New Delhi: Government auditor CAG today said I-T department has provided "irregular" tax benefits to infrastructure companies without verification, which have cost the exchequer over Rs 4,500 crore.
Central Board of Direct Taxes (CBDT) did not have any established mechanism to assess the impact of revenue foregone on account of deductions under Section 80 IA on the economy and industrial growth of the country, it said.
The Income Tax department has "irregularly" allowed deductions to various companies engaged in infrastructure business which have tax effect of Rs 4,524 crore, Comptroller and Auditor General (CAG) said.
This included Rs 1,766.74 crore tax benefit availed by Reliance Ports & Terminals Ltd for construction of captive jetties at Port Sikka in Bihar.
The other major companies that availed of such benefits include JSW Energy (Rs 340 crore), Reliance Infrastructure (Rs 51.88 crore), Tata Power (Rs 36.99 crore) and Gujarat Fluro Chemicals (Rs 22.75 crore).
"There is no existing system to ascertain from the sponsoring ministries as to whether the tax holidays have had the desired impact on the growth of the economy," CAG said.
It adding that in the absence of such a mechanism the auditor failed to ascertain whether the very purpose of tax holidays has been achieved.
CAG mentioned in its performance audit of the Revenue Department that CBDT may evolve a mechanism for proper linkage between tax benefit allowed by the I-T department with the actual investment made by the assessee to assess the impact of tax holiday.
In order to encourage investment in infrastructure, the government provides tax holiday to companies under Section 80 IA for deduction in respect of profits and gains of companies engaged in infrastructure development at 100 per cent for a certain period.
The report, tabled in Parliament, is based on test audit conducted by CAG between 2012-13 and 2014-15....