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TMI Blog2005 (1) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act and all the assets and liabilities of the firm including the capital investment in the road became the ownership of the company. Viewed from any angle, namely, the conversion of the firm into company under Part IX of the Companies Act or enterprise being owned by the company registered in India at the time of claiming deduction or factual position emerging from correspondence of M/s. Chetak Enterprises with the State Government indicating its intention of conversion of firm into company, ab initio, lead us to infallible conclusion that the assessee-company complied with sub-clause (a) of section 80-IA(4)(i). In our considered view, the learned CIT(A) was not justified in unnecessarily distinguishing the present case from that of the Ayush Ajay Construction Ltd. [ 2000 (7) TMI 225 - ITAT INDORE] . In fact, it is the ratio decidendi of a decision which is required to be looked into and applied to similar situations when the question is the interpretation of a provision of a statute. No attempt should be made unnecessarily; to embark upon distinguishing a case. It is further noted from para 2, page 8, of the assessment order, that the Assessing Officer noted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Chetak Enterprises, a partnership firm, which was being assessed to tax for the last several years, continued to remain as a partnership firm upto 28th March, 2000. The said firm was converted into company, namely, M/s. Chetak Enterprises (P.) Ltd., under Part IX of the Companies Act, 1956, and certificate of incorporation was issued by the Registrar of Companies, Jaipur, on 28th March, 2000. Regarding the eligibility for deduction under section 80-IA(4)(i), it was stated that the company had been sanctioned a tender for the construction of road for 10 kms. It was put forth that the designate authority, Chief Engineer (Roads), Rajasthan, Jaipur, sanctioned the tender and made direction to the Ex. Engineer, PWD, Chittorgarh, for the construction of the road effective from 15th Dec, 1999. It was explained that as per the terms and conditions, the time period to hand over the road so constructed was 30 months and 21 days and the assessee was to construct the road and to start collection of toll tax. It was pointed out that the construction of the road was completed on 27th March, 2000, by way of incurring expenditure of Rs. 3,43,24,533, which amount was shown as BOT work-in-progr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said road on BOT basis was signed by the Government of Rajasthan with the said firm, and the work was also completed on 27th March, 2000 for which certificate was issued in favour of the firm on 31st Marc, 2000. Hence, the mandatory requirement of sub-clause (a) or section 80-IA(4)(i), being the company owning the infrastructure facility was not complied with. (ii) No agreement in terms of sub-clause (b) of section 80-IA(4)(i) was made by the assessee-company with the Government of Rajasthan for collection of toll tax on 1st April, 2000 in supersession of original agreement dated 1st Dec, 1999 signed by the Government of Rajasthan with the firm M/s. Chetak Enterprises. It was also held that proviso to sub-clause (c) of section 80-IA(4)(i) was not applicable. The Assessing Officer further held that the decision of the Indore Bench of the Tribunal in the case of Ayush Ajay Construction Ltd. v. ITO [2001] 79 ITD 213, cited by the assessee, was not acceptable as it was not clear whether the Department had finally accepted that order or not. In the first appeal, the learned CIT(A) echoed the action of the Assessing Officer. He distinguished the aforesaid order of the Indore Bench by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during Which the transferor enterprise would have, been entitled to the deduction, if the transfer had not taken place." E. Finding (i) Section 80-IA(4)(i), sub-clause (a) (a) The first and the foremost factor which weighed with the Assessing Officer for not allowing deduction is that the eligible enterprise was owned by the firm M/s. Chetak Enterprise, whereas the sub-clause (a) stipulates that it should be owned by a company registered in India. The facts as set out above, clearly indicate that the erstwhile firm M/s. Chetak Enterprises entered into an agreement with the Government of Rajasthan and continued to incur expenses on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration in pursuance of this Part, shall, on such registration, pass to and vest in the company as incorporated under this Act. It, therefore, becomes clear that the property acquired by a promoter can be claimed by the company after its incorporation without any need for conveyance. The vesting being statutory, no registered instrument of transfer is necessary. The Hon'ble Andhra Pradesh High Court in the case of Valli Pattabhirama Rao v. Sri Ramanuja Ginning Rice Factory (P.) Ltd. [1986] 60 Comp. Cos. 568 has held that if the constitution of the partnership firm is changed into that of a company by registering it under Part IX of the present Act, there shall be statutory vesting of title of all the properties of the previous firm in the newly incorporated company without any need for a separate conveyance. Thus, when a partnership firm is treated as company under the statutory provisions of Part IX of Companies Act, the company succeeds the firm and all the properties of the firm vest in the company on the firm being treated as a company under this part of the Act. On the vesting of all the properties of the firm statutorily in the company, the firm gets replaced with the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EOU) v. Dy. CIT [2004] 82 TTJ (Asr.) 847 in the context of the chargeability of capital gains on conversion under Part IX of the Companies Act. The sum and substance of the above discussion is that on conversion of a firm into a company under Part IX of the