2020 INSC 0649
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1764 OF 2010
Commissioner of Income Tax, Udaipur   … Appellant(s)
Versus
M/s. Chetak Enterprises Pvt. Ltd.          …Respondent(s)
J U D G M E N T
A. M. KHANWILKAR, J.
1. This   appeal   takes   exception   to   the   judgment   and   order   dated
5.5.2008   passed   by   the   High   Court   of   Judicature   for   Rajasthan   at
Jodhpur (for short, “the High Court”) in Income Tax Appeal No. 71 of
2008.
2. The   matter   relates   to   Assessment  Year  2002­2003,   the   relevant
Previous/Financial   year   for   which   is   2001­2002   i.e.   1.4.2001   to
31.3.2002.
3. Briefly   stated,   the   erstwhile   partnership   firm   ­   M/s.   Chetak
Enterprises   entered   into   an   agreement   with   the   Government   of

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Rajasthan   for   construction   of   road   and   collection   of   road/toll   tax.
The construction of road was completed by the said firm on 27.3.2000
and the same was inaugurated on 1.4.2000.   The firm was converted
into   a  private   limited   company   on   28.3.2000   named  as  M/s.  Chetak
Enterprises (P) Ltd. (for short, “the assessee­Company”) under Part IX
of   the   Companies   Act,   1956   (for   short,   “the   Companies   Act”).     On
conversion   of   the   firm   into   company,   an   intimation   was   given   to   the
Chief   Engineer   (Roads),   P.W.D.,   Rajasthan,   Jaipur.     The   said
authority noted the change and cancelled the registration of the firm
and   granted   a   fresh   registration   code   to   the   assessee­Company.     As
aforesaid,   the   road   was   inaugurated   on   1.4.2000   and   the   assessee­
Company   started   collecting   toll   tax.     For   the   relevant   assessment
year,   the   assessee­Company   claimed   deduction   under   Section   80­IA
of   the   Income   Tax   Act,   1961   (for   short,   “the   Income   Tax   Act”).   The
assessing officer declined that claim of the assessee­Company, which
decision was reversed by  the Commissioner  of Income­Tax  (Appeals),
Udaipur.     The   Income   Tax   Appellate   Tribunal   (for   short,   “the   ITAT”)
confirmed   the   decision   of   the   first   appellate   authority,   following   its
decision 1
  in   the   case   of   the   assessee­Company   for   the   Assessment
Year   2001­2002.     As   a   result,   the   Department   preferred   an   appeal
1   Chetak Enterprises P. Ltd. vs. ACIT, (2005) 95 ITD 1 (Jodh.)

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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 assessee­Company was right in finding
that   the   assessee   fulfilled   the   condition   of   sub­
Section (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
during   the   periods   as   specified   in   sub­section   (2)   and
thereafter,   twenty­five   per   cent   of   the   profits   and   gains   for
further five assessment years:
Provided   that   where   the   assessee   is   a   company,   the
provisions   of   this   sub­section   shall   have   effect   as   if   for   the
words “twenty­five per cent”, the words “thirty per cent” had
been substituted. 
(2) The deduction specified in sub­section  (1) may,  at  the
option   of   the   assessee,   be   claimed   by   him   for   any   ten
consecutive   assessment   years   out   of   fifteen   years   beginning
from   the   year   in   which   the   undertaking   or   the   enterprise
develops  and  begins  to  operate  any   infrastructure  facility   or
starts   providing   telecommunication   service   or   develops   an
industrial   park   or   generates   power   or   commences
transmission or distribution of power:
Provided   that   where   the   assessee   begins   operating   and
maintaining   any   infrastructure   facility   referred   to   in   clause
(b)   of   Explanation   to   clause   (i)   of   sub­section   (4),   the

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provisions   of   this   sub­section   shall   have   effect   as   if   for   the
words   “fifteen   years”,   the   words   “twenty   years”   had   been
substituted. 
(2A) Notwithstanding anything contained in sub­section (1)
or   sub­section   (2),   the   deduction   in   computing   the   total
income   of   an   undertaking   providing   telecommunication
services,   specified   in   clause   (ii)   of   sub­section   (4),   shall   be
hundred   per   cent   of   the   profits   and   gains   of   the   eligible
business   for   the   first   five   assessment   years   commencing   at
any   time   during   the   periods   as   specified   in   sub­section   (2)
and   thereafter,   thirty   per   cent   of   such   profits   and   gains   for
further five assessment years. 
(3) This   section   applies   to   an   industrial   undertaking
referred to in clause (iv) of sub­section (4) which fulfils all the
following conditions, namely: ­
(i) it   is   not   formed   by   splitting   up,   or   the
reconstruction,   of   a   business   already   in
existence:
Provided   that   this   condition   shall   not   apply
in respect of an industrial undertaking which
is formed as a result of the re­establishment,
re­construction   or   revival   by   the   assessee   of
the   business   of   any   such   industrial
undertaking   as   is   referred   to   in   section   33B,
in   the   circumstances   and   within   the   period
specified in that section; 
(ii) it   is   not   formed   by   the   transfer   to   a   new
business   of   machinery   or   plant   previously
used for any purpose.
Explanation 1.­For the purposes of clause (ii),
any   machinery   or   plant   which   was   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 

