Dehradun, April 29 -- The Uttarakhand high court has ruled that the state legislature does not have the authority to impose a tax on electricity generation through hydropower projects and struck down the Uttarakhand Water Tax on Electricity Generation Act, 2012. Justice Alok Kumar Verma, in a hearing concerning multiple special appeals by hydropower companies, including THDC India Limited, NHPC Limited, Jaiprakash Power Ventures Limited and others, held that the taxable event under the law was not merely the use of water but specifically the use of water to generate power. This backed the stance of the petitioners, who argued that the legislation was essentially a tax on electricity generation in the guise of a levy on water used for power generation. They contended that taxation on electricity generation does not fall within the powers of state legislatures under the Constitution. The state government had defended the Act by claiming that it fell under the state legislature's powers relating to water resources. Earlier, a separate division bench of the high court had delivered a split verdict on the matter in October 2023. While the then- Chief Justice favoured the appeals' dismissal, there was a note of dissent from justice Ravindra Maithani, after which the reference was placed before justice Varma for a final decision. "The question is whether the tax is one on 'drawal of water' for use in electricity generation, or on generation of electricity? The then ..Chief Justice held that the nature of impugned tax, in pith and substance, is a tax on drawl / use / consumption of water for electricity generation, and not a tax on electricity generation, whereas ..Justice Ravindra Maithani held that the impugned tax is on electricity generation," read Monday's court order. "The State cannot take advantage of the referred judgments in the present matter because it is well-settled that Taxation is a distinct matter and there is a clear distinction between general subjects of legislation and taxation. State has no power to levy water tax on generation of electricity as there is no Entry under List II of Schedule VII to levy water tax. Taxation is regarded as a distinct matter and is separately set out,"it added. "It has been found in the earlier analysis that the Act imposes a tax on the generation of electricity. The State Legislature is not competent to levy tax on the generation of electricity. Therefore, I am in full agreement with the conclusion of brother Ravindra Maithani, Justice that the Act is ultra vires (beyond the powers)the Constitution," stated the judgment. Acording to records, the agreements executed after the state's formation required companies to provide 12 per cent of generated electricity to Uttarakhand free of cost. The remaining power was designated for sale to Uttar Pradesh....