9911796707
TMI Blog2013 (10) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... Shrawat And Shri A. K. Garodia,JJ. For the Petitioner : Shri O. P. Batheja, Sr. D.R. For the Respondent : Shri S. N. Soparkar, A.R. ORDER Per Shri Mukul Kr. Shrawat, Judicial Member :- This is an appeal filed by the assessee arising from an order of learned CIT(A)-III, Baroda, dated 28.06.2012. Grounds raised are hereby decided as follows: "On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax(Appeals) erred in upholding the A.O.'s disallowance of Rs.42,94,240/- being premium on redemption of debentures despite the fact that the contractual obligation in respect of the said payment was on the appellant company i.e. resulting company on the facts of the case and that the said liability has been duly discharged by actual payment during the year. The learned CIT(Appeal) ought to have appreciated that the appellant's claim is allowable in view of clause 13.2 on page 22 of the scheme of demerger duly sanctioned by the Hon'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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had in equity investment if and when conversion takes place. Time of redemption was to expire in October, 2008 (i.e. 5 years from the date of allotment in October, 2003). Subsequently by the due date of exercising the option of redemption/conversion, OFCD holders did not exercise the option of conversion into equity but opted for redemption. Hence, we had to bear the expenses of redemption premium 5% amounting to Rs.42.94 lakhs. It is therefore submitted that the expenditure, being related to pharma division and specifically agreed upon, is allowable as deduction u/s.37." 2.1 However, the AO was not convinced and held that the expenditure so claimed was not in respect of the business of the assessee and disallowed the same in the following manner:- "I have duly considered the submission made by the assessee. However, the contention raised by the assessee is not found tenable. It is important to mention here that at the time of demerger, the assessee company has not received any 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debentures is not a payment made for the purpose of the business of the appellant, but rather it is a payment made for he purposes of business of some other entity and it can at best be held to be gratuitous in nature. Moreover, the definitions of the demerged undertaking and remaining business have been given in clause (1) of section 1 of the Scheme of Arrangement. As per this , all the debts and liabilities of the demerged undertaking has been transferred to the appellant and balance liabilities of the business and other divisions of erstwhile UTL, except pertaining to pharmaceutical business has been defined as the remaining business. Since only the pharmaceutical undertaking is transferred to the appellant and no debenture has been allocated to the appellant on the basis of Scheme of Arrangement, hence, the appellant's claim for allowance of redemption charges paid on debentures are against this scheme of arrangement also which has been approved by Hon'ble Gujarat High Court. Accordingly, 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 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 6. We have heard both the sides at some length. We have perused the contents of the scheme in the light of the order of the Hon'ble Gujarat High Court, dated 26th of November, 2009 through which the said demerger scheme was approved. As per the Scheme of Arrangement which was executed between Unimed Technology Ltd. (UTL) and Milmet Pharma Ltd (MPL) it was decided for demerger and transfer of pharmaceutical business from UTL to MPL. The demerged company, i.e., UTL was having a separate Pharmaceutical Business. On the appointed date, i.e. 1st day of April, 2008, the debts/liability and obligation of the said pharmaceutical division of UTL got demerged. The "Remaining Business" of the UTL remained unchanged. As per Clause 11, i.e. "Change of name", upon the scheme being effective, the name of the Resulting Company changed to "Unimed Investment Ltd.", however, the name of the Demerged company remained to be "Unimed Technologies Ltd". These facts, in respect of change of name, are hereby mentioned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convertible debentures were not a part and parcel of the pharmaceutical division. Due to said reason, the OFCD were not received by the assessee company. As per Clause 1 there was a clear demarcation of "demerged undertaking" which was dealt as provisional balance sheet of UTL. Meaning thereby the entire business of UTL was not transferred (a feature of Demerger as defined u/s. 2 (19AA) of IT Act) but an undertaking was transferred under the "Scheme of Arrangement". The assets and liabilities of that pharma division, which was transferred, did not contain the OFCD. Meaning thereby, in a situation when an asset and the connected liability in demerger is not transferred by the Demerged Company to a Resulting Company then naturally the Resulting Company shall not in any way be concerned about that asset, so even can not claim expenditure. On account of these facts, we hereby hold that the premium on redemption of debenture was not the liability of the assessee. Hence, it was wrongly claimed for year under consideration. The provision of Section 37(1) are unambiguous that an expenditure is allowable only if the expenditure is laid out or expanded wholly and exclusively for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
