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TMI Blog2020 (3) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... he same was inaugurated on 1.4.2000, where after toll tax was being collected by the assessee-Company. In the present case, the agreement was initially executed between the erstwhile partnership firm and the State Government, but with clear understanding that as and when the partnership firm is converted into a company, the name of the company in the agreement so executed be recorded recognising the change. Notably, the agreement itself mentions that M/s. Chetak Enterprises as party to the agreement was meant to include its successors and assignee. Further, the State Government had granted sanction to the company and the original agreement entered into with the firm automatically stood converted in favour of the assessee-Company, which came into existence on 28.3.2000 being the successor of the erstwhile partnership firm. Thus understood, even the stipulation in clause (b) of Section 80IA( 4)(i) is fulfilled by the assessee-Company. Since these are the only two issues which weighed with the assessing officer to deny deduction to the assessee-Company as claimed under Section 80IA the first appellate authority was justified in reversing the view taken by the assessing officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) confirmed the decision of the first appellate authority, following its decision Chetak Enterprises P. Ltd. vs. ACIT, (2005) 95 ITD 1 (Jodh.) in the case of the assessee-Company for the Assessment Year 20012002. As a result, the Department preferred an appeal before the High Court. The High Court formulated the following question of law: Whether in the facts and in the circumstances of the case, the assessee-Company was right in finding that the assessee fulfilled the condition of subSection (4)(i)(b) of Section 80IA? Section 80IA, as applicable to Assessment Year 200203 reads thus: 80IA (1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or an enterprise referred to in subsection (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to hundred per cent of profits and gains derived from such business for the first five assessment years commencing at any time duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely: (a) Such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of machinery or plant by the assessee. Explanation 2.Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this subsection, the condition specified therein shall be deemed to have been complied with. (4) This section app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gement system; (ii) any undertaking which has started or starts providing telecommunication services whether basic or cellular, including radio paging, domestic satellite service, network of turnking, broadband network and internet services on or after the 1st day of April, 1995, but on or before the 31st day of March, 2003; (iii) any undertaking which develops, develops and operates or maintains and operates an industrial park notified by the Central Government in accordance with the scheme framed and notified by the Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006: Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 and transfers the operation and maintenance of such industrial park to another undertaking (hereafter in this section referred to as the transferee undertaking) the deduction under subsection (1), shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years in a manner as if the operation and maintenance were not so transferred to the transferee undertaking; (iv) an industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been audited by an accountant, as defined in the Explanation below subsection (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. (8) Where any goods held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date: Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place. The High Court while upholding the view taken by the first appellate authority and the ITAT, dismissed the appeal and observed thus: .. In the present case, so far as the facts are concerned, it is not in dispute, that the work of construction of roads was completed on 27.3.2000, and on and with effect from 28.3.2000, the partnership firm was converted into a Company, by being registered under Part IX of the Companies Act, and became a private Limited Company. As noticed above, the relevant previous year is 1.4.2000 to 31.3.2001. Thus, right from the commencement of the relevant financial year, it cannot be disputed, that it was a Company, and was undertaking the specified business. Then, so far as the question, as has been gone into by the Assessing Officer, and the Excise Commissioner that the assessee Company has not entered into any agreement with the Government, is concerned, in that regard, the learned Tribunal has found, that the main objects of the Memorandum of Association of the assessee Company indicates, that it was mentioned as under: On conversion of the partnership firm into a company limited by shares under these presents to acquire by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company takes over all assets and liabilities statutorily. In other words, by operation of law, there is statutory transformation of the Firm into the Company, obviously the rights and liabilities of the Company, and the assets, go to the Company. It is a different story that even from the agreement entered into by the promoter (predecessor in the interest of the Company), as successor of the Firm and the Company is deemed to be a party, and, therefore also, is very much entitled to the benefit of deduction on this ground. Over above all this, the proviso is a complete answer to the contention of the Revenue, and in favour of the assessee, which rather clearly provides, that even in case of transfer, the transferee will become entitled to deduction of course with effect from the date of transfer. In the present case, the transfer was statutory, and did come into effect since 28.3.2000, i.e. much before the commencement of the relevant financial year, and as such, considering from any standpoint, the assessee could not be denied benefit of deduction available to it. 4. Being aggrieved, the Department filed two separate special leave petitions before this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le partnership firm, in which the communication sent by the Chief Engineer, dated 27.8.1999, was made part of the agreement. Notably, after the conversion of the partnership firm into a company under Part IX of the Companies Act, the State authorities noted the change and provided fresh registration code to the assessee-Company. 7. The question is: what is the effect of conversion of partnership firm into a company under Part IX of the Companies Act? That can be discerned from Section 575 of the Companies Act, which reads thus: 575. Vesting of property on registration.All property, movable and immovable (including actionable claims), belonging to or vested in a company at the date of its registration in pursuance of this Part, shall, on such registration, pass to and vest in the company as incorporated under this Act for all the estate and interest of the company therein. 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 aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self mentions that M/s. Chetak Enterprises as party to the agreement was meant to include its successors and assignee. Further, the State Government had granted sanction to the company and the original agreement entered into with the firm automatically stood converted in favour of the assessee-Company, which came into existence on 28.3.2000 being the successor of the erstwhile partnership firm. Thus understood, even the stipulation in clause (b) of Section 80IA( 4)(i) is fulfilled by the assessee-Company. Since these are the only two issues which weighed with the assessing officer to deny deduction to the assessee-Company as claimed under Section 80IA of the Income Tax Act, the first appellate authority was justified in reversing the view taken by the assessing officer. For the same reason, the ITAT, as well as, the High Court have justly affirmed the view taken by the first appellate authority, holding that the respondent/assessee-Company qualified for the deduction under Section 80IA being an enterprise carrying on the stated business pertaining to infrastructure facility and owned by a Company registered in India on the basis of the agreement executed with the State Government t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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