2015 (6) TMI 1206 - AT - Income Tax

Deduction u/s 80IA(4)(i) - Whether widening of existing roads constitute creation of new infrastructure facility for the purpose of section 80IA(4) - HELD THAT - Section 80IA mainly speaks of development of infrastructure facility; whether widening of roads would amount to development of infrastructure facility has been clarified by the CBDT and the same is binding on the Revenue. In the light of the circular issued by CBDT and also the decision in the case of Rohan Rajdeep Infrastructure 2013 (4) TMI 758 - ITAT PUNE wherein circular No. 4/2010 was applied by the Tribunal to hold that widening of roads would amount to new infrastructure facility falling within the purview of section 80IA of the Act - the expression development of infrastructure facility includes widening of roads. Under these circumstances we do not find any infirmity in the order passed by the CIT(A). Appeal filed by the Revenue is dismissed.

Summary

Issues:
Entitlement to deduction under section 80IA(4)(i) of the Act for a company engaged in the business of construction, operation, and maintenance of highways.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai pertained to the assessment year 2008-09, with the main issue being the eligibility of the assessee for deduction under section 80IA(4)(i) of the Act. The Assessing Officer (AO) contended that the assessee, engaged in the widening of existing roads, was not eligible for the deduction as it did not constitute the development of new infrastructure facilities. The AO emphasized the term 'new' and opined that widening cannot be equated with new construction, thereby disallowing the deduction. However, the learned CIT(A) referred to a circular issued by the Central Board of Direct Taxes (CBDT) to support the assessee's claim. The circular clarified that widening of existing roads, as part of a highway project, would be considered a new infrastructure facility for the purpose of section 80IA(4)(i) of the Act.

In the detailed order for the assessment year 2007-08, the CIT(A) highlighted that the appellant's project involved constructing a new 4-lane divided carriageway by dismantling the existing 2-lane road, which was considered a new infrastructure facility according to the CBDT circular. The appellant's argument that the project qualified as a new infrastructure facility was supported by the CBDT circular, which specifically addressed the issue of widening existing roads as part of a highway project. The CIT(A) concluded that the project undertaken by the appellant met the criteria of a new infrastructure facility under section 80IA(4)(i) of the Act, thereby allowing the deduction and overturning the AO's disallowance.

During the hearing, the appellant's counsel pointed out that the AO had accepted the deduction claim for the preceding assessment year, which had not been reversed by the Revenue. Additionally, the counsel referenced a decision by the ITAT Pune, applying the CBDT circular to support the claim that widening of roads constituted a new infrastructure facility eligible for deduction under section 80IA of the Act. The Revenue's argument that development of infrastructure facility should imply new construction was rejected by the Tribunal, which upheld the CIT(A)'s decision based on the CBDT circular and the precedent set by the ITAT Pune Bench. Consequently, the appeal filed by the Revenue was dismissed, affirming the eligibility of the assessee for deduction under section 80IA(4)(i) of the Act as per the CBDT circular and judicial precedents.

The Tribunal's decision, pronounced on 2nd June 2015, underscored the significance of the CBDT circular in interpreting the scope of development of infrastructure facilities under section 80IA of the Income Tax Act, emphasizing that widening of roads could indeed qualify as a new infrastructure facility, thus entitling the assessee to the deduction under section 80IA(4)(i) of the Act.