Infrastructure facility qualification: integrated design build finance operate maintain street lighting attracts section 80IA deduction when entrepreneurial risk exists.

Assessee's turnkey provision of design, finance, implementation, commissioning, long term operation and maintenance of LED street lighting for roads and highways qualifies as development of an infrastructure facility under section 80IA(4)(i) because the arrangement evidences entrepreneurial risk, long term operational responsibility and performance guarantees rather than a mere supply and installation works contract. Pursuing a purposive and contextual construction of the undefined term "road", the analysis treats lighting and related monitoring/automation as integral components of modern road/highway infrastructure, and therefore the design build finance operate maintain model attracts the section 80IA deduction claimed.

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Issues: (i) Whether the assessee's activities of designing, financing, implementing, commissioning, operating and maintaining an energy-efficient public LED street lighting system for roads and highways in Jaipur constitute development of an "infrastructure facility" within the meaning of section 80IA(4)(i) of the Income-tax Act, 1961, entitling the assessee to deduction under that provision.

Analysis: The assessee is a company registered in India and had entered into an Energy Performance Contract with Jaipur Municipal Corporation dated 24.12.2014 and evidenced Capital Work-in-Progress prior to 01.04.2017, satisfying conditions under clauses (a) to (c) of section 80IA(4)(i). The Explanation to section 80IA(4)(i) includes a "road" and a "highway project including other activities being an integral part of the highway project" within "infrastructure facility". The statutory term "road" is undefined in the Income-tax Act; a purposive and contextual interpretation is therefore appropriate. The contract obligations - design, finance, implementation, commissioning, long-term operation and maintenance, performance guarantees, deployment of technical manpower and compensation linked to energy savings - go beyond mere supply-and-installation and demonstrate entrepreneurial risk and long-term operational responsibility. Modern road/highway infrastructure encompasses functional components such as lighting, monitoring and automation which render roads usable and safe; such components qualify as activities integral to a highway/road project. The proviso excluding works contracts does not apply where the undertaking operates on a design-build-finance-operate-maintain basis with financial and performance risk, indicating developer status rather than mere contractor status.

Conclusion: The assessee's activities qualify as development of an "infrastructure facility" within the meaning of section 80IA(4)(i) of the Income-tax Act, 1961; the assessee is therefore eligible for the deduction claimed and the disallowance of Rs. 7,16,84,974/- is deleted.

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