IN THE SUPREME COURT OF INDIA
\nCIVIL APPELLATE JURISDICTION
\nCIVIL APPEAL NO. 1764 OF 2010
\nCommissioner of Income Tax, Udaipur \u2026 Appellant(s)
\nVersus
\nM\/s. Chetak Enterprises Pvt. Ltd. \u2026Respondent(s)
\nJ U D G M E N T
\nA. M. KHANWILKAR, J.
\n1. This appeal takes exception to the judgment and order dated
\n5.5.2008 passed by the High Court of Judicature for Rajasthan at
\nJodhpur (for short, \u201cthe High Court\u201d) in Income Tax Appeal No. 71 of
\n2008.
\n2. The matter relates to Assessment Year 20022003,
\nthe relevant
\nPrevious\/Financial year for which is 20012002
\ni.e. 1.4.2001 to
\n31.3.2002.
\n3. Briefly stated, the erstwhile partnership firm M\/
\ns. Chetak
\nEnterprises entered into an agreement with the Government of
\n2
\nRajasthan for construction of road and collection of road\/toll tax.
\nThe construction of road was completed by the said firm on 27.3.2000
\nand the same was inaugurated on 1.4.2000. The firm was converted
\ninto a private limited company on 28.3.2000 named as M\/s. Chetak
\nEnterprises (P) Ltd. (for short, \u201cthe assesseeCompany\u201d)
\nunder Part IX
\nof the Companies Act, 1956 (for short, \u201cthe Companies Act\u201d). On
\nconversion of the firm into company, an intimation was given to the
\nChief Engineer (Roads), P.W.D., Rajasthan, Jaipur. The said
\nauthority noted the change and cancelled the registration of the firm
\nand granted a fresh registration code to the assesseeCompany.
\nAs
\naforesaid, the road was inaugurated on 1.4.2000 and the assesseeCompany
\nstarted collecting toll tax. For the relevant assessment
\nyear, the assesseeCompany
\nclaimed deduction under Section 80IA
\nof the Income Tax Act, 1961 (for short, \u201cthe Income Tax Act\u201d). The
\nassessing officer declined that claim of the assesseeCompany,
\nwhich
\ndecision was reversed by the Commissioner of IncomeTax
\n(Appeals),
\nUdaipur. The Income Tax Appellate Tribunal (for short, \u201cthe ITAT\u201d)
\nconfirmed the decision of the first appellate authority, following its
\ndecision1 in the case of the assesseeCompany
\nfor the Assessment
\nYear 20012002.
\nAs a result, the Department preferred an appeal
\n1 Chetak Enterprises P. Ltd. vs. ACIT, (2005) 95 ITD 1 (Jodh.)
\n3
\nbefore the High Court. The High Court formulated the following
\nquestion of law: \u201c
\nWhether in the facts and in the circumstances of
\nthe case, the assesseeCompany
\nwas right in finding
\nthat the assessee fulfilled the condition of subSection
\n(4)(i)(b) of Section 80IA?\u201d
\nSection 80IA,
\nas applicable to Assessment Year 200203
\nreads thus:
\n\u201c
\n80IA
\n(1) Where the gross total income of an assessee
\nincludes any profits and gains derived from any business of
\nan industrial undertaking or an enterprise referred to in
\nsubsection
\n(4) (such business being hereinafter referred to
\nas the eligible business), there shall, in accordance with and
\nsubject to the provisions of this section, be allowed, in
\ncomputing the total income of the assessee, a deduction
\nfrom such profits and gains of an amount equal to hundred
\nper cent of profits and gains derived from such business for
\nthe first five assessment years commencing at any time
\nduring the periods as specified in subsection
\n(2) and
\nthereafter, twentyfive
\nper cent of the profits and gains for
\nfurther five assessment years:
\nProvided that where the assessee is a company, the
\nprovisions of this subsection
\nshall have effect as if for the
\nwords \u201ctwentyfive
\nper cent\u201d, the words \u201cthirty per cent\u201d had
\nbeen substituted.