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(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 applies to­ 
(i) Any enterprise carrying on the business of (i)
developing,   (ii)   maintaining   and   operating   or
(iii)   developing,   maintaining   and   operating
any infrastructure facility which fulfils all the
following conditions, namely: ­
(a) it  is  owned  by  a  company   registered  in
India   or   by   a   consortium   of   such
companies;
(b) it   has   entered   into   an   agreement   with
the   Central   Government   or   a   State
Government or a local authority or any
other   statutory   body   for   (i)   developing,
(ii)   maintaining   and   operating   or   (iii)
developing,   maintaining   and   operating
a   new   infrastructure   facility   subject   to
the   condition   that   such   infrastructure
facility   shall   be   transferred   to   the
Central   Government,   State
Government,   local   authority   or   such
other   statutory   body,   as   the   case   may
be,   within   the   period   stipulated   in   the
agreement;
(c) it   has   started   or   starts   operating   and
maintaining   the   infrastructure   facility
on or after the 1 st
 day of April, 1995:

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Provided   that   where   an   infrastructure
facility is transferred on or after the 1 st
day   of   April,   1999   by   an   enterprise
which   developed   such   infrastructure
facility   (hereafter   referred   to   in   this
section   as   the   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. 
Explanation.­ For the purposes of this clause,
“infrastructure facility” means,­
(a) a   road,   bridge,   airport,   port,   inland
waterways   and   inland   ports,   rail
system   or   any   other   public  facility   of   a
similar   nature   as   may   be   notified   by
the   Board   in   this   behalf   in   the   Official
Gazette;
(b) a highway project including housing or
other activities being an integral part of
the highway project; and 
(c) a water supply project, water treatment
system,   irrigation   project   sanitation
and   sewerage   system   or   solid   waste
management 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 1 st
  day of April, 1995,
but on or before the 31 st 
day of March, 2003;

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(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   1 st
  day   of   April,
1997   and   ending   on   the   31 st
  day   of   March,
2006:
Provided   that   in   a   case   where   an
undertaking   develops   an   industrial   park   on
or   after   the   1 st
  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 undertaking which,­
(a) is   set   up   in   any   part   of   India   for   the
generation   or   generation   and
distribution   of   power   if   it   begins   to
generate   power   at   any   time   during   the
period beginning on the 1 st
 day of April,
1993   and   ending   on   the   31 st
  day   of
March, 2003;
(b) starts   transmission   or   distribution   by
laying   a   network   of   new   transmission
or distribution lines at any time during
the   period   beginning   on   the   1 st
  day   of
April, 1999 and ending  on the 31 st
  day
of March, 2003:
Provided   that   the   deduction   under   this   section   to
an   industrial   undertaking   under   sub­clause   (b)
shall   be   allowed   only   in   relation   to   the   profits
derived from laying of such network of new lines for
transmission or distribution. 
(5) Notwithstanding   anything   contained   in   any   other
provision   of   this   Act,   the   profits   and   gains   of   an   eligible
business   to   which   the   provisions   of   sub­section   (1)   apply
shall,   for   the   purposes   of   determining   the   quantum   of

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deduction   under   that   sub­section   for   the   assessment   year
immediately   succeeding   the   initial   assessment   year   or   any
subsequent assessment year, be computed as if such eligible
business   were   the   only   source   of   income   of   the   assessee
during   the   previous   year   relevant   to   the   initial   assessment
year   and   to   every   subsequent   assessment   year   up   to   and
including the assessment year for which the determination is
to be made. 
(6) Notwithstanding anything contained in sub­section (4),
where   housing   or   other   activities   are   an  integral   part   of   the
highway   project   and   the   profits   of   which   are   computed   on
such   basis   and   manner   as   may   be   prescribed,   such   profit
shall   not   be   liable   to   tax   where   the   profit   has   been
transferred   to   a   special   reserve   account   and   the   same   is
actually   utilised   for   the   highway   project   excluding   housing
and other activities before the expiry of three years following
the   year   in   which   such   amount   was   transferred   to   the
reserve account; and the amount remaining  unutilised shall
be   chargeable   to   tax   as   income   of   the   year   in   which   such
transfer to reserve account took place. 
(7) Where the assessee is a person other than a company
or   a   co­operative   society,   the   deduction   under   the   sub­
section (1) from profits and gains derived from an industrial
undertaking   shall   not   be   admissible   unless   the   accounts   of
the   industrial   undertaking   for   the   previous   year   relevant   to
the assessment year for which the deduction is claimed 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:

