1/2006 dated 12 01 2006
Circular No. 1/2006 was issued by the Central Board of Direct Taxes on 12 January 2006. Its subject is 1/2006 dated 12 01 2006.
Holds that an effluent treatment and conveyance system is part of a water treatment system and so an infrastructure facility for section 80-IA. The reasoning is factual: effluents from chemical industries are carried into the sea through an onshore pipeline and the entire load is treated to marine standards before discharge. The circular restates the frame of the section, that the deduction of 100 per cent of profits goes to an enterprise developing, or operating and maintaining, or developing, operating and maintaining an infrastructure facility, where the enterprise is a company registered in India, a consortium of such companies or a statutory authority, board, corporation or body, has an agreement with the Central Government, a State Government, a local authority or another statutory body, and started operating the facility on or after 1 April 1995. It lists the infrastructure facilities: a road including a toll road, a bridge or a rail system; a highway project including housing or other activities integral to it; a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; and a port, airport, inland waterway or inland port. The deduction runs for any ten consecutive assessment years out of twenty from the year of commencement, or out of fifteen for a port, airport, inland waterway or inland port. The circular closes by saying the benefit is still subject to the other conditions of the section.
Pollution Control Boards had prescribed norms for treating and conveying effluents to a safe disposal point, plants were set up to do it, and a number of representations asked whether such a system counted as an infrastructure facility for section 80-IA.
Circular No.01/2006, dated 12-1-2006
Effluent treatment and conveyance system – Infrastructure facility u/s 80-IA of the Income-tax Act, 1961
Section 80-IA of the Income-tax Act, 1961, inter alia, provides for 100% deduction of profits and gains derived by an enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions:-
it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;
it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;
it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995.
2. For the purpose of section 80-IA ‘infrastructure facility’ means-
(i) a road including toll road, a bridge or a rail system;
(ii) a highway project including housing or other activities being an integral part of the highway project;
(iii) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; and
(iv) a port, airport, inland waterway or inland port.
The deduction is available for any ten consecutive assessment years out of twenty assessment years beginning from the year in which the enterprise develops and begins to operate any infrastructure facility. However, in the case of an infrastructure facility being, a port, airport, inland waterway or inland port, the deduction is available for any ten consecutive assessment years out of fifteen assessment years.
In order to control environmental degradation, due to discharge of effluents into nearby rivers by industries, the Pollution Control Boards have prescribed norms for treatment and conveyance of effluents to a safe disposal point. As a result, a number of plants have been set up for treatment of effluents and its conveyance system. In this context, a number of representations have been received seeking clarification as to whether the ‘effluent treatment and conveyance system’ may be treated as an ‘infrastructure facility’ for the purposes of tax benefit u/s 80IA.
Under the treatment of effluents and its conveyance system, the effluents emanating from chemical industries are to be conveyed inside the sea through onshore pipeline and before discharging effluent through pipeline, entire load of effluent is to be treated to marine standards. Therefore, it is a part of ‘water treatment system’ and would accordingly, qualify as an infrastructure facility for the purposes of tax benefit under section 80-IA. However, an enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining such infrastructure facility shall be eligible to the tax benefit under section 80-IA, subject to fulfillment of other conditions laid down therein.
[F. No. 150/169/2004-TPL]
A disallowance of the section 80-IA deduction to an effluent treatment company on the ground that its plant is not among the listed infrastructure facilities.
It mentions. Circular No. 01/2006
Source: the Income Tax Department’s own published text — its page for this instrument.
