Summary
The Supreme Court upheld Chetak Enterprises’ infrastructure deduction for assessment year 2002–03 after a partnership firm’s statutory conversion into a company. Assets vested without conveyance under Part IX of the Companies Act, and the company succeeded to the government road agreement, which contemplated conversion and included successors and assigns. Both the corporate-ownership and government-agreement conditions relied upon to deny deduction were therefore fulfilled.
Issues
- Whether statutory conversion of the firm satisfied the corporate-ownership requirement for infrastructure deduction.
- Whether the company succeeded to the government agreement originally executed by the firm.
Provisions considered
- Section 80-IA(4)(i)(a) and (b), as applicable to AY 2002–03, Income-tax Act, 1961Corporate ownership and agreement requirements were satisfied by statutory succession and the acknowledged conversion. (¶¶ 3, 8, 9)
- Section 575, Companies Act, 1956Property vested in the incorporated company by operation of law without a separate conveyance. (¶ 7)
Held
- Conversion under Part IX produced statutory vesting of the firm’s property and succession by the company without a conveyance. The firm ceased its earlier status, and the company carried on the enterprise. (¶ 7)
- The company existed before the relevant assessment year and operated the completed road by collecting toll. Its enterprise accordingly met the registered-Indian-company ownership condition. (¶¶ 6, 7, 8)
- The original bid disclosed intended conversion, the State accepted that arrangement, and the agreement included successors and assigns. The State recognised the change and sanctioned the company; the agreement consequently stood in the successor company’s favour, satisfying the government-agreement condition. (¶¶ 6, 7, 9)
- Those two grounds were the assessing officer’s reasons for denying deduction. Their rejection justified the appellate authorities’ allowance of the claim. The separately disposed appeal for assessment year 2001–02 had been closed for low tax effect with the legal question left open. (¶¶ 4, 9, 10)
Result
Revenue’s appeal for assessment year 2002–03 dismissed without costs; deduction under section 80-IA upheld.