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Facts
The assessee claimed a deduction under Section 80IA(4)(i) for developing an energy-efficient public LED street lighting project in Jaipur. The Assessing Officer and CIT(A) disallowed this claim, stating the project was not an infrastructure facility.
Held
The Tribunal held that the project, involving the design, financing, implementation, operation, and maintenance of street lighting systems, formed an integral part of road and highway projects. Consequently, it qualified as an 'infrastructure facility' under Section 80IA(4)(i).
Key Issues
Whether the development and maintenance of an energy-efficient public LED street lighting system qualifies as 'infrastructure facility' for deduction under Section 80IA(4)(i).
Sections Cited
80IA(4)(i), 143(3), 143(3A), 143(3B), 250
AI-generated summary — verify with the full judgment below
The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity ‘the ld. CIT(A)], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for assessment year 2018-19, date of order 04.07.2025. The impugned order emanated from the order of the National e- Assessment Centre, Delhi (for brevity the ‘Ld. AO’) order passed under section 143(3) r.w.s. 143(3A) and 143(3B) of the Act date of order 26.03.2021.
“The Commissioner of Income-tax (Appeals) at the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the CIT(A)) erred in upholding the action of the Officer at the National e-Assessment Centre, Delhi (hereinafter referred to as the Assessing Officer) in making a disallowance of deduction of Rs 7,16,84,974 claimed by the appellants under section 80- IA(4)(i) of the Act on the ground that the appellants have not developed an infrastructure facility and hence, are not eligible for the said deduction. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) erred in upholding the action of the Assessing Officer inasmuch as he has not correctly appreciated the facts of the case in its entirety and hence, the said disallowance is bad in law and ought to be deleted. The appellants crave leave to add to, alter and/or amend the aforestated ground of appeal.”
Brief Facts of the Case are that the assessee filed its return of income, which was selected for scrutiny assessment. In the return, the assessee claimed, for the first time, a deduction under section 80IA(4)(i) of the Act amounting to Rs.7,16,84,974/- in respect of the development and maintenance of an infrastructure facility. During the course of assessment proceedings, the Ld. AO called upon the assessee to furnish details in support of the aforesaid claim. The assessee submitted that it had undertaken a project awarded by the Office of the Executive Engineer (Light), Jaipur Municipal Corporation, a local government authority of the State of Rajasthan, vide award dated 09.09.2014. Pursuant thereto, the assessee entered into an Energy Performance Contract (EPC) agreement on 24.12.2014 with the Jaipur Municipal Corporation and the Government of Rajasthan for the development, operation, and maintenance of the said facility. The assessee-company also furnished a performance guarantee for the stipulated period. It was further submitted that the assessee deployed
Efficient Illumination Pvt Ltd. technical manpower for the design, supervision, and implementation of the project. As per the audited financial statements as on 31.03.2017, the assessee reflected Capital Work-in-Progress (CWIP) amounting to Rs.28.70 crores, which demonstrates that the development work had commenced prior to 01.04.2017. The assessee stated that it was engaged in the development of an Energy Efficient Public (EEP) LED street lighting project for roads and highways in the city of Jaipur, Rajasthan, along with its operation and maintenance. The project involved the design, financing, implementation, commissioning, operation, and maintenance of approximately 70,000 energy-efficient public street lights, along with monitoring systems and automation technologies such as voltage dimming and on/off switching mechanisms. According to the assessee, the said activity formed an integral part of road and highway infrastructure projects in Jaipur city. However, during assessment, the learned Assessing Officer held that the activities undertaken by the assessee did not fall within the ambit of section 80IA(4)(i) of the Act. Consequently, the deduction claimed under section 80IA was disallowed and added back to the total income of the assessee. Aggrieved by the said disallowance, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the findings and observations of the Ld. AO. Being further aggrieved, the assessee has filed the present appeal before us.
