The Income Tax Appellate Tribunal has held that contractors, while calculating their income-tax liability, cannot claim deduction on profits from an infrastructure project.

Section 80-IA (4) of the Income-tax Act allows deduction in respect of profits from infrastructure projects for developers but not contractors, who execute only part of the project.

There should be complete development of the facility and not just a part of it, to claim such deduction, held the ITAT in a judgement on October 26. Only the persons directly engaged in developing, maintaining and operating the facility can be given the benefit, added the order.

The ITAT was hearing an appeal filed by a civil contractor who claimed deduction under section 80-IA (4) on profits from infrastructure projects executed by it.

The lower authorities had rejected the claim on the ground that the assessee was a mere contractor and not a developer. The ITAT held that on merit, the provision applies to a developer.

The difference between a developer and contractor is that the former designs and conceives new projects, while the latter executes them.

As the assessee was merely executing the job of civil construction, it was not eligible for the deduction. The assessee was also not the owner of the facility, the appellate body held.

The section under which the assessee sought deduction provides that it shall not apply to a person executing a work contract, the I-T appellate authority observed.

Also, the provision is unambiguous and cannot be interpreted otherwise, the I-T appellate authority observed.