Energy-Efficient Street Lighting Project Integral to Road Infrastructure: ITAT Allows Deduction

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has allowed a deduction of Rs. 7.16 crore claimed under Section 80-IA of the Income Tax Act by Efficient Illumination Pvt. Ltd., holding that the development and operation of an energy-efficient public LED street lighting system forms an integral part of road infrastructure. The bench of Anikesh Banerjee (Judicial Member) and Makarand Vasant Mahadeokar (Accountant Member) has observed that modern road infrastructure cannot be restricted to the physical construction of roads alone. Essential systems such as lighting, monitoring, and safety installations form integral components that ensure the functionality and safety of the road network. The assessee company had claimed a deduction of ₹7,16,84,974 under Section 80-IA(4)(i) of the Income Tax Act in its return of income. The claim was based on a project awarded by the Jaipur Municipal Corporation involving the development, operation, and maintenance of an energy-efficient LED street lighting system across roads and highways in Jaipur. The project was undertaken pursuant to an Energy Performance Contract executed on December 24, 2014 between the company, the Jaipur Municipal Corporation, and the Government of Rajasthan. Under the agreement, the company was responsible for designing, financing, implementing, commissioning, operating, and maintaining approximately 70,000 energy-efficient public LED lights along with monitoring and automation technologies such as voltage dimming and switching systems. The assessee also furnished a performance guarantee and deployed technical manpower to execute and supervise the project. Financial statements indicated capital work-in-progress of ₹28.70 crore as of March 31, 2017, demonstrating that development activities had commenced before April 1, 2017. During the assessment proceedings, the AO rejected the deduction claim on the ground that installing lighting systems on existing roads did not amount to developing an “infrastructure facility” within the meaning of Section 80-IA(4)(i). According to the department, the provision covers activities such as construction or development of roads, bridges, or highways, and the assessee’s work was limited to replacing and installing energy-efficient lights under a public-private partnership arrangement. Therefore, it could not be treated as development of infrastructure. The NFAC upheld the disallowance, prompting the assessee to approach the ITAT. The assessee contended that the lighting system formed an integral part of road infrastructure and the project went beyond mere installation of lights. The company argued that it had undertaken responsibilities involving design, financing, implementation, and long-term operation and maintenance, thereby functioning as a developer rather than a contractor executing a works contract. It was further argued that the term “road” is not defined under the Income Tax Act and should therefore be interpreted in a broader sense. The assessee relied on the Rajasthan Municipalities Act, 2009, which adopts an inclusive definition of “street” covering ancillary components associated with road infrastructure. After examining the agreements, statutory provisions, and the nature of the project, the Tribunal observed that the assessee satisfied all the conditions prescribed under Section 80-IA(4)(i). The Tribunal noted that the company was an Indian entity and had entered into a valid agreement with a local authority—Jaipur Municipal Corporation—for developing and maintaining the infrastructure project. It also accepted that development work had commenced prior to the statutory cut-off date. The bench further observed that the project involved a comprehensive design-build-finance-operate-maintain (DBFOM) model with performance guarantees and operational responsibilities, indicating that the assessee had acted as a developer rather than a mere contractor. The Tribunal concluded that the development of an energy-efficient public lighting system across nearly 70,000 locations in Jaipur constituted an integral part of the city’s road infrastructure project. The ITAT held that the assessee was eligible for deduction under Section 80-IA(4)(i) and directed the deletion of the disallowance of ₹7.16 crore made by the Assessing Officer and sustained by the appellate authority. Case Details Case Title: Efficient Illumination Pvt. Ltd. Versus ITO Citation: JURISHOUR-237-ITA-2026(MUM) Case No.: ITA No.5048/Mum/2025 Date: 05/03/2026 Counsel For Appellant: Neelkanth Khandelwal, Advocate Counsel For Respondent: Ritesh Misra (CIT DR) Click Here To Read Order Read More: Failure To Decide Immunity Application U/S 270AA Vitiates Penalty Proceedings: ITAT

Energy-Efficient Street Lighting Project Integral to Road Infrastructure: ITAT Allows Deduction

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