InvITs- A New Investment Gateway for Infrastructure Growth in India

Introduction

1. Large scale, efficient Infrastructure is the basic requirement for any economy to function competitively. This is also essential to maintain and updated these infra for continuous growth and smooth running of economy.

With the vision of Make in India, our Prime Minister has given much emphasis on infrastructure growth and taking various steps to revive the sector. Several infrastructure projects which are under development in India are on hold or delayed due to various reasons. These infra systems are high-cost investments.

The infrastructure projects comprising roads and highways, ports, power, Communication and water sanitation projects etc. have been facing severe liquidity crunch due to the limited funding options, high interest cost and lack of investor interest. Witnessing the requirement for infrastructure in a country like India coupled with the huge funding requirements of the infrastructure developers, the structureof InvIT seems to be a much needed and a welcome introduction.

Finance Minister Mr. Arun Jaitely announces exemption from dividend distribution tax (DDT) by a domestic company to business trust (InvITs) in his speech in Budget 2016 . This announcement has suddenly given momentum to attract investor in Infra companies.

Custom duty borne by purchaser would be deductible even if liability disputed by importer seller

Facts:

a) Assessee-firm purchased certain imported products under two agreements. The price as agreed in both the cases was the gross costs to the sellers with certain amount of net profit. The gross cost included all expenditure incurred by the sellers for supplying the goods to the assessee.

b) However, as there was uncertainty about the incidence of customs duties, the parties inserted a clause in the agreements, to make it clear that any liability with respect to duty of customs payable by the seller, would be a part of the costs and the buyer (assessee) would pay for the same. In terms of the contract the assessee was required to pay custom duty of Rs 1.78 crores to its seller as a part of the cost of the goods.

c) While completing assessment, the Assessing Officer accepted expenditure incurred on account of customs duty. There after, the CIT, in exercise of powers under section 263, reversed assessment order holding that the amount of custom duty was a contingent liability as the sellers of goods had challenged the same in the Supreme Court.

d) On appeal, the Tribunal held that liability on account of customs duty was to be allowed as the deduction on accrual basis. Aggrieved-revenue filed the instant appeal. The High Court held in favour of assessee as under: