Lok Sabha Question No. 5042 (UNSTARRED), answered on 2016-12-16
Subject: Irregular Tax Benefits
Ministry: FINANCE
Asked by: VINOD KUMAR BOIANAPALLI

## LOK SABHA

## UNSTARRED QUESTION NO. 5042

## TO BE ANSWERED ON FRIDAY, THE 16 TH  DECEMBER, 2016 Agrahayana 25, 1938 (Saka)

## IRREGULAR TAX BENEFITS

## 5042.  SHRI B VINOD KUMAR:

Will the Minister of Finance be pleased to state:

- (a)  whether the Government is aware that the Income Tax Department has provided irregular tax benefits to infrastructure companies without verification costing the exchequer over Rs.4500 crore;
- (b)  if so, the details thereof
- (c)  whether  the  Central  Board  of  Direct  Taxes  (CBDT)  has  any  established mechanism to assess the impact of revenue foregone on account of deductions under Section 801A on the economy and industrial growth of the country, if so, the details thereof;
- (d)  whether  the  CBDT  has  mechanism  for  proper  linkage  between  tax  benefit allowed by the IT department with the actual investment made by the assessee to assess the impact of tax holiday; and
- (e)  if  so,  the  details  thereof  along  with  the  companies  that  availed  such  benefits during the last three years and the current year?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (SHRI SANTOSH KUMAR GANGWAR)

- (a) Yes, Madam. The office of the Comptroller & Auditor General (C & AG) conducts compliance as well as performance audit relating to specific area of work of the

Department.  Such an audit on the issue relating to 'Allowance of deduction to the assessees engaged in Infrastructure Development' was conducted by the C & AG in the year 2015 and the report was tabled in Parliament on 22/11/2016. The C & AG has pointed out irregularity in allowance of deduction of Rs.4539.09 crores.    The  Government  is  aware  of  the  possibility  of  irregular  allowance  of deduction as reported by the C & AG.  However, the objections raised by the C & AG are subject matter of verification and acceptance at the field level, therefore, it is not correct that the irregular tax benefits have been allowed to Infrastructure Company  to  the  extent  of  amount  over  Rs.4,500  crores.    There  is  a  well established  mechanism  of  dealing  with  Audit  Objections  and  taking  remedial action.  Wherever required the Department of Income Tax takes remedial action to safeguard the revenue under intimation to the C & AG.

- (b) The Details of  irregular  tax  benefits as  pointed out  by  the  C  &  AG(as  per  C & AG's report No. 28 of 2016) is attached as Annexure A.
- (c) There is no mechanism in CBDT to assess the impact of revenue foregone on account of deduction under section 80IA on the economy and industrial growth of the country.
- (d) At present there is no mechanism for linkage between tax benefit allowed by the IT Department with the actual investment made by the assessee to assess the impact of tax holiday.
- (e) NIL

*******

## Details of irregular tax benefits to Infrastructure Companies as per report of C & AG

| S. No   | Heading                                                                                                                          |   Number of cases reported |   Tax Effect as per C & AG |
|---------|----------------------------------------------------------------------------------------------------------------------------------|----------------------------|----------------------------|
| 1       | Irregular allowance of deduction to ineligible assessees                                                                         |                         33 |                     205.84 |
| 2       | Deduction allowed to business not specified in the Act                                                                           |                         16 |                     174.35 |
| 3       | Treatment of receipts from sale of carbon credits                                                                                |                         19 |                      34.77 |
| 4       | Deduction on additions made during scrutiny assessment                                                                           |                          9 |                      74.66 |
| 5       | Deduction on infrastructure facility developed for captive/private use                                                           |                          8 |                    2066.7  |
| 6       | Incorrect allowance of deduction despite belated filing of returns                                                               |                         11 |                      80.49 |
| 7       | Deduction allowed beyond permissible periods                                                                                     |                          6 |                     859.47 |
| 8       | Incorrect apportionment of expenses                                                                                              |                         15 |                     224.47 |
| 9       | Consequences of Demerger / Amalgamation                                                                                          |                          7 |                     376.1  |
| 10      | Mistake in computation of eligible profits                                                                                       |                         43 |                     143.65 |
| 11      | Transaction with related parties not done at market price                                                                        |                          6 |                      15.1  |
| 12      | Deduction allowed on old Plant and Machinery / pre-existing infrastructure facility / splitting of business already in existence |                         11 |                      40.51 |
| 13      | Allowance of deduction on Transfer Pricing adjustment                                                                            |                          4 |                      15.11 |
| 14      | Deduction against income from other sources                                                                                      |                         27 |                     227.87 |
|         | Total                                                                                                                            |                        215 |                    4539.09 |