Chetak Enterprises, a partnership firm, entered into an agreement with the Government of Rajasthan for construction of road and collection of road\/toll tax. The construction of road was completed on 27th March 2000. The partnership\u00a0\u00a0 firm was converted into a private limited company Chetak Enterprises (P) Ltd. on 28th March 2000 under Part IX of the Companies Act, 1956. Assessee company intimated the fact of conversion to the Chief Engineer (Roads), PWD which was noted and fresh registration code was granted to the assessee company. The road was inaugurated on 1st April 2000 and the assessee company started collecting\u00a0\u00a0 toll tax. For the assessment year 2002-03, the assessee claimed deduction under section 80-IA of the Income-tax Act, 1961. The Assessing Officer denied the claim. The CIT (Appeals) allowed the claim and the Tribunal confirmed this following its decision in the case of the assessee for the assessment year 2001-02 (see Chetak Enterprises P.\u00a0 Ltd. v.\u00a0 Asst. CIT [2006] 281 ITR (AT) 162 (Jodhpur)). <\/em><\/strong>On appeal\u00a0\u00a0\u00a0 by the Department on the question whether the Tribunal was\u00a0 right in finding that the assessee fulfilled the conditions of sub-section (4)(i)(b) of section 80-IA,\u00a0 the High Court upholding the view taken by the CIT (Appeals) and the Tribunal, dismissed the appeal.<\/p>\n \u00a0<\/p>\n What is the effect of conversion of\u00a0 partnership\u00a0 firm\u00a0 into\u00a0 a\u00a0 company under Part IX of the Companies Act? Whether deduction under section 80IA is available to\u00a0\u00a0 the assessee company post conversion when the agreement for construction of infrastructure facility wasentered into by the erstwhile partnership firm.<\/p>\n \u00a0<\/p>\n 80IA(4)(i) of the Act inter-alia <\/em>provides that section 80-IA applies to an enterprise carrying on\u00a0 the\u00a0 business of\u00a0 (i)\u00a0 developing (ii)\u00a0maintaining and\u00a0 operating \u00a0or<\/p>\n (iii) developing, maintaining and operating any infrastructure facility. The said<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n section further states that the enterprise should be owned by a company registered\u00a0\u00a0 in India and that such company should have entered into an agreement for developing\/maintaining\/operating a new infrastructure facility with the Central\/ State Government\/local authority. In other words, deduction under the section will not be allowed if a partnership firm carries on the specified business.<\/p>\n \u00a0<\/p>\n Supreme Court dismissed the department\u2019s appeal and held that the assessee was entitled to deduction under section 80IA. Supreme Court observed that as\u00a0\u00a0\u00a0\u00a0 per section 575 of the Companies Act, on conversion of a partnership firm into a company under Part IX of the Companies Act all properties of the firm statutorily vest in the company without any need for a conveyance. Post\u00a0 conversion of firm into company, the earlier agreement entered into between the erstwhile partnership firm and the State Government for construction of road, by legal implication, would be treated as an agreement between the assessee company and the State Government. The assessee company, therefore, satisfied the requirements of section 80IA(4)(i). (AY. 2002-03) (CA No. 1764 of 2010 dt. 5-3-2020)<\/p>\n Editorial: <\/em><\/strong>in CIT v. Texspin Engg. & Mfg. Works (2003) 263 ITR 345 (Bom) (HC) <\/em><\/strong>has held that when a firm is converted into a\u00a0 company under Part\u00a0 IX\u00a0 of the Companies Act, 1956, there is no transfer of capital asset as contemplated by section 45 but a statutory vesting of all properties in the company. Bombay High Court observed that \u201con the vesting of all the properties statutorily in the company, the cloak given to the firm is replaced by a different cloak and the same firm is\u00a0\u00a0\u00a0\u00a0 now treated as a company.\u201d<\/em><\/p>\n \u00a0<\/em><\/p>\n \u201cMan is a product of his thoughts.<\/em><\/p>\n What he thinks, he becomes.\u201d<\/em><\/p>\n – Mahatma Gandhi<\/p>\n","protected":false},"excerpt":{"rendered":" \tS. 80IA: Industrial undertaking \u2013 Conversion of a partnership firm into a company \u2013 Part IX of Companies Act \u2013 As per S. 575 of the Companies Act, the conversion of a partnership firm into a company under Part IX causes a statutory vesting of all assets of the firm into the company without the need for a conveyance \u2013 The business of the firm is carried on by the company and the latter is eligible for the benefits of S. 80IA(4) of the Act. [S. 80IA(4), Companies Act, 1956 , S. 575 ]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-13389","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3tX","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13389","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=13389"}],"version-history":[{"count":2,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13389\/revisions"}],"predecessor-version":[{"id":18949,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13389\/revisions\/18949"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=13389"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=13389"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=13389"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Issue<\/h3>\n
Views<\/h3>\n
Held<\/h3>\n