COMMISSIONER OF INCOME TAX, UDAIPUR versus M/S. CHETAK ENTERPRISES PVT. LTD.

Citation: [2020] 4 S.C.R. 44 · Decided: 05-03-2020 · Supreme Court of India · Bench: A.M. KHANWILKAR · Disposal: Dismissed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2020] 4 S.C.R.
COMMISSIONER OF INCOME TAX, UDAIPUR
v.
M/S. CHETAK ENTERPRISES PVT. LTD.
(Civil Appeal No. 1764 of 2010)
MARCH 05, 2020
[A. M. KHANWILKAR AND DINESH MAHESHWARI, JJ.]
Income Tax Act, 1961 – 80-IA – Matter relates to Assessment
Year 2002-2003 (Financial year being 2001-2002 i.e. 01.04.2001
to 31.3.2002) – An erstwhile partnership firm- M/s. Chetak
Enterprises entered into agreement with Govt. of Rajasthan for
construction of road and collection of road/toll tax– Firm converted
into a private limited company (the respondent/assessee) under 1956
Act – Road was inaugurated and respondent started collecting toll
tax – Claimed deduction u/s.80-IA – Declined by assessing officer
– Reversed by Commissioner of Income-Tax (Appeals) – Confirmed
by Income Tax Appellate Tribunal (ITAT) – Upheld by High Court –
Held: 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 – 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 – Firm ceases to exist and assumes the
status of a company after its registration as a company – For the
purpose of considering compliance of clause (a) of s.80-IA(4)(i),
the assessee must be an enterprise carrying on business of (i)
developing (ii) maintaining and operating or (iii) developing,
maintaining and operating any infrastructure facility, which
enterprise is owned by a company registered in India – This is
fulfilled in the present case, as the registered firm was converted
into a company u/Part IX of the 1956 Act on 28.3.2000, which is
before the commencement of Assessment Year 2002-2003 – For the
assessment year, the activity undertaken by the assessee is only
maintaining and operating or developing, maintaining and
operating the infrastructure facility, inasmuch as, the construction
[2020] 4 S.C.R. 44
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of the road was completed on 27.3.2000 and the same was
inaugurated on 01.04.2000, whereafter toll tax was being collected
by the assessee – Also, the stipulation in clause (b) of s. 80-IA(4)(i)
is fulfilled by the assessee in the present case – ITAT and the High
Court justly affirmed the view taken by the first appellate authority
– Companies Act, 1956 – Part IX – s.575.
Dismissing the appeal, the Court
HELD: 1.1 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. 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. For the purpose of considering
compliance of clause (a) of Section 80-IA(4)(i), the assessee must
be an enterprise carrying on business of (i) developing, (ii)
maintaining and operating or (iii) developing, maintaining and
operating any infrastructure facility, which enterprise is owned
by a company registered in India. That stipulation is fulfilled in
the present case, as the registered firm was converted into a
company under Part IX of the Companies Act on 28.3.2000, which
is before the commencement of Assessment Year 2002-2003. For
the assessment year under consideration, the activity undertaken
by the assessee is only maintaining and operating or developing,
maintaining and operating the infrastructure facility, inasmuch as,
the construction of the road was completed on 27.3.2000 and the
same was inaugurated on 1.4.2000, whereafter toll tax was being
collected by the assessee-Company. [Paras 7, 8][57-H; 58-A-E]
1.2 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. The
agreement itself mentions that M/s. Chetak Enterprises as party
COMMI

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