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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
such   profits   and   gains   on  such  reasonable  basis  as  he  may
deem fit. 
Explanation.   ­For   the   purposes   of   this   sub­section,   “market
value”,   in   relation   to   any   goods,   means   the   price   that   such
goods would ordinarily fetch on sale in the open market. 
(9) Where   any   amount   of   profits   and   gains   of   an   industrial
undertaking or of an enterprise in the case of an assessee is
claimed   and   allowed   under   this   section   for   any   assessment
year, deduction to the extent of such profits and gains shall
not   be   allowed   under   any   other   provisions   of   this   Chapter
under   the   heading   “C.­Deductions   in   respect   of   certain
incomes”,   and   shall   in  no   case   exceed   the   profits   and  gains
of   such   eligible   business   of   industrial   undertaking   or
enterprise, as the case may be. 
(10) Where   it   appears   to   the   Assessing   Officer   that,   owing
to the close connection between the assessee carrying on the
eligible   business   to   which   this   section   applies   an   any   other
person,   or   for   any   other   reason,   the   course   of   business
between   them   is   so   arranged   that   the   business   transacted
between   them   produces   to   the   assessee   more   than   the
ordinary   profits   which   might   be   expected   to   arise   in   such
eligible   business,   the   Assessing   Officer   shall,   in   computing
the   profits   and   gains   of   such   eligible   business   for   the
purposes   of   the   deduction   under   this   section,   take   the
amount of profits as may be reasonably deemed to have been
derived therefrom. 
(11) The   Central   Government   may,   after   making   such
inquiry   as   it   may   think   fit,   direct,   by   notification   in   the
Official Gazette, that the exemption conferred by this section
shall   not   apply   to   any   class   of   industrial   undertaking   or
enterprise with effect from such date as it may specify in the
notification. 
(12) Where any undertaking of an Indian company which is
entitled   to   the   deduction   under   this   section   is   transferred,
before   the   expiry   of   the   period   specified   in   this   section,   to
another   Indian   company   in   a   scheme   of   amalgamation   or
demerger­ 
(a) no   deduction   shall   be   admissible   under   this
section to the amalgamating or the demerged
company   for   the   previous   year   in   which   the

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amalgamation   or   the   demerger   takes   place;
and 
(b) the   provisions   of   this   section   shall,   as   far   as
may   be,   apply   to   the   amalgamated   or   the
resulting   company   as   they   would   have
applied to the amalgamating or the demerged
company   if   the   amalgamation   or   demerger
had not taken 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   operation   of   Law   under
Part   IX   of   the   Companies   Act,   1956   as   going
concern and continue the partnership business
now being carried on under the name & style of
M/s Chetak Enterprises including all its assets,
movables   and   immovables,   rights,   debts   and
liabilities in connection therewith.’’
Then,  it  has  also been  found by  the  learned  Tribunal,
at   page   13   of   the   judgment,   that   the   erstwhile   partnership
firm,   in   its   first   communication   to   the   Chief   Engineer   on
23.10.1998,   while  replying   to   the   notice   inviting   bids,   made
it   categorically   clear,   that   ‘‘the   firm   will   be   converted   into   a
limited company under Chapter IX of the Companies Act. As
such,   you   are   requested   to   allow   us   change   in   constitution
and   accordingly   change   of   name   in   agreement,   after

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converting   firm   into   company   with   the   existing   partners   as
its   Directors,   and   the   Chief   Engineer   vide   letter   dt.
27.8.1999,   took   note   of   this   letter,   and   informed,   that   their
offer was accepted, subject to terms and conditions specified
therein.   It   is   thereafter,   that   agreement   was   entered   into
between   the   Government   and   the   Firm,   wherein   the   said
letter of the Chief Engineer dt. 27.8.1999, was considered as
part   of   the   agreement.   With   this,   the   agreement   also
mentions the firm, ‘‘to mean and include its successors and
assigns’’. Thus it has been found, that since incorporation of
the Firm into a Company, has the effect of statutorily vesting
of   liabilities   and   assets   in   the   Firm,   and   the   agreement
comprehends   successors   and   assigns,   it   is   clear,   that   the
assessee   fulfils   all   the   conditions.   Then   the   proviso,
appended   in   this   sub­section,   has   also   been   considered,
which clearly provides for entitlement of the deduction to the
transferee,   with   effect   from   the   date   of   transfer,   therefore
also, it was found that the deduction is available. 
In   our   view,   when   right   from   the   day   one,   i.e.   while
replying   to   the   notice   inviting   tenders   itself,   it   was   made
clear   by   the   Firm,   that   the   Firm   will   be   converting   into   a
limited   Company   under   Part   IX   of   the   Companies   Act,   and
the Chief Engineer was requested to allow the change in the
Constitution,   and   accordingly   change   of   name   in   the
agreement, after converting the Firm into the Company, with
the   existing   partners   as   its   Directors,   and   this   request   was
accepted,   and   that   acceptance   letter   formed   part   of   the
agreement,   in   our   view,   the   Firm   stands   in   the   shoes   of
promoter,   and   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,

