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Informist, Wednesday, Nov. 13, 2024

 

NEW DELHI – The Delhi High Court has held that the capital grant subsidy given by the National Highways Authority of India to its concessionaires would not be subject to a withholding tax under Section 194C of the Income Tax Act, 1961. The court has dismissed the Income Tax Department's challenge and held that the subsidy granted by the highways authority could not possibly have been construed as payment made for a work undertaken by the contractor.

 

"...the capital grant subsidy was essentially aid and support that the NHAI extended to the concessionaire as opposed to payment that it would have ordinarily made to a contractor and would be directly connected with or constitute recompense for physical work that was performed," the court said. The word "work" in the context of Section 194C is liable to be understood as relating to labour that is expended, the undertaking of a task or operation which produces a result, it said. The infusion of equity capital as a measure of financial support, while surely a contractual obligation, cannot consequently be understood to mean the payment for a work undertaken, the court added.

 

The case arises out of the highways authority's assessment year 2010-11. In 2012, an assessing officer had held that the highways authority had failed to comply with the obligation to deduct taxes in terms of Section 194 on the capital grant subsidy released by it to its concessionaires. The highways authority moved the Commissioner of Income Tax (Appeals), which affirmed the view taken by the assessing officer. Being aggrieved by the order, the highways authority moved the Income Tax Appellate Tribunal, which ruled in its favour.  End

 

Reported by Surya Tripathi

Edited by Vandana Hingorani

 

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