ITAT Allows ₹7.16 Crore Infrastructure Deduction for Jaipur LED Street Lighting Project

Dispute Over Infrastructure Deduction

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has allowed the appeal of Efficient Illumination Pvt. Ltd. and deleted a disallowance of ₹7.16 crore made under Section 80IA(4)(i) of the Income Tax Act for Assessment Year 2018–19. The Tribunal held that the company’s project involving development and maintenance of energy-efficient LED street lighting in Jaipur constituted an integral part of road infrastructure and qualified for deduction. The assessee had claimed the deduction for profits derived from an infrastructure project undertaken under an Energy Performance Contract with the Jaipur Municipal Corporation and the Government of Rajasthan. The project involved designing, financing, implementing, commissioning, operating, and maintaining approximately 70,000 energy-efficient LED street lights across roads and highways in Jaipur city. The company also deployed technical manpower, installed monitoring systems, and provided performance guarantees for the project.

Tribunal’s Findings

During assessment proceedings, the Assessing Officer disallowed the deduction on the ground that installing lighting systems on existing roads did not amount to developing an “infrastructure facility” under Section 80IA. The Commissioner of Income Tax (Appeals) upheld the disallowance, concluding that the assessee’s activities were limited to installation work rather than infrastructure development. However, the Tribunal observed that the assessee had fulfilled all statutory conditions under Section 80IA(4)(i). The company was incorporated in India, had entered into a valid agreement with a local authority, and had commenced development work before 1 April 2017 as evidenced by capital work-in-progress reflected in its financial statements. The ITAT further noted that modern road infrastructure includes essential components such as lighting systems, monitoring technologies, and automation mechanisms that improve safety and operational efficiency. Since the project involved design, financing, implementation, and long-term operation and maintenance of the lighting network, the company functioned as a developer rather than merely executing a works contract.

Accordingly, the Tribunal held that the LED street lighting system formed an integral part of road and highway infrastructure. On this basis, the disallowance of ₹7,16,84,974 was deleted and the appeal of the assessee was allowed.