Gujarat HC: Infrastructure Developing Companies Are Eligible for Tax Deductions U/S 80IA(4)

In a significant legal judgment, the Gujarat High Court emphasized that companies involved in the development of infrastructure projects, such as roads and canals, are eligible for deductions under Section 80IA(4) of the Income Tax Act, 1961.

The respondent, a Private Limited Company engaged in construction activities and infrastructure development projects like irrigation canals and road construction, faced disallowance of deductions under Section 80IA(4) by the assessing officer.

The disallowance was based on the argument that the respondent, categorized as a works contractor, did not qualify as a developer, as per the explanation following Subsection 13 of Section 80IA of the Income Tax Act.

Both the Commissioner of Income Tax (Appeal) and the Tribunal independently concluded that the respondent indeed undertook the development of infrastructure facilities, affirming their eligibility to claim deductions under Section 80IA(4) of the Income Tax Act.

Section 80IA of the Income Tax Act enables deductions from the gross total income, encompassing profits and gains derived by an undertaking or enterprise involved in businesses specified in Subsection 4. The deduction allows for an amount equal to 100% of the profits and gains from such business for ten consecutive assessment years.

The Interim payment to the tune of the estimated contract value for the development work done for each month post retention and additional adjustments were to be incurred security deposit was to be paid by the assessee, and there was a penalty for delay, procurement of the material was the responsibility of the assessee, procurement of land for camp, for the shop, labor camp, etc. also the employment of qualified engineers, action and compensation in respect of bad work, defect liability of the accidents to persons about Workman Compensation Act, indemnity insurance of the workmen employed, A Division Bench comprising Justices Bhargav D Karia and Niral R Mehta followed.

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Considering the simultaneous discovery of the aforementioned facts, we hold the belief that there is no legal question, let alone a significant legal question, arising from the challenged Tribunal order. The appeal, lacking merit, is thus dismissed, as stated by the Bench.