\n(2) The deduction specified in subsection
\n(1) may, at the
\noption of the assessee, be claimed by him for any ten
\nconsecutive assessment years out of fifteen years beginning
\nfrom the year in which the undertaking or the enterprise
\ndevelops and begins to operate any infrastructure facility or
\nstarts providing telecommunication service or develops an
\nindustrial park or generates power or commences
\ntransmission or distribution of power:
\nProvided that where the assessee begins operating and
\nmaintaining any infrastructure facility referred to in clause
\n(b) of Explanation to clause (i) of subsection
\n(4), the
\n4
\nprovisions of this subsection
\nshall have effect as if for the
\nwords \u201cfifteen years\u201d, the words \u201ctwenty years\u201d had been
\nsubstituted.
\n(2A) Notwithstanding anything contained in subsection
\n(1)
\nor subsection
\n(2), the deduction in computing the total
\nincome of an undertaking providing telecommunication
\nservices, specified in clause (ii) of subsection
\n(4), shall be
\nhundred per cent of the profits and gains of the eligible
\nbusiness for the first five assessment years commencing at
\nany time during the periods as specified in subsection
\n(2)
\nand thereafter, thirty per cent of such profits and gains for
\nfurther five assessment years.
\n(3) This section applies to an industrial undertaking
\nreferred to in clause (iv) of subsection
\n(4) which fulfils all the
\nfollowing conditions, namely: (
\ni) it is not formed by splitting up, or the
\nreconstruction, of a business already in
\nexistence:
\nProvided that this condition shall not apply
\nin respect of an industrial undertaking which
\nis formed as a result of the reestablishment,
\nreconstruction
\nor revival by the assessee of
\nthe business of any such industrial
\nundertaking as is referred to in section 33B,
\nin the circumstances and within the period
\nspecified in that section;
\n(ii) it is not formed by the transfer to a new
\nbusiness of machinery or plant previously
\nused for any purpose.
\nExplanation 1.For
\nthe purposes of clause (ii),
\nany machinery or plant which was used
\noutside India by any person other than the
\nassessee shall not be regarded as machinery
\nor plant previously used for any purpose, if
\nthe following conditions are fulfilled, namely:
\n(
\na) Such machinery or plant was not, at
\nany time previous to the date of the
\ninstallation by the assessee, used in
\nIndia;
\n(b) such machinery or plant is imported
\ninto India from any country outside
\nIndia; and
\n5
\n(c) no deduction on account of
\ndepreciation in respect of such
\nmachinery or plant has been allowed or
\nis allowable under the provisions of this
\nAct in computing the total income of
\nany person for any period prior to the
\ndate of the installation of machinery or
\nplant by the assessee.
\nExplanation 2.Where
\nin the case of an
\nindustrial undertaking, any machinery or
\nplant or any part thereof previously used for
\nany purpose is transferred to a new business
\nand the total value of the machinery or plant
\nor part so transferred does not exceed twenty
\nper cent of the total value of the machinery or
\nplant used in the business, then, for the
\npurposes of clause (ii) of this subsection,
\nthe
\ncondition specified therein shall be deemed to
\nhave been complied with.
\n(4) This section applies to(
\ni) Any enterprise carrying on the business of (i)
\ndeveloping, (ii) maintaining and operating or
\n(iii) developing, maintaining and operating
\nany infrastructure facility which fulfils all the
\nfollowing conditions, namely: (
\na) it is owned by a company registered in
\nIndia or by a consortium of such
\ncompanies;
\n(b) it has entered into an agreement with
\nthe Central Government or a State
\nGovernment or a local authority or any
\nother statutory body for (i) developing,
\n(ii) maintaining and operating or (iii)
\ndeveloping, maintaining and operating
\na new infrastructure facility subject to
\nthe condition that such infrastructure
\nfacility shall be transferred to the
\nCentral Government, State
\nGovernment, local authority or such
\nother statutory body, as the case may
\nbe, within the period stipulated in the
\nagreement;
\n(c) it has started or starts operating and
\nmaintaining the infrastructure facility
\non or after the 1st day of April, 1995:
\n6
\nProvided that where an infrastructure
\nfacility is transferred on or after the 1st
\nday of April, 1999 by an enterprise
\nwhich developed such infrastructure
\nfacility (hereafter referred to in this
\nsection as the transferor enterprise) to
\nanother enterprise (hereafter in this
\nsection referred to as the transferee
\nenterprise) for the purpose of operating
\nand maintaining the infrastructure
\nfacility on its behalf in accordance with
\nthe agreement with the Central
\nGovernment, State Government, local
\nauthority or statutory body, the
\nprovisions of this section shall apply to
\nthe transferee enterprise as if it were
\nthe enterprise to which this clause
\napplies and the deduction from profits
\nand gains would be available to such
\ntransferee enterprise for the unexpired
\nperiod during which the transferor
\nenterprise would have been entitled to
\nthe deduction, if the transfer had not
\ntaken place.