The Ld.AR contended that the assessee had rightly claimed deduction under section 80IA(4) in respect of development of road infrastructure in Jaipur city. It was submitted that the project was duly awarded and guaranteed by the Jaipur Municipal Corporation, a local self-government authority of the State of Rajasthan. The assessee-company is incorporated in India under the Companies
Efficient Illumination Pvt Ltd. Act, 2013 and is a subsidiary of M/s. SMC Infrastructure Pvt. Ltd. It was argued that the entire factual matrix had been duly explained during the assessment proceedings. The Ld. AR further submitted that the Ld. AO, in the impugned assessment order (at pages 5 to 7), has provided a tabular comparison of the work executed by the assessee vis-à-vis the statutory conditions prescribed under section 80IA(4)(i). The relevant extract, as reproduced in the assessment order, is as under:
Sr. No. Conditions Prescribed by the Act Note on satisfaction of the condition by the company 1 It is owned by company M/s Efficient Illumination Private Limited is a registered in India or by a Private Limited Company registered in India and consortium of such companies incorporated under the Companies Act, 2013. It or by an authority or a board or is a subsidiary company of M/s SMC a corporation or any other body Infrastructures Private Limited (also registered in established or constituted under India). It is a Special Purpose Vehicle formed S any Central or State Act specifically as an Energy Service Company to [Section E 80-IA(4)(i)(a)] undertake the Project under Consideration 2 It has entered into an The Project under consideration has been agreement with the Central awarded by the Office of Executive Engineer Government or a State (Light) of Jaipur Municipal Corporation, a Local Government or a local authority Government Authority of the State of Rajasthan or any other statutory body for on 09/09/201 It has entered into an agreement (i) developing or (ii) operating (Energy Performance Contract) with Jaipur and maintaining or (iii) Municipal Corporation (a Local Body) and State developing, and maintaining a Government of Rajasthan on 24/12/2014, for new infrastructure c operating developing operating and maintaining the facility [Section 80-IA(4)(i)(b)] C facility. performance guarantee for this period is given by the company. The company has deputed technical manpower for designing and supervision implementation of this facility. 3 It has started or starts operating The Project has been awarded to the Company and maintaining the on 09/09/2014 and the Company has entered infrastructure facility on or after into the agreement with Jaipur Municipal
Efficient Illumination Pvt Ltd. the 1st day of. April, 1995 Corporation on 24/12/2014. Further, a work [Section 80-IA(4)(i)(c)] order for the first phase of the project was received from Jaipur Municipal Corporation on Further, the proviso to Section 12/02/2015. 80-IA states as that nothing contained in this section shall The Audited Financial Statements of the apply to any enterprise which Company as on 31/03/2017 reflects Capital starts the development on Work in Progress (CWIP) of Rs. 28.70 Crores. operation and maintenance of This indicates that the Company has already the infrastructure facility on or started development work for the Project before after the 1st day of April, 2017 01/04/2017 4 Explanation to Section 80- The Company is engaged in the Project of IA(4)(1) T states "For the Development of Energy Efficient Public LED purposes of this D Street Lights for the Roads and Highways of the "infrastructure facility" L clause, City of Jaipur, Rajasthan and Maintenance of the means- same. The project includes improvements to Road Infrastructures by way designing, (a) a road including toll road, a financing, implementing, commissioning & bridge or a rail system; operation and maintenance of approximately 70,000 energy efficient public lights along with (b) a highway project including monitoring system and relevant automation housing or other activities being technologies like voltage dimming, on off an integral part of the highway switching etc on the highways and the roads of project. Jaipur City. Thus, the activity undertaken by the Company forms an integral part of (c) a water supply project, water highway/road project treatment system, irrigation project, sanitation and sewerage system or solid management system; waste
(d) a port, airport, inland waterway, inland port navigational channel in the sea. 5 Explanation to Section 80-IA As per the agreements entered by the Company, states "For the removal of it can be noticed that: doubts, it is hereby declared
Efficient Illumination Pvt Ltd. that nothing contained in this a. The Company is required to Design, Finance, section shall apply in relation to Implement and Commission the project a business referred to in sub- alongwith the Operation and Maintenance of section (4) which is in the nature the road. of a works, contract awarded by b. Access was given to the Company of all the any person (including the switching point lights and all related Central Government or State infrastructure relating to Switching Point Lights. Government) and executed by Also, the Company was given right to appoint the undertaking or enterprise contractors, sub-contractors, agents, advisors referred to in sub-section (1). and consultants to carry out its obligations. c. Operate and maintain the all the phases of the Project. d. The Company on its own cost and expense, make such improvements to the project as maybe necessary or appropriate to implement the project in accordance with the agreement. e. Payments for achieved energy savings were made to the Company as per the terms and conditions of the agreement. f. The company has given the Performance Guarantee in form of Bank Guarantee g. The company has engaged the manpower for designing, implementation and maintenance of the Project.
Thus, all the above actions and also those stated in the agreement prove the fact that the Company is a developer and the project given to the Company is not in nature of works contract.
Efficient Illumination Pvt Ltd. ‘The satisfaction of all the above conditions laid down by the provisions of section 80-IA of the Act by the Company justifies the eligibility of the Company to claim deduction under the aforementioned provision.”
