Tax Tribunal Confirms Deduction for Road Widening as New Infrastructure, Citing CBDT Circular and Judicial Precedents.

The ITAT Mumbai dismissed the Revenue's appeal, affirming the assessee's eligibility for a deduction under section 80IA(4)(i) of the Income Tax Act. The Tribunal upheld the CIT(A)'s decision, supported by a CBDT circular, that widening existing roads as part of a highway project qualifies as a new infrastructure facility, thus entitling the assessee to the deduction. The Tribunal's decision emphasized the relevance of the CBDT circular and judicial precedents, reinforcing that such projects meet the criteria for new infrastructure development.

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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.

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