\nExplanation.For
\nthe purposes of this clause,
\n\u201cinfrastructure facility\u201d means,(
\na) a road, bridge, airport, port, inland
\nwaterways and inland ports, rail
\nsystem or any other public facility of a
\nsimilar nature as may be notified by
\nthe Board in this behalf in the Official
\nGazette;
\n(b) a highway project including housing or
\nother activities being an integral part of
\nthe highway project; and
\n(c) a water supply project, water treatment
\nsystem, irrigation project sanitation
\nand sewerage system or solid waste
\nmanagement system;
\n(ii) any undertaking which has started or starts
\nproviding telecommunication services
\nwhether basic or cellular, including radio
\npaging, domestic satellite service, network of
\nturnking, broadband network and internet
\nservices on or after the 1st day of April, 1995,
\nbut on or before the 31st day of March, 2003;
\n7
\n(iii) any undertaking which develops, develops
\nand operates or maintains and operates an
\nindustrial park notified by the Central
\nGovernment in accordance with the scheme
\nframed and notified by the Government for
\nthe period beginning on the 1st day of April,
\n1997 and ending on the 31st day of March,
\n2006:
\nProvided that in a case where an
\nundertaking develops an industrial park on
\nor after the 1st day of April, 1999 and
\ntransfers the operation and maintenance of
\nsuch industrial park to another undertaking
\n(hereafter in this section referred to as the
\ntransferee undertaking) the deduction under
\nsubsection
\n(1), shall be allowed to such
\ntransferee undertaking for the remaining
\nperiod in the ten consecutive assessment
\nyears in a manner as if the operation and
\nmaintenance were not so transferred to the
\ntransferee undertaking;
\n(iv) an industrial undertaking which,(
\na) is set up in any part of India for the
\ngeneration or generation and
\ndistribution of power if it begins to
\ngenerate power at any time during the
\nperiod beginning on the 1st day of April,
\n1993 and ending on the 31st day of
\nMarch, 2003;
\n(b) starts transmission or distribution by
\nlaying a network of new transmission
\nor distribution lines at any time during
\nthe period beginning on the 1st day of
\nApril, 1999 and ending on the 31st day
\nof March, 2003:
\nProvided that the deduction under this section to
\nan industrial undertaking under subclause
\n(b)
\nshall be allowed only in relation to the profits
\nderived from laying of such network of new lines for
\ntransmission or distribution.
\n(5) Notwithstanding anything contained in any other
\nprovision of this Act, the profits and gains of an eligible
\nbusiness to which the provisions of subsection
\n(1) apply
\nshall, for the purposes of determining the quantum of
\n8
\ndeduction under that subsection
\nfor the assessment year
\nimmediately succeeding the initial assessment year or any
\nsubsequent assessment year, be computed as if such eligible
\nbusiness were the only source of income of the assessee
\nduring the previous year relevant to the initial assessment
\nyear and to every subsequent assessment year up to and
\nincluding the assessment year for which the determination is
\nto be made.
\n(6) Notwithstanding anything contained in subsection
\n(4),
\nwhere housing or other activities are an integral part of the
\nhighway project and the profits of which are computed on
\nsuch basis and manner as may be prescribed, such profit
\nshall not be liable to tax where the profit has been
\ntransferred to a special reserve account and the same is
\nactually utilised for the highway project excluding housing
\nand other activities before the expiry of three years following
\nthe year in which such amount was transferred to the
\nreserve account; and the amount remaining unutilised shall
\nbe chargeable to tax as income of the year in which such
\ntransfer to reserve account took place.