The Ld. AR contended that the Ld. AO had, on mere presumption, characterized the assessee’s activities as being limited to installation of lighting and decorative work on roads, and on that basis denied the deduction under section 80IA(4) of the Act. It was submitted that such a narrow interpretation is not supported either by the statutory provisions or by the nature and scope of the project undertaken by the assessee. The Ld. AR further submitted that the issue has already been dealt with by the Assessing Officer in paragraph 7.2 of the impugned assessment order, and the relevant extract of the said paragraph is reproduced hereunder: Sr.No. Conditions prescribed by Reasons for non eligibility by the company the Act 1 It has entered into an The main work as per the work order was stated to be agreement with the Replacement of 15,000 Non Conventional Light out of Central Government or a total 70,000 nos in first phase and to replace remaining State Government or a street light with execution of the project work as per local authority or any Energy Performance Contract. As per EPC, the project is other statutory body for developing an energy efficient Public Lighting System in (i)developing or (ii) Jaipur City on a public private partnership basis. It is no operating (iii) where developing, operating and maintaining a new developing, operating infrastructure facility since for the purpose of this section and maintaining a new "infrastructure facility" means a road including toll road, infrastructure facility. a bridge or a rail system. Merely installing new energy efficient pubic lights on already existing road does not tantamount to developing, operating and maintaining a new infrastructure facility. As per Circular No. 4/2010 [F.No. 178/14/2010-ITA-I] dated 18.5.2010, widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 801A(4)(i) which itself
Efficient Illumination Pvt Ltd. implies that any work related to roads in its literal sense would qualify for infrastructure. 2 [Provided further that The company has stated that audited financial nothing contained in this statements as on 31/03/2017 reflects Capital WIP of Rs section shall apply to any 28.70 cr which indicates that development work has enterprise which starts started before 1.4.2017. the development or Notwithstanding any thing mentioned in Sr. No 1 above operation and merely building up the necessary infrastructure of the maintenance of the company for carrying out the main work of development infrastructure facility on of infrastructure does not amount to development of or after the 1st day of infrastructure in itself. The company had only April 2017] accumulated the necessary infrastructure needed for starting its main object of alleged development of infrastructure.
In view of the above detailed discussion it is concluded that the assessee is not entitled for deduction u/sec. 80IA(4)(i) of the I.T. Act 1961 (Disallowance Rs.71684974/-). Penalty proceedings u/sec. 270A of the Act are initiated separately for under reporting of income.”
The Ld. AR further advanced his submissions and contended that the core dispute pertains to the nature of the activities undertaken by the assessee pursuant to the contract awarded by the Jaipur Municipal Corporation. It was submitted that the Ld. AO had erroneously concluded that the activities carried out by the assessee do not fall within the scope of “infrastructure facility” relating to development of roads under section 80IA(4)(i) of the Act. According to the Ld. AR, the controversy has arisen primarily on account of the absence of a specific and exhaustive definition of the term “road” in the Income-tax Act, 1961. The Ld. AR further submitted that, during the appellate proceedings before the Ld. CIT(A), the assessee had duly complied with all requisitions and had elaborately explained the meaning and scope of the term “road” by placing reliance upon the relevant provisions of the Rajasthan Municipalities Act, 2009. It
Efficient Illumination Pvt Ltd. was contended that, as per the said Act, the definition of “road” is wide enough to include ancillary and integral components forming part of road infrastructure. The relevant extract, as recorded in paragraph 2 at page 21 of the impugned appellate order, is reproduced hereunder:
“2. We would further like to state that the word "Road" has not been defined under the Income Tax Act, 1961. Further, Section 2(Ixii) of The Rajasthan Municipalities Act, 2009 defines Street as:
"street means any road, bridge, foot-way, lane, square, Court, alley or passage accessible, whether permanently or temporarily to the public, whether a thoroughfare or not, and includes on either side - (a) the drain or gutters and the land up to the defined boundary, notwithstanding the projection over such land of any verandah or other super-structure; (b) every space, notwithstanding that it may be private property or partly or wholly obstructed by any gate, post, chain or other barrier, if it is used by any person, whether or not occupying any abutting property, as a means of access to or from any public place or thoroughfare; It may please be noted that the above definition is an inclusive definition. Sub-clause (b) of the above definition covers every space used by any person under the purview of street. Since, the current project under discussion carried out by the Company involves development of energy efficient public lighting system for the roads of city of Jaipur meant for public use, the same should logically be construed as part of road infrastructure.”
