80IA Allowance Performance Audit: CAG detects leakage of IT Revenue of Rs.4.8k crores

CAG detects leakage of Income Tax Revenue of more thab Rs. 4800 crores during performance audit of 80IA Allowances by Income Tax Deptt. (ITD)

Section 80IA provides for deductions in respect of profits and gains of industrial undertakings or enterprises engaged in ‘’infrastructure development’’ or “eligible business’’ at 100% for a certain period subject to fulfillment of certain conditions stipulated therein. Provision of tax holidays for Industrial Undertakings and Enterprises have significantly enhanced the investment in ‘’infrastructure development’’ in India in the last two decades or so.

CAG conducted performance audit of the Income Tax Department (ITD) with the objectives of verifying whether

(a) the deduction under section 80IA has been allowed by the ITD only to the eligible assessees/businesses in compliance with the provision of the Act/ Rules/ Circulars / Instructions;

(b) adequate internal control mechanism exists for monitoring the allowance of deduction under section 80IA in general and specific circumstances;

(c) there are lacuna/ambiguities in the provision of the Act in the administration of the policy relating to allowance of deduction that accentuates litigation; and

(d) the objective of tax holiday or extension thereof has been achieved.

Performance audit by CAG, of assessments completed by IT Deptt during financial years 2012-13 to 2014-15 and upto date of report, has detected leakage of Income Tax revenue of more than 4,800 crores pertaining to system issues as well as compliance issues, as under:

A. Cases involving System Deficiency

CAG has come across 229 cases involving under-assessment of income with aggregate tax effect of Rs. 2716.79 crores due to system related issues, i.e. where unintended benefits were given to the assessees engaged in infrastructure development due to certain provisions of the Act being deficient, unclear and ambiguous which further lead to avoidable litigation, as under:

B. Cases involving Non-compliance with IT provisions

Also CAG has come across 146 cases of under-assessment of income involving aggregate tax effect of Rs. 2153.05 crores, i.e. the cases which were non-compliant to the provisions of the Income Act/ Rules/ Circulars/ Notifications, etc., as under:

For further details, please refer the complete report of CAG hosted at its website:

CAG’s Performance Audit Report IT Deptt 80IA Allowance dt. 1 Aug. 2016 along with CBDT Replies

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