Earlier, this exemption was turned down under the plea that an enterprise seeking approval should have a separate identity, goal, organisation and financing arrangements, never mind the fact that MSEB was wholly engaged in the business of developing, maintaining and operating an infrastructure facility, as required. It was also contended that for power companies, tax concession was also applicable to projects set up after 1993, and so MSEB, which has been in the generation of power since 1940, didn't qualify.

As an understandably puzzled MSEB pointed out, this would have led it to set up a special purpose vehicle for every separate project it took up. That would be extremely impractical, in view of the costs, time and trouble involved. In one of those rare cases where the CBDT has seen the larger picture rather than merely avenuesof revenue collection, it has recognised MSEB's problem and decided that the bonds could be tax-free. This will have major implications for the financing of state electricity boards. If MSEB can float tax-free bonds, so can other state electricity boards. The immediate impact will of course be that the cost of funds to electricity boards will come down, no mean achievement given the precarious state of their finances. Financing of power projects will get a boost. Nor will the implications of CBDT's clarification be limited to power projects. Presumably, any company engaged in infrastructure projects can now claim tax-free status using the ruling in MSEB's case as a precedent.