By TIOL News Service

AHMEDABAD, MAY 08, 2018: THE ISSUE BEFORE THE COURT IS - Whether infrastructure development projects undertaken by assessee with nodal agency incorporated by the State Government is entitled for deduction 80IA(4) of the Act. YES IS THE VERDICT.

Facts of the case:

The assessee company, engaged in implementing infrastructure development projects, had filed return for relevant AY. The assessee had claimed deduction 80IA(4) of the Act. During assessment AO noted that assessee had undertaken road development project, in pursuance of an agreement with Gujarat State Road Development Corporation ('GSRDC'). The Assessee contended that the GSRDC was performing all the functions of the State Government and therefore the concession agreement executed by GSRDC should be treated to have been entered into by the State Government. The AO however did not accept such contention and rejected the assessee's claim of deduction u/s 80IA(4) of the Act. On appeal, CIT(A) granted deduction to assessee. On further appeal, Tribunal upheld the order of CIT(A).

High Court held that,

++ GSRDC was a nodal agency constituted by the State Government for the purpose of executing road development projects through private participation and was a Government agency. The road widening project was cleared by the Government, land for such purpose was allotted by the Government. The concession agreement which GSRDC executed was approved by the Government. It was under the Government Resolution that the assessee would collect toll upon completion of such project. Upon the completion of the project period, the entire infrastructure so developed would vest in the Government. Signatory to the applicant may be GSRDC for all practical purposes and in essence, it was the agreement between the assessee and the State Government. Condition (b) of subsection (4) of section 80IA requires the assessee to have entered into agreement with the Central Government or a State Government or a local authority or any other statutory authority. However, rigid interpretation of this provision as canvassed by the Revenue would only result into the assessees involved in genuine infrastructure development projects for and on behalf of the Government or local authorities would be denied the deduction merely on the ground that the State Government had created a nodal agency for working out the finer details and nittygritty of such infrastructure development. The purpose of creating such nodal agencies as well as the legislative intent of granting deduction to the assessee engaged in developing, maintaining or operating any infrastructure projects for Central or State Government or local or statutory authorities would frustrate.

(See 2018-TIOL-851-HC-AHM-IT)