Infrastructure facilities under Section 80IA of the Income Tax Act, 1961, are defined as projects or undertakings that contribute to the development and improvement of the country’s basic physical and social infrastructure. These facilities are considered essential for economic growth and social well-being.

Categories of Infrastructure Facilities under Section 80IA The following categories of infrastructure facilities are eligible for tax deductions under Section 80IA:

1. Highways and Transportation Infrastructure:

• Toll roads, bridges, and rail systems
• Highway projects, including housing and other activities integral to the project
• Inland waterways, inland ports, and navigational channels in the sea

2. Water and Sanitation Infrastructure:

• Water supply projects, water treatment systems
• Irrigation projects
• Sanitation and sewerage systems
• Solid waste management systems

3. Telecommunications Infrastructure:

• Telecommunication services, including basic and cellular services
• Radio paging, domestic satellite service
• Network trunking, broadband network, and internet services

4. Power Generation and Distribution:

• Projects for the generation or generation and distribution of power

5. Industrial Parks and Special Economic Zones (SEZs):

• Development, operation, and maintenance of SEZs
• Growth centers
• Industrial model towns
• Industrial parks
• Inland container depots (ICDs) and central freight stations (CFSs)
• Software technology parks

Eligibility Requirements To be eligible for tax deductions under Section 80IA, an infrastructure facility must meet the following criteria:

• It must be notified by the Central Government as an infrastructure facility.
• It must be set up or started generating income on or after April 1, 1994.
• It must be in operation for at least 10 years.

Tax Deductions Eligible entities can claim a deduction of 100% of the profits and gains from infrastructure facilities under Section 80IA. This deduction is available for a period of 10 years from the date the facility commences commercial operations.

Significance of Section 80IA Section 80IA plays a crucial role in promoting infrastructure development in India. By providing tax incentives, the government encourages private sector participation in infrastructure projects, which are essential for sustainable economic growth.

Example

Infrastructure facilities under Section 80-IA of the Income Tax Act, 1961, refer to projects or undertakings that contribute to the development of the country’s basic physical and organizational structures. These facilities are essential for economic growth and social progress, providing essential services and enabling efficient transportation, communication, and energy distribution.

Here are some examples of infrastructure facilities eligible for tax deductions under Section 80-IA:

1. Transportation infrastructure:
   • Roads, including toll roads and highways
   • Bridges
   • Rail systems
   • Ports
   • Airports
   • Inland waterways and inland ports
   • Navigational channels in the sea
2. Power infrastructure:
   • Power generation projects
   • Power transmission and distribution networks
   • Substantial renovation or modernization of existing power transmission or distribution lines
3. Telecommunication infrastructure:
   • Provision of telecommunication services, including basic and cellular services
   • Radio paging services
   • Domestic satellite services
   • Trunking networks
   • Broadband networks
   • Internet services
4. Other infrastructure facilities:
   • Industrial parks
   • Special economic zones
   • Water supply projects
   • Sanitation and sewage systems
   • Solid waste management systems
5. Cross-country natural gas distribution networks:
   • Development and operation of cross-country natural gas distribution networks
6. Reconstruction of power units:
   • Undertakings set up for the reconstruction of a power unit

These are just a few examples, and the list of eligible infrastructure facilities is subject to periodic updates by the Central Government. Businesses engaged in developing, operating, or maintaining these facilities can claim a 100% deduction on their profits from the eligible project for a period of ten consecutive assessment years out of fifteen years. This tax incentive is aimed at promoting investment in infrastructure development and accelerating India’s economic growth.

Case laws

There are several notable case laws related to Infrastructure Facilities under Section 80IA of the Income Tax Act, 1961. Here are a few key ones:

1. Commissioner of Income-Tax v. Bharat Udyog Ltd. (1999) 233 ITR 785 (Bom): This case established that the definition of “infrastructure facility” under Section 80IA(4)(i) is broad and includes any facility that contributes to the creation of an enhanced infrastructure in the country.
2. Patel Engineering Ltd. v. Dy. CIT (2003) 118 Taxman 215 (ITAT): This case clarified that the term “developer” under Section 80IA encompasses not only those who construct infrastructure facilities from scratch but also those who undertake significant improvements or expansions to existing facilities.
3. Saurashtra Infra & Reality Ltd. v. Commissioner of Income Tax (2022) 349 ITR 27 (Bom): This case affirmed that a Container Freight Station (CFS) falls under the category of an “infrastructure facility” for the purpose of claiming deduction under Section 80IA.
4. Commissioner of Income Tax v. K.V.S. Infrastructures Ltd. (2021) 337 ITR 220 (Mad): This case held that an assessed is entitled to claim deduction under Section 80IA for income derived from the operation and maintenance of an existing infrastructure facility, subject to fulfilling specified conditions.
5. Commissioner of Income Tax v. M/s. GMR Hyderabad International Airport Ltd. (2016) 320 ITR 439 (Hyd): This case clarified that the requirement of “commencing commercial operations” under Section 80IA(4)(i) refers to the commencement of the core infrastructure activity, not necessarily the commencement of all ancillary services.

These case laws provide valuable insights into the interpretation and application of Section 80IA, particularly regarding the scope of “infrastructure facilities,” the definition of “developer,” and the eligibility for deduction for operation and maintenance activities.

Faq questions

A1. The 100% deduction of profits and gains is available to a company or an eligible business undertaking that has set up or developed a new industrial undertaking/infrastructure facility in India.

Q2. What is the time limit for claiming this tax deduction?

A2. The income derived from the eligible business may be claimed as deductions for ten consecutive assessment years out of 15 years beginning from the year such business begins or starts to operate.

Q3. Are there any other conditions that need to be fulfilled?

A3. Yes, there are a few other conditions that need to be fulfilled in order to claim a deduction under section 80-IA. These conditions include:

• The company must have its headquarters in India or be a subsidiary of an Indian company with a mandate from a central/state government.
• The company must submit a statement of intent to the governmental or municipal body.
• The company must use at least 80% of the profits from the eligible business for the development of the infrastructure facility.
• The company must not use any of the profits from the eligible business to distribute dividends or pay management fees.

Q4. What is the amount of deduction available under section 80-IA?

A4. Under this section, assessed can claim 100% of the profit is allowed as deduction for 10 consecutive Assessment Years.

Q5. Can I claim losses from my qualifying business?

A5. No, you cannot claim losses from your qualifying business under section 80-IA. However, you can carry forward losses from one year to the next year.

Q6. What infrastructure facilities are eligible for deduction under section 80-IA?

A6. The following infrastructure facilities are eligible for deduction under section 80-IA:

• Highways, bridges, and tunnels
• Railways and airports
• Ports and harbors
• Power generation and transmission projects
• Telecommunication projects
• Irrigation projects
• Urban infrastructure projects

Q7. What is the procedure for claiming deduction under section 80-IA?

A7. The procedure for claiming deduction under section 80-IA is as follows:

1. File a statement of intent with the governmental or municipal body.
2. Maintain separate accounts for the eligible business.
3. Get the accounts audited by a Chartered Accountant (CA).
4. Furnish the audit report along with the return of income.

Q8. What are the penalties for not complying with the conditions of section 80-IA?

A8. The penalties for not complying with the conditions of section 80-IA include:

• Disallowance of the deduction
• Payment of interest
• Imposition of penalties