Infrastructure deduction under section 80IA(4) can cover agreements routed through a State-owned nodal agency acting for the Government.

Section 80IA(4) was treated as satisfied where an infrastructure project agreement was executed through a wholly State Government-owned nodal corporation acting on behalf of the Government. The Gujarat High Court's reasoning turned on the statutory scheme: the corporation functioned as the State's implementing agency, and approvals for the project, land allotment, concession, and toll permissions all arose from the State Government framework. Reading the Income-tax Act together with the Gujarat Infrastructure Development Act, 1999, the agreement was regarded in substance as one with the State Government, and a rigid literal reading was rejected because it would defeat the object of the deduction provision. The deduction was therefore held allowable.

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Issues: Whether deduction under section 80IA(4) of the Income-tax Act, 1961 was available where the infrastructure project agreement was executed through a wholly government-owned nodal corporation acting for the State Government.

Analysis: Section 80IA(4) requires an agreement with the Central Government, a State Government, a local authority, or another statutory body for developing, operating, or maintaining infrastructure facilities. The relevant corporation was wholly owned and controlled by the State Government and functioned as the nodal agency for road development projects. The Gujarat Infrastructure Development Act, 1999 recognised concession agreements with a Government agency, and defined Government agency to include a corporation owned or controlled by the State Government. The project approval, land allotment, concession approval, and toll permission all flowed from the State Government framework. Reading the statutory scheme and the surrounding facts together, the agreement was in substance one with the State Government through its agency, and a rigid literal construction would defeat the object of the deduction provision.

Conclusion: The assessee satisfied the conditions of section 80IA(4), and the deduction was correctly allowed.

Ratio Decidendi: For section 80IA(4), an agreement executed with a wholly government-controlled nodal agency acting on behalf of the State Government can satisfy the statutory requirement when the project is substantively undertaken for the Government under the governing infrastructure statute.

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