565-567. Whether Build-Own-Lease-Transfer (BOLT) Scheme of Indian Railways shall be eligible for benefit under section 80-IA, since it is not legally possible for any enterprise other than Indian Railways to maintain and operate Railway System
Circular No. 733 was issued by the Central Board of Direct Taxes on 3 January 1996. Its subject is 565-567. Whether Build-Own-Lease-Transfer (BOLT) Scheme of Indian Railways shall be eligible for benefit under section 80-IA, since it is not legally possible for any enterprise other than Indian Railways to maintain and operate Railway System.
Holds that the Indian Railways' Build-Own-Lease-Transfer scheme qualifies for the section 80-IA(4A) infrastructure deduction even though the private enterprise does not itself operate or maintain the rail system. Sub-section (4A), inserted by the Finance Act, 1995, gives a five-year tax holiday and 30 per cent deduction for the next five years within twelve assessment years to an enterprise operating and maintaining an infrastructure facility on BOT or BOOT terms. The Board's reason is that no one but the Indian Railways can lawfully maintain and operate a railway system, so the operating condition cannot be insisted on here. The concession is confined to a facility for development of a rail system and does not extend to any other infrastructure facility, rolling stock included.
The BOLT scheme has the private enterprise build and own the crucial components, lease them back to Indian Railways for operation and maintenance, and finally transfer them, so it did not fit the literal operate-and-maintain condition in sub-section (4A).
565-567. Whether Build-Own-Lease-Transfer (BOLT) Scheme of Indian Railways shall be eligible for benefit under section 80-IA, since it is not legally possible for any enterprise other than Indian Railways to maintain and operate Railway System
1. The Finance Act, 1995 has introduced sub-section (4A) in section 80-IA of the Income-tax Act, 1961 providing for a five-year tax holiday and a deduction of 30 per cent in the subsequent five years within a period of twelve assessment years beginning with the assessment year in which an enterprise (which may be owned by a company or a Consortium of companies) begins operating and maintaining an infrastructure facility on Build-Operate-Transfer (BOT) or on Build-Own-Operate-Transfer (BOOT) basis, subject to certain conditions specified in that sub-section.
One of the conditions to be fulfilled by the enterprise is that it should develop, maintain and operate a new infrastructure facility which shall be transferred to the Central Government, etc., within the period stipulated in the agreement. The definition of infrastructure as per sub-section (12) of section 80-IA includes a rail system also.
2. The Indian Railways have formulated a Build-Own-Lease-Transfer (BOLT) Scheme, whereunder a private enterprise will provide the necessary and crucial components of a Railway system, own them for a stipulated period but will not maintain or operate the same. Instead, the enterprise will lease the asset (only necessary and crucial components of a Railway System) back to Indian Railways for maintenance and operation, and shall ultimately transfer it to Indian Railways.
3. This is to clarify that, the said (BOLT) Scheme of the Indian Railways shall be eligible for the benefit of section 80-IA of the Income-tax Act, 1961, since it is not legally possible for any enterprise other than the Indian Railways to maintain and operate a Railway System. However, this concession shall be applicable only to an infrastructure facility meant for development of Rail System and not to any other infrastructure facility including Rolling Stocks.
Circular : No. 733, dated 3-1-1996.
On assessment of an 80-IA claim by a BOLT participant, where the Assessing Officer objects that the assessee never operated the facility.
Source: the Income Tax Department’s own published text — its page for this instrument.
