In a welcome relief for infrastructure projects, the Supreme Court has ruled that benefit of certain deductions will apply to both business and other income.
Under section 80-IA of the income tax law, companies engaged in infrastructure facilities like road or water supply or port, telecom services, industrial parks or SEZs, power sector, natural gas distribution, etc. can claim tax relief on profit/gain from such businesses. For such entities, 30-100% of the profit is allowed as deduction for 10 consecutive years.
So far, tax authorities have disallowed the claim and restricted the deduction to business income on the contention that the matter is sub-judice and pending before Supreme Court, Anita Basrur, partner at Sudit K Parekh & Co. LLP, pointed out.
“This led to huge tax demands, recovery proceedings and also adjustment of refunds against the demands thereby blocking funds of taxpayers,” she said.
The relief under section 80-IA was phased out by the government from April 2017. So, this ruling will benefit cases which are in the litigation pipeline and where companies have claimed a deduction on “other income” in the past but were denied by the tax department, experts told BloombergQuint.