\n(7) Where the assessee is a person other than a company
\nor a cooperative
\nsociety, the deduction under the subsection
\n(1) from profits and gains derived from an industrial
\nundertaking shall not be admissible unless the accounts of
\nthe industrial undertaking for the previous year relevant to
\nthe assessment year for which the deduction is claimed have
\nbeen audited by an accountant, as defined in the
\nExplanation below subsection
\n(2) of section 288, and the
\nassessee furnishes, along with his return of income, the
\nreport of such audit in the prescribed form duly signed and
\nverified by such accountant.
\n(8) Where any goods held for the purposes of the eligible
\nbusiness are transferred to any other business carried on by
\nthe assessee, or where any goods held for the purposes of
\nany other business carried on by the assessee are
\ntransferred to the eligible business and, in either case, the
\nconsideration, if any, for such transfer as recorded in the
\naccounts of the eligible business does not correspond to the
\nmarket value of such goods as on the date of the transfer,
\nthen, for the purposes of the deduction under this section,
\nthe profits and gains of such eligible business shall be
\ncomputed as if the transfer, in either case, had been made at
\nthe market value of such goods as on that date:
\n9
\nProvided that where, in the opinion of the Assessing Officer,
\nthe computation of the profits and gains of the eligible
\nbusiness in the manner hereinbefore specified presents
\nexceptional difficulties, the Assessing Officer may compute
\nsuch profits and gains on such reasonable basis as he may
\ndeem fit.
\nExplanation. For
\nthe purposes of this subsection,
\n\u201cmarket
\nvalue\u201d, in relation to any goods, means the price that such
\ngoods would ordinarily fetch on sale in the open market.
\n(9) Where any amount of profits and gains of an industrial
\nundertaking or of an enterprise in the case of an assessee is
\nclaimed and allowed under this section for any assessment
\nyear, deduction to the extent of such profits and gains shall
\nnot be allowed under any other provisions of this Chapter
\nunder the heading \u201cC.Deductions
\nin respect of certain
\nincomes\u201d, and shall in no case exceed the profits and gains
\nof such eligible business of industrial undertaking or
\nenterprise, as the case may be.
\n(10) Where it appears to the Assessing Officer that, owing
\nto the close connection between the assessee carrying on the
\neligible business to which this section applies an any other
\nperson, or for any other reason, the course of business
\nbetween them is so arranged that the business transacted
\nbetween them produces to the assessee more than the
\nordinary profits which might be expected to arise in such
\neligible business, the Assessing Officer shall, in computing
\nthe profits and gains of such eligible business for the
\npurposes of the deduction under this section, take the
\namount of profits as may be reasonably deemed to have been
\nderived therefrom.
\n(11) The Central Government may, after making such
\ninquiry as it may think fit, direct, by notification in the
\nOfficial Gazette, that the exemption conferred by this section
\nshall not apply to any class of industrial undertaking or
\nenterprise with effect from such date as it may specify in the
\nnotification.
\n(12) Where any undertaking of an Indian company which is
\nentitled to the deduction under this section is transferred,
\nbefore the expiry of the period specified in this section, to
\nanother Indian company in a scheme of amalgamation or
\ndemerger(
\na) no deduction shall be admissible under this
\nsection to the amalgamating or the demerged
\ncompany for the previous year in which the
\n10
\namalgamation or the demerger takes place;
\nand
\n(b) the provisions of this section shall, as far as
\nmay be, apply to the amalgamated or the
\nresulting company as they would have
\napplied to the amalgamating or the demerged
\ncompany if the amalgamation or demerger
\nhad not taken place.\u201d
\nThe High Court while upholding the view taken by the first appellate
\nauthority and the ITAT, dismissed the appeal and observed thus: \u2018\u2018\u2026..
\nIn the present case, so far as the facts are concerned, it
\nis not in dispute, that the work of construction of roads was
\ncompleted on 27.3.2000, and on and with effect from
\n28.3.2000, the partnership firm was converted into a
\nCompany, by being registered under Part IX of the
\nCompanies Act, and became a private Limited Company. As
\nnoticed above, the relevant previous year is 1.4.2000 to
\n31.3.2001. Thus, right from the commencement of the
\nrelevant financial year, it cannot be disputed, that it was a
\nCompany, and was undertaking the specified business.
