Section 80IA(4)(i) of the Income-tax Act, 1961 (the Act) provides for a tax holiday to an undertaking engaged in developing, or operating and maintaining, or developing, operating and maintaining any infrastructure facility subject to satisfaction of certain conditions mentioned in the Section.
Explanation to Section 80IA(4)(i) of the Act considers a road including toll road, a bridge or a rail system and highway project including housing or other activities being an integral part of the highway project, as infrastructure facility eligible for tax holiday under Section 80IA of the Act. However, one of the conditions for claiming the said tax holiday is that the facility should be a new infrastructure facility.
In the past, there have been litigation on whether projects involving widening of existing roads create a new infrastructure facility, therefore, leading to ambiguity on the ability of such undertaking to claim tax holiday under Section 80IA(4)(i) of the Act.
CBDT Circular
Central Board of Direct Taxes (CBDT) has issued Circular no. 4 of 2010 dated 17 May 2010 clarifying that widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a ‘new infrastructure facility’ for the purpose of Section 80IA(4)(i) of the Act.
The Circular also mentions that simply relaying of an existing road would not be classifiable as a ‘new infrastructure facility’.
Our Views:- This is a welcome Circular by CBDT to clarify the position that widening of existing roads involving substantive development would be considered as a new infrastructure facility and therefore, such undertakings would be eligible for tax holiday under Section 80IA of the Act.
In the past, the Delhi bench of the Income-tax Appellate Tribunal (the Tribunal) had, in a similar case2, remanded the matter back to the Assessing Officer for a fresh determination as to whether widening of two lanes into four lanes created a new infrastructure facility. The Tribunal has stated that the word ‘new’ does not always mean having ‘never existed before’ or ‘just invented / made’ or ‘fresh’. It could also mean ‘renewed’. Further, there are certain judicial precedents3 which state that in order to determine whether something ‘new’ has come into place, the significant test is change in identity.
This Circular has resolved the above controversy and accordingly, now, undertakings would be able to claim tax holiday under Section 80IA of the Act on such projects. This Circular will be particularly useful in view of the large number of concessions (awarded and yet to be awarded) contemplated under the National Highways Development Project of the National Highway Authority of India as well as other state concessions, which involve widening of roads into four / six lanes.
but the circular is not binding on the high/district court is it?
and it is still discretion of court to adjudge either way… right?
Can u please tell me the name of that similar case u referred in your article?