The Ld.DR vehemently argued that the activities undertaken by the assessee during the impugned assessment year do not fall within the ambit of section 80IA(4)(i) of the Act. It was contended that the statutory provision specifically contemplates development of an “infrastructure facility,” and for the purposes of this clause, such facility includes a road, including a toll road, a Efficient Illumination Pvt Ltd. bridge, or other specified infrastructure as enumerated in the Explanation to the section. The Ld. DR invited our attention to the Explanation to section 80IA(4)(i) of the Act and submitted that the legislative intent is clear and unambiguous. According to him, the benefit of deduction is confined to enterprises engaged in the development, operation and maintenance of infrastructure facilities such as roads (including toll roads), bridges, highways, or similar projects, and does not extend to activities such as installation of lighting systems or allied works. The relevant portion of the Explanation to section 80IA(4)(i) of the Act, as relied upon by the learned DR, is reproduced hereunder: “80IA(4)(i)……………. [Explanation.-For the purposes of this clause, “infrastructure facility” means- (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port, airport, inland waterway[, inland port or navigational channel in the sea]”
So in any case the assessee’s activities is not eligible for the deduction u/sec. 80IA(4)(i) in the return of income. He stands in favor of the order of the revenue authorities.
We have carefully considered the rival submissions, perused the assessment records, the agreements entered into with the Jaipur Municipal Corporation, and examined the scope and ambit of section 80IA(4)(i) of the Act. There is no dispute that the assessee is a company registered in India and thus satisfies the requirement under section 80IA(4)(i)(a). It is also an admitted fact that the assessee has entered into a duly executed Energy Performance Contract
Efficient Illumination Pvt Ltd. dated 24.12.2014 with the Jaipur Municipal Corporation, a local authority of the State Government, thereby fulfilling the condition prescribed under section 80IA(4)(i)(b). Further, the audited financial statements reflecting Capital Work-in- Progress of Rs.28.70 crores as on 31.03.2017 establish that the development work had commenced prior to 01.04.2017, and thus the condition under section 80IA(4)(i)(c) stands satisfied. The core controversy revolves around whether the activities undertaken by the assessee namely, design, financing, implementation, commissioning, operation and maintenance of approximately 70,000 energy- efficient public LED street lights along with monitoring and automation systems— constitute development of an “infrastructure facility” within the meaning of the Explanation to section 80IA(4)(i). The Explanation defines “infrastructure facility” to include a road (including toll road) and a highway project including other activities being an integral part of the highway project. The term “road” has not been defined under the Income-tax Act. In such circumstances, a purposive and contextual interpretation is warranted. The assessee has rightly drawn support from the definition under the Rajasthan Municipalities Act, 2009, which adopts an inclusive and expansive meaning of “street,” encompassing not only the road surface but also ancillary and appurtenant components forming part of public access infrastructure. The material on record demonstrates that the project undertaken by the assessee was not a mere supply-and-installation contract. The assessee was required to design, finance, implement, commission, operate and maintain the entire lighting system under a long-term Energy Performance Contract. It provided performance guarantees, deployed technical manpower, assumed operational responsibilities, and was compensated based on energy savings achieved. These obligations clearly transcend a mere works contract and Efficient Illumination Pvt Ltd. establish the assessee as a developer of a critical and functional component of public road infrastructure. Modern road and highway infrastructure is not confined to the physical laying of asphalt or construction of bridges. Functional infrastructure necessarily includes lighting systems, automation, monitoring mechanisms, and safety-related installations which render the road usable, safe, and operational. In the present case, the development of an energy-efficient public lighting system across approximately 70,000 points in Jaipur city forms an integral and inseparable part of the road and highway project. The contention of the revenue that the assessee merely installed lights on an existing road is too narrow and literal an interpretation of the statute. The phrase “a highway project including other activities being an integral part of the highway project” clearly enlarges the scope of eligible activities. The lighting system developed by the assessee enhances safety, accessibility, and operational efficiency of the road network and therefore qualifies as an integral part of the highway/road project. Further, the proviso excluding works contracts does not apply in the present case, as the assessee undertook the project on a design-build-finance-operate-maintain (DBFOM) basis with entrepreneurial and financial risks, performance guarantees, and long-term operational responsibilities. The nature of the agreement and the obligations undertaken establish that the assessee acted as a developer and not merely as a contractor executing a works contract. In view of the above factual and legal position, we hold that the assessee has satisfied all the conditions prescribed under section 80IA(4)(i) of the Act and is eligible for deduction in respect of the profits derived from the impugned infrastructure project. Accordingly, the disallowance of Rs.7,16,84,974/- made by Efficient Illumination Pvt Ltd. the Ld.AO and sustained by the Ld. CIT(A) is hereby deleted. The grounds raised by the assessee are allowed.
9. In the result, the appeal of the assessee bearing is allowed. Order pronounced in the open court on 05th day of March 2026. Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 05/03/2026 SAUMYA Sr.PS