12
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   Court.     The   present   civil   appeal   emanates   from
SLP(C)   No.   6772/2009   and   pertains   to   Assessment   Year   2002­2003.
As   regards   Civil   Appeal   No.   1748/2010   (arising   out   of   SLP(C)   No.
3430/2009) pertaining to Assessment Year 2001­2002, the same has
been   disposed   of   in   terms   of   order   dated   17.10.2019   due   to   low   tax
effect leaving question of law open.
5. We   have   heard   Mr.   Rupesh   Kumar,   learned   counsel   for   the
appellant and Mr. S. Krishnan, learned counsel for the respondent.
6. It is not in dispute that an agreement was executed between the
erstwhile partnership firm and the State Government for construction
of   road   and   collection   of   toll   tax.     Before   the   commencement   of   the
assessment year in question i.e. 2002­2003, the construction of road
was   completed   (on   27.3.2000)   and   it   was   inaugurated   on   1.4.2000.
Before   the   date   of   inauguration,   the   partnership   firm   was   converted
into   a   company   on   28.3.2000   under   Part   IX   of   the   Companies   Act.
The Memorandum of Association of the assessee­Company reveals the
main object as follows: ­

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“On   conversion   of   the   partnership   firm   into   a
company  limited by shares under these presents to
acquire   by   operation   of   law   under   Part   IX   of   the
Companies   Act,   1956   as   going   concern   and
continue   the   partnership   business   now   being
carried on under the name and style of M/s. Chetak
Enterprises   including   all   its   assets,   movables   and
immovables,   rights,   debts   and   liabilities   in
connection therewith.”
As   a   matter   of   fact,   before   the   agreement   was   executed   with   the
erstwhile   partnership   firm,   it   was   clearly   understood   that   the
partnership   firm   would   in   due   course   be   converted   into   a   registered
limited company.  That is evident from the communication addressed
to   the   Chief   Engineer   on   23.10.1998,   at   the   time   of   replying   to   the
notice   inviting   bids.     An   explicit   request   was   made   to   allow   the
partnership firm  to change its constitution and consequently  change
of   name   in   the   agreement   after   converting   the   firm   into   a   company
with the existing partners as its Directors.   The Chief Engineer being
the   appropriate   authority   of   the   State,   vide   letter   dated   27.8.1999,
took note  of the request  made by  the erstwhile partnership firm  and
informed   the   said   firm   that   its   offer   was   accepted   subject   to   terms
and   conditions   specified   in   that   regard.     It   is   only   after   this
interaction, an agreement  was entered into between  the  Government

14
of   Rajasthan   and   the   erstwhile   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 assessee­Company.
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   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

15
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.
8. For   the   purpose   of   considering   compliance   of   clause   (a)   of
Section   80­IA(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
2002­2003.     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

16
27.3.2000 and the same was inaugurated on 1.4.2000, whereafter toll
tax was being collected by the assessee­Company.
9. As   regards   clause   (b)   of   Section   80­IA(4)(i),   the   requirement
predicated is that the assessee must have entered into an agreement
with   the   Central   Government   or   a   State   Government   or   a   local
authority   or   any   other   statutory   body   for   (i)   developing,   (ii)
maintaining   and   operating   or   (iii)   developing,   maintaining   and
operating   a   new   infrastructure   facility.     As   aforesaid,   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 assessee­Company, 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   assessee­Company.     Since

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these are the only two issues which weighed with the assessing officer
to deny deduction to the assessee­Company 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/assessee­Company   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   to   which   the   respondent/assessee­Company   has
succeeded   in   law   after   conversion   of   the   partnership   firm   into   a
company.
10. Learned   counsel   for   the   appellant   has   relied   on   the   decision   of
this   Court   in   Giridhar   G.   Yadalam   vs.   Commissioner   of   Wealth
Tax   &   Anr . 2
.       In   the   said   decision,   the   Court   had   delineated   the
contours   regarding   permissibility   of   purposive   interpretation   of
taxing/fiscal   statutes,   particularly   in   the   context   of   an   exemption.
This decision is of no avail to doubt the correctness of the view taken
2   (2015) 17 SCC 664

18
by   the   High   Court   vide   the   impugned   judgment,   in   the   facts   of   the
present case.
11.  In view of the above, the appeal stands dismissed with no order
as to costs.
................................., J
     (A.M. Khanwilkar)      
................................., J
      (Dinesh Maheshwari)   
New Delhi;
March 05, 2020.