CAG has pulled up the Income Tax department for giving benefit of Rs 1,767 crore to the port and terminal arm of Reliance Industries by allowing deductions meant for public facilities to the company’s captive jetties.

CAG said the income tax assessing officer (AO) allowed deduction of Rs 5,245.38 crore to Reliance Ports and Terminals Ltd towards construction of four captive jetties at Port Sikka in Gujarat without examining the eligibility criteria for allowance of the deduction.

In a performance audit of tax holiday for development of infrastructure sector, which was tabled in Parliament today, CAG said: “The irregular allowance of deduction by the AO has resulted in under assessment of income of Rs 5,245.38 crore involving tax effect of Rs 1,766.74 crore”.

The Comptroller and Auditor General of India (CAG) said that since the jetties were captively used by Reliance Ports and not for public purposes, “deduction allowed (by AO) was not in order”.

The Income Tax department, however, did not accept the observation of CAG and said the I-T Act did not distinguish between “public facility” and “private facility” for claiming deductions under 80 IA which provides deduction in respect of profits and gains of companies engaged in infrastructure development at 100 per cent for a certain period.

On the contention of the I-T department that the facility was open for usage by other players also when not in use by RIL Group companies, the CAG sought to know from the CBDT which other companies had used the facility.

CAG said that I-T department, in order to substantiate their stand, had not submitted any list of other assessees owning ships who had used jetties when they were not in use by RPL/RIL.

The CAG report is based on test audit conducted by CAG between 2012-13 and 2014-15.