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TMI Blog2013 (10) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble High Court of Gujarat, according to which the Directors of both the companies are authorized to take such steps as may be necessary or desirable including any directions for settling any question or doubt or difficulty whatsoever that may arise." 2. Facts in brief as emerged from the corresponding assessment order passed u/s. 143(3), dated 27.12.2011 were that the assessee company is in the business of manufacturing and trading of pharmaceutical products. It was noted by the AO that under the head "Misc. Expenses" an expenditure of Rs.1,11,31,098/- was claimed. On verification, it was found that under the said head of expenditure an amount of Rs.42,94,250/- was debited as "premium on redemption of debentures". The AO has further noted that there was a demerger of pharmaceutical business division of Unimed Technologies Ltd. to Milmet Pharma Ltd. The said demerger was approved by the Hon'ble Gujarat High Court. The AO has examined the balance sheet of the division of the said Unimed Technologies Ltd. drawn as on 31st of March, 2008. It was observed that at the time of demerger, the said fully convertible debentures were not transferred to the balance sheet of Pharma Division o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully convertible debentures worth Rs.8,58,85,000/- from the demerged company. Therefore, the expenses claimed of Rs.42,94,250/- on account premium on redemption of debentures is not allowable in the hands of the assessee company because the said expenditure has not been incurred for the purpose of earning any income accrued to the assessee rather it is evident that the expenditure was incurred on account of premium on redemption of debentures which has not been received by the company and which has not been taken as part of total income of the assessee company. The same is disallowed u/s. 37(1) of the Income Tax Act and added to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) of the Act is initiated on this issue." 2.2 Being aggrieved the matter was carried before the first appellate authority. 3. Before learned CIT(A), those very facts as discussed (supra) were reiterated. On examination of the facts and law, learned CIT(A) has affirmed the action of the AO in the following manner:- "I have considered the facts of the case as also the observation of the AO. Here it is worth noting that the appellant's original name was Milmet Pharma Ltd. On merger of Pharm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the AO's action of disallowance of payment on redemption of debentures is upheld and this ground of appeal is dismissed." 4. From the side of the assessee, learned AR., Mr. S.N. Soparkar appeared and informed that vide an order, on demerger petition, dated 26th of November, 2009, the Hon'ble Gujarat High Court has approved the scheme of demerger. As per the said scheme, pharmaceutical business division of Unimed Technologies was transferred to Milmet Pharma Ltd. He has informed that vide clause 11 of Scheme of Arrangement, the name of the "Resulting Company" shall stand as "Unimed Technologies Ltd." and then the name of the demerged company was accordingly changed to "Unimed Investments Ltd.". In any case, whatever was the change of name, he has confined his argument on the fact that 0% optional fully convertible debentures were issued on 20th of October, 2003 for Rs.100/- of Unimed Technologies Ltd. The appointed date was 1st of April, 2008. 4.1 Learned AR has pleaded that in the light of the decision of Madras Industrial Investment Corp. 225 ITR 802 (S.C.) the premium on redemption is allowable. The OFCDs were for a period of 5 years from the date of allotment. After the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned only for the sake of clarity because it appears that the clauses in this regard about the change in name were not aptly drafted being somewhat similar type of names were given, may bound to create slight confusion. In any case, if there is some fault in our understanding about the names so changed, the same is not going to effect our decision on the main controversy. The issue before us is about the admissibility of a deduction in respect of alleged redemption expenditure related to OFCD found to be issued by a demerged company. The objection of the AO was that the OFCD remained with the Unimed Investments Ltd. We have noted that as per Clause 9 of the Scheme the remaining business as well as the assets and liabilities were continued to be vested and managed by the demerged company. The assessee was unable to discard the aforesaid finding of the AO. We have noted that as per the schedule forming part of the Return filed for the year ended 31st March, 2009, it was noted as under: "The Board of Directors of Unimed Technologies Ltd. (now known as Unimed Investments Ltd.) at their meeting held on 25th March, 2009 approved the scheme of demerger (Scheme) between Unimed Technologie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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