IMPORTANT POINT
The agreement entered into between the erstwhile partnership firm and the State Government assumes the character of an agreement between the company succeeding the partnership firm and the State Government for (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating a new infrastructure facility.

JUDGMENT :

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 2002-2003, the relevant Previous/Financial year for which is 2001-2002 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 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 assessee-Company”) 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 assessee-Company. As aforesaid, the road was inaugurated on 1.4.2000 and the assessee-Company started collecting toll tax. For the relevant assessment year, the assessee-Company 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 assessee-Company, which decision was reversed by the Commissioner of Income-Tax (Appeals), Udaipur. The Income Tax Appellate Tribunal (for short, “the ITAT”) confirmed the decision of the first appellate authority, following its decision, [Chetak Enterprises P. Ltd. v.ACIT, (2005) 95 ITD 1 (Jodh.)] in the case of the assessee-Company for the Assessment Year 2001-2002. 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 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:

(b) of Explanation to clause (i) of subsection (4), the

Provided that where the assessee begins operating and maintaining any infrastructure facility referred to in clause 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 a