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Projects to get 10-year tax break
May, 21st 2010

Highway widening projects will indisputably qualify for the 10-year tax break under Section 80 IA of the Income-Tax Act.

The Central Board of Direct Taxes (CBDT) has now made it clear that widening of existing roads by constructing additional lanes as a part of a highway project, by an undertaking, will be regarded as a new infrastructure facility.

This clarification will help highway developers receive tax deduction for a 10-year period under Section 80IA of the Income-Tax Act.

However, simply re-laying of an existing road will not be classifiable as a new infrastructure facility for this purpose, the CBDT has said. Most of the national highway development programme projects involve widening existing highways from two lanes to four, and from four lanes to six.

Since, in its Section 80 IA, the CBDT had not defined term new', several highway developers were denied deduction by the I-T authorities for their road-widening projects. Following this, they had raised the issue with the NHAI and the Road Transport and Highways Ministry. The Ministry had also written to the Revenue Department demanding a clarification that widening of existing roads should be regarded as new infrastructure facility. The road developers had said that a clarification is necessary to avoid disputes during tax assessments at the field level. The lack of clarity had resulted in disputes and also blocking of funds, impacting the viability of projects.

The Prime Minister-appointed committee under Mr B.K. Chaturvedi, Member, Planning Commission, had also said that a clarification is required.

When contacted, Dr J.N. Singh, Member-Finance, National Highways Authority of India (NHAI), welcomed the move and said that this clarification will further help in increasing the interest for highway biddings. NHAI has an internal target to award 12,000 km of highways for development in 2010-11.

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