\nThen, so far as the question, as has been gone into by the
\nAssessing Officer, and the Excise Commissioner that the
\nassessee Company has not entered into any agreement with
\nthe Government, is concerned, in that regard, the learned
\nTribunal has found, that the main objects of the
\nMemorandum of Association of the assessee Company
\nindicates, that it was mentioned as under:
\n\u2018\u2018On conversion of the partnership firm into a
\ncompany limited by shares under these
\npresents to acquire by operation of Law under
\nPart IX of the Companies Act, 1956 as going
\nconcern and continue the partnership business
\nnow being carried on under the name & style of
\nM\/s Chetak Enterprises including all its assets,
\nmovables and immovables, rights, debts and
\nliabilities in connection therewith.\u2019\u2019
\nThen, it has also been found by the learned Tribunal,
\nat page 13 of the judgment, that the erstwhile partnership
\nfirm, in its first communication to the Chief Engineer on
\n23.10.1998, while replying to the notice inviting bids, made
\nit categorically clear, that \u2018\u2018the firm will be converted into a
\nlimited company under Chapter IX of the Companies Act. As
\nsuch, you are requested to allow us change in constitution
\nand accordingly change of name in agreement, after
\n11
\nconverting firm into company with the existing partners as
\nits Directors, and the Chief Engineer vide letter dt.
\n27.8.1999, took note of this letter, and informed, that their
\noffer was accepted, subject to terms and conditions specified
\ntherein. It is thereafter, that agreement was entered into
\nbetween the Government and the Firm, wherein the said
\nletter of the Chief Engineer dt. 27.8.1999, was considered as
\npart of the agreement. With this, the agreement also
\nmentions the firm, \u2018\u2018to mean and include its successors and
\nassigns\u2019\u2019. Thus it has been found, that since incorporation of
\nthe Firm into a Company, has the effect of statutorily vesting
\nof liabilities and assets in the Firm, and the agreement
\ncomprehends successors and assigns, it is clear, that the
\nassessee fulfils all the conditions. Then the proviso,
\nappended in this subsection,
\nhas also been considered,
\nwhich clearly provides for entitlement of the deduction to the
\ntransferee, with effect from the date of transfer, therefore
\nalso, it was found that the deduction is available.
\nIn our view, when right from the day one, i.e. while
\nreplying to the notice inviting tenders itself, it was made
\nclear by the Firm, that the Firm will be converting into a
\nlimited Company under Part IX of the Companies Act, and
\nthe Chief Engineer was requested to allow the change in the
\nConstitution, and accordingly change of name in the
\nagreement, after converting the Firm into the Company, with
\nthe existing partners as its Directors, and this request was
\naccepted, and that acceptance letter formed part of the
\nagreement, in our view, the Firm stands in the shoes of
\npromoter, and the Company takes over all assets and
\nliabilities statutorily.
\nIn other words, by operation of law, there is statutory
\ntransformation of the Firm into the Company, obviously the
\nrights and liabilities of the Company, and the assets, go to
\nthe Company. It is a different story that even from the
\nagreement entered into by the promoter (predecessor in the
\ninterest of the Company), as successor of the Firm and the
\nCompany is deemed to be a party, and, therefore also, is very
\nmuch entitled to the benefit of deduction on this ground.
\nOver & above all this, the proviso is a complete answer to the
\ncontention of the Revenue, and in favour of the assessee,
\nwhich rather clearly provides, that even in case of transfer,
\nthe transferee will become entitled to deduction of course
\nwith effect from the date of transfer.
\nIn the present case, the transfer was statutory, and did
\ncome into effect since 28.3.2000, i.e. much before the
\ncommencement of the relevant financial year, and as such,
\n12
\nconsidering from any standpoint, the assessee could not be
\ndenied benefit of deduction available to it.\u201d
\n4. Being aggrieved, the Department filed two separate special leave
\npetitions before this Court. The present civil appeal emanates from
\nSLP(C) No. 6772\/2009 and pertains to Assessment Year 20022003.
