Govt Infra firms can pick year to claim tax benefits

The Income Tax Department today said infrastructure companies will have the option to choose the year from which they desire to claim tax benefits for ten consecutive years, a move aimed at reducing litigations.

Issuing clarification, the Central Board of Direct Taxes (CBDT) said 'initial assessment year' in the Section 80IA (5) of the Income Tax Act, dealing with tax holiday, would mean the first year on which a company would claim for tax benefit.

Companies engaged in sectors like infrastructure, road and power get tax holiday under the Section 80 IA of the Act.

The CBDT said it had representation that some Assessing Officers were interpreting the term 'initial assessment year' as the year in which the business activity had commenced.

The CBDT clarified that an eligible assessee has the option to choose initial/first year from which it may desire the claim of deduction for 10 consecutive years.

"It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80 IA for ten consecutive years beginning from the year in respect of which has has exercised such option...

"Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction," the CBDT said.

Hemal Zobalia, Partner, Deloitte Haskins & Sells LLP said while the provision was clear, infrastructure companies were facing this issue where the 'initial assessment year' was incorrectly applied at the field officer level.

"This will help Infrastructure and Energy sector as it avoids unnecessary litigation and releases much wanted funds which get caught up in such litigation," Zobalia said.

Infrastructure companies get deduction of an amount equal to 100 per cent of the profits and gains derived by an undertaking or enterprises from an eligible business.

Further, the deduction can be claimed by the assessee, at his option, for any ten consecutive years.

Poor infrastructure is considered a serious bottleneck for economic development in the country. Creation of infrastructure has been the major focus of the government.

In the sector, India is aiming an investment of about USD 1 trillion in the coming years.

Business Standard, New Delhi, 16th February 2016