“33.99%”] including surcharge and cess:
Rate of return on equity = 15.50/ (1-0.3399) = 23.481%