Companies Act, 1956, the firm ceases to exist and gets substituted with the company and all the assets and liabilities of the erstwhile firm become the assets and liabilities of the company. Reverting to the facts of the instant case, it is gathered from the main object of the company that the earlier firm named as M/s. Chetak Enterprises was genuinely converted under Part IX of the Companies Act into company as going concern acquiring all the assets, rights and liabilities of the erstwhile firm. (b) The Assessing Officer denied the benefit of deduction by coming to the conclusion that the enterprise is not owned by a company registered in India in terms of sub-clause (a). We shall proceed to examine and evaluate the relevant position in this regard. First of all, it is observed that this section refers to an 'enterprise' carrying on eligible business. Sub-clause (a) provides that such an enterprise should be owned by a 'company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y change of name in agreement after converting firm into company with the existing partners as its directors". This letter is available at p. 5 of the paper book. The Chief Engineer vide letter dated 27th Aug., 1999, copy placed at p. 10 of paper book, took note of the assessee's letter dated 23rd Oct., 1998 and informed that their offer was accepted subject to terms and conditions specified therein. Thereafter, an agreement was entered into between the Government of Rajasthan and M/s. Chetak Enterprises, a copy of which is available at p. 11 onwards of the paper book, in which the aforesaid letter of Chief Engineer dated 27th Aug., 1999, was considered as part of the agreement. Page 14 of the paper book is agreement for lease of land to the assessee in which it is clearly mentioned that this agreement is between the Government and M/s. Chetak Enterprises referred to as lessee 'to mean and include its successors and assigns.' The agreement for authorising collection of toll by concessionaire is placed on p. 19 of paper book in which again M/s. Chetak Enterprises has been adopted as party to the agreement to mean and include 'its successors and assigns'. On going through these docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prise which is engaged in the eligible business, should have entered into agreement with the State Government, so as to qualify for deduction under this section. When the agreement was entered into with firm M/s Chetak Enterprises, which subsequently got converted into the assessee-company and no objection was raised by the concerned authorities on intimation sent in this regard, it cannot be stated that there was no agreement of the assessee-company with the State Government. On the contrary, they accepted the position and granted fresh registration to the assessee-company in lieu of the earlier registration granted to the erstwhile firm. Not only this, the State Government allowed the assessee-company to operate and maintain the said road w.e.f. 1st April, 2000 and collect the toll tax. These facts, along with the documents discussed supra wherein M/s Chetak Enterprises as party to agreement was meant to "include its successors and assigns", go to show that the State Government had granted sanction to the company and the original agreement entered into with the firm M/s Chetak Enterprises automatically stood converted with the assessee-company when it came into existence. We are, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nally granted tender for construction of bridge by the State Government. He entered into an agreement with 'U' promoter of the company and assigned the tender for construction of the bridge on BOT basis. 'U' undertook the construction work and after the incorporation, the company carried it on. On the basis of tripartite agreement between the company, 'A' and the State Government, the assessee claimed deduction under section 80-IA(4)(i), which was rejected by the Assessing Officer, but finally allowed by the Tribunal. The learned CIT(A), in the present case distinguished it by observing that the facts were materially different. We are unable to appreciate any such distinction, which mars the assessee's claim for deduction under this section. Albeit, a tripartite agreement between the assessee-company, the firm M/s Chetak Enterprises and the State Government was not directly reached, yet, it cannot be said that the ratio of the said decision, based on the legal position, is not applicable. In the instant case, the firm entered into an agreement with the State Government which included the successors and assigns of the firm and intention of conversion into company was made clear to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present case, coupled with the relevant proposition of law and in particular, the material provisions of section 80-IA, we hold that the assessee is entitled to deduction under section 80-IA(4)(i) and the learned CIT(A) erred in not accepting the assessee's claim. This ground is, therefore, allowed. 3. The assessee has raised second ground, as alternative to ground No. 1. Since the first ground is allowed, this alternative ground becomes academic. 4. Last effective ground is on the charging of interest under section 234B. The facts of this ground are that the Assessing Officer gave direction for charging of interest under section 234B in the assessment order and in the income-tax computation form charged interest at Rs. 67,14,592 under section 234B. It was contended before the first appellate authority that there was no obligation on the part of the company to make the payment of advance tax in view of the fact that it had computed its income in terms of section 115JB of the Act. The learned CIT(A) rejected the assessee's contention. We have heard the rival submissions and perused the relevant material on record in the light of precedents cited by both the sides. The short ..... X X X X Extracts X X X X X X X X Extracts X X X X
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