\nAs regards Civil Appeal No. 1748\/2010 (arising out of SLP(C) No.
\n3430\/2009) pertaining to Assessment Year 20012002,
\nthe same has
\nbeen disposed of in terms of order dated 17.10.2019 due to low tax
\neffect leaving question of law open.
\n5. We have heard Mr. Rupesh Kumar, learned counsel for the
\nappellant and Mr. S. Krishnan, learned counsel for the respondent.
\n6. It is not in dispute that an agreement was executed between the
\nerstwhile partnership firm and the State Government for construction
\nof road and collection of toll tax. Before the commencement of the
\nassessment year in question i.e. 20022003,
\nthe construction of road
\nwas completed (on 27.3.2000) and it was inaugurated on 1.4.2000.
\nBefore the date of inauguration, the partnership firm was converted
\ninto a company on 28.3.2000 under Part IX of the Companies Act.
\nThe Memorandum of Association of the assesseeCompany
\nreveals the
\nmain object as follows: 13
\n\u201cOn conversion of the partnership firm into a
\ncompany limited by shares under these presents to
\nacquire by operation of law under Part IX of the
\nCompanies Act, 1956 as going concern and
\ncontinue the partnership business now being
\ncarried on under the name and style of M\/s. Chetak
\nEnterprises including all its assets, movables and
\nimmovables, rights, debts and liabilities in
\nconnection therewith.\u201d
\nAs a matter of fact, before the agreement was executed with the
\nerstwhile partnership firm, it was clearly understood that the
\npartnership firm would in due course be converted into a registered
\nlimited company. That is evident from the communication addressed
\nto the Chief Engineer on 23.10.1998, at the time of replying to the
\nnotice inviting bids. An explicit request was made to allow the
\npartnership firm to change its constitution and consequently change
\nof name in the agreement after converting the firm into a company
\nwith the existing partners as its Directors. The Chief Engineer being
\nthe appropriate authority of the State, vide letter dated 27.8.1999,
\ntook note of the request made by the erstwhile partnership firm and
\ninformed the said firm that its offer was accepted subject to terms
\nand conditions specified in that regard. It is only after this
\ninteraction, an agreement was entered into between the Government
\n14
\nof Rajasthan and the erstwhile partnership firm, in which the
\ncommunication sent by the Chief Engineer, dated 27.8.1999, was
\nmade part of the agreement. Notably, after the conversion of the
\npartnership firm into a company under Part IX of the Companies Act,
\nthe State authorities noted the change and provided fresh registration
\ncode to the assesseeCompany.
\n7. The question is: what is the effect of conversion of partnership
\nfirm into a company under Part IX of the Companies Act? That can
\nbe discerned from Section 575 of the Companies Act, which reads
\nthus: \u201c
\n575. Vesting of property on registration.All
\nproperty,
\nmovable and immovable (including actionable claims),
\nbelonging to or vested in a company at the date of its
\nregistration in pursuance of this Part, shall, on such
\nregistration, pass to and vest in the company as
\nincorporated under this Act for all the estate and interest of
\nthe company therein.\u201d
\nIt is manifest that all properties, movable and immovable (including
\nactionable claims) belonging to or vested in a company at the date of
\nits registration would vest in the company as incorporated under the
\nAct. In other words, the property acquired by a promoter can be
\nclaimed by the company after its incorporation without any need for
\nconveyance on account of statutory vesting. On such statutory
\nvesting, all the properties of the firm, in law, vest in the company and
\n15
\nthe firm is succeeded by the company. The firm ceases to exist and
\nassumes the status of a company after its registration as a company.
\nA priori, it must follow that the business is carried on by the
\nenterprise owned by a company registered in India and the agreement
\nentered into between the erstwhile partnership firm and the State
\nGovernment, by legal implication, assumes the character of an
\nagreement between the company registered in India and the State
\nGovernment for (i) developing, (ii) maintaining and operating or (iii)
\ndeveloping, maintaining and operating a new infrastructure facility.
