The performance audit on Allowance of deduction to the assessees engaged in infrastructure development covered assessments completed by the Assessing officers (AOs) during financial years 2012-13 to 2014-15 and up to the date of audit. Audit noticed systemic issues in 229 cases involving tax effect of ` 27.17 crore which comprised deduction allowed to ineligible assessees/business not specified in the Act, incorrect computation of Minimum Alternative Tax, valuation of transient goods, aggregation of income/loss of business vs undertaking, inconsistency in setting off brought forward losses and unabsorbed depreciation relating to eligible units, treatment of receipts from sale of carbon credits, and deduction on Infrastructure facility developed for captive/private use etc. Besides, mistakes in assessments were noticed in 146 cases involving tax effect of ` 21.53 crore.
The CBDT did not have any established mechanism to assess the impact of revenue foregone on account of deduction under section 80 IA on the economic and industrial growth of the country. There is no existing system to ascertain from the sponsoring ministries as to whether the tax holidays had the desired impact on the growth of the economy. Therefore, the audit was unable to ascertain whether the very purpose of introducing the deductions in the Act had been achieved. The CBDT also failed to produce any records to give an assurance that Government has put in any system to do the cost-benefit analysis of the scheme so as to assess the benefits to the society derived out of the concessions/disallowances given to the assessee companies.