\n8. For the purpose of considering compliance of clause (a) of
\nSection 80IA(
\n4)(i), the assessee must be an enterprise carrying on
\nbusiness of (i) developing, (ii) maintaining and operating or (iii)
\ndeveloping, maintaining and operating any infrastructure facility,
\nwhich enterprise is owned by a company registered in India. That
\nstipulation is fulfilled in the present case, as the registered firm was
\nconverted into a company under Part IX of the Companies Act on
\n28.3.2000, which is before the commencement of Assessment Year
\n20022003.
\nFor the assessment year under consideration, the
\nactivity undertaken by the assessee is only maintaining and operating
\nor developing, maintaining and operating the infrastructure facility,
\ninasmuch as, the construction of the road was completed on
\n16
\n27.3.2000 and the same was inaugurated on 1.4.2000, whereafter toll
\ntax was being collected by the assesseeCompany.
\n9. As regards clause (b) of Section 80IA(
\n4)(i), the requirement
\npredicated is that the assessee must have entered into an agreement
\nwith the Central Government or a State Government or a local
\nauthority or any other statutory body for (i) developing, (ii)
\nmaintaining and operating or (iii) developing, maintaining and
\noperating a new infrastructure facility. As aforesaid, in the present
\ncase, the agreement was initially executed between the erstwhile
\npartnership firm and the State Government, but with clear
\nunderstanding that as and when the partnership firm is converted
\ninto a company, the name of the company in the agreement so
\nexecuted be recorded recognising the change. Notably, the agreement
\nitself mentions that M\/s. Chetak Enterprises as party to the
\nagreement was meant to include its successors and assignee.
\nFurther, the State Government had granted sanction to the company
\nand the original agreement entered into with the firm automatically
\nstood converted in favour of the assesseeCompany,
\nwhich came into
\nexistence on 28.3.2000 being the successor of the erstwhile
\npartnership firm. Thus understood, even the stipulation in clause (b)
\nof Section 80IA(
\n4)(i) is fulfilled by the assesseeCompany.
\nSince
\n17
\nthese are the only two issues which weighed with the assessing officer
\nto deny deduction to the assesseeCompany
\nas claimed under Section
\n80IA
\nof the Income Tax Act, the first appellate authority was justified
\nin reversing the view taken by the assessing officer. For the same
\nreason, the ITAT, as well as, the High Court have justly affirmed the
\nview taken by the first appellate authority, holding that the
\nrespondent\/assesseeCompany
\nqualified for the deduction under
\nSection 80IA
\nbeing an enterprise carrying on the stated business
\npertaining to infrastructure facility and owned by a Company
\nregistered in India on the basis of the agreement executed with the
\nState Government to which the respondent\/assesseeCompany
\nhas
\nsucceeded in law after conversion of the partnership firm into a
\ncompany.
\n10. Learned counsel for the appellant has relied on the decision of
\nthis Court in Giridhar G. Yadalam vs. Commissioner of Wealth
\nTax & Anr.2. In the said decision, the Court had delineated the
\ncontours regarding permissibility of purposive interpretation of
\ntaxing\/fiscal statutes, particularly in the context of an exemption.
\nThis decision is of no avail to doubt the correctness of the view taken
\n2 (2015) 17 SCC 664
\n18
\nby the High Court vide the impugned judgment, in the facts of the
\npresent case.
\n11. In view of the above, the appeal stands dismissed with no order
\nas to costs.
\n……………………………, J
\n(A.M. Khanwilkar)
\n……………………………, J
\n(Dinesh Maheshwari)
\nNew Delhi;
\nMarch 05, 2020.<\/p>\n","protected":false},"excerpt":{"rendered":"
It is manifest that all properties, movable and immovable (including actionable claims) belonging to or vested in a company at the date of its registration would vest in the company as incorporated under the Act. In other words, the property acquired by a promoter can be claimed by the company after its incorporation without any need for conveyance on account of statutory vesting. On such statutory vesting, all the properties of the firm, in law, vest in the company and the firm is succeeded by the company. The firm ceases to exist and assumes the status of a company after its registration as a company. A priori, it must follow that the business is carried on by the enterprise owned by a company registered in India and the agreement entered into between the erstwhile partnership firm and the State Government, by legal implication, assumes the character of an agreement between the company registered in India and the State Government for (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating a new infrastructure facility.<\/p>\n