M/s. Unimed Technologies Ltd., Panchmahal V. The Income tax Officer,Ward-4(1), Baroda

ITA 1786/AHD/2012

• Counselvise Citation: 178620514 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-08-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 13-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: S N SOPARKAR
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 1786/AHD/2012 A.Y: 2009-10 UNIMED TECHNOLOGIES LTD., BASKA, BASKA UJETI ROAD, UJETI, HALOL, DIST. PANCHMAHAL, GUJARAT. PAN: AAACE 4022B VS ITO, WARD-4(1), BARODA. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI O.P. BATHEJA, SR. D.R . ASSESSEE(S) BY : SHRI S.N. SOPARKAR, A.R. DATE OF HEARING : 14/08/ 2013 DATE OF PRONOUNCEMENT : 16/09/2013 O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M AN ORDER OF LEARNED CIT(A)-III, BARODA, DATED 28.06.2012. GROUN DS 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 UPHOLD ING 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 DISCHARGE D BY ACTUAL PAYMENT DURING THE YEAR. THE LEARNED CIT(APPEAL) OUGHT TO HAVE APPRECIATED T HAT THE APPELLANTS CLAIM IS ALLOWABLE IN VIEW OF CLAUSE 13.2 ON PAGE 22 OF T HE SCHEME OF DEMERGER DULY SANCTIONED BY THE HONBLE HIGH COURT OF GUJARAT, AC CORDING TO WHICH THE DIRECTORS OF BOTH THE COMPANIES ARE AUTHORIZED TO T AKE SUCH STEPS AS MAY BE NECESSARY OR DESIRABLE INCLUDING ANY DIRECTIONS FOR SETTLING ANY QUESTION OR DOUBT OR DIFFICULTY WHATSOEVER THAT MAY ARISE. ITA NO.1786/AHD/2012 UNIMED TECHNOLOGIES LTD. VS. ITO, BARODA A.Y. 2009-10 - 2 - 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 PHARMA CEUTICAL PRODUCTS. IT WAS NOTED BY THE AO THAT UNDER THE HEAD MISC. EXPE NSES AN EXPENDITURE OF RS.1,11,31,098/- WAS CLAIMED. ON VER IFICATION, IT WAS FOUND THAT UNDER THE SAID HEAD OF EXPENDITURE AN AM OUNT 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 TECHNOLO GIES LTD. TO MILMET PHARMA LTD. THE SAID DEMERGER WAS APPROVED BY THE H ONBLE GUJARAT HIGH COURT. THE AO HAS EXAMINED THE BALANCE SHEET O F THE DIVISION OF THE SAID UNIMED TECHNOLOGIES LTD. DRAWN AS ON 31 ST OF MARCH, 2008. IT WAS OBSERVED THAT AT THE TIME OF DEMERGER, THE SAID FULLY CONVERTIBLE DEBENTURES WERE NOT TRANSFERRED TO THE BALANCE SHEE T OF PHARMA DIVISION OF THE ASSESSEE (FORMERLY KNOWN AS MILMET PHARMA LT D.). AT THIS JUNCTURE, LEARNED AR MR. S.N. SOPARKAR, HAS CLARIFI ED THAT THE BUSINESS OF THE DEMERGED COMPANY VIZ. UNIMED TECHNOLOGIES LTD. HAD A SEPARATE PHARMA DIVISION. AFTER THE DEMERGER WITH MILMET TE CHNOLOGIES LTD. THE RESULTING COMPANY IS ALSO NAMED AS UNIMED TECHNOLOG IES LTD.,( THE APPELLANT). THE AO HAS OBJECTED THAT THE EXPENDITUR E CLAIMED OF RS.42,94,250/- ON ACCOUNT OF PREMIUM ON REDEMPTION OF DEBENTURE WAS NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE COMPANY. IN COMPLIANCE, THE ASSESSEE HAS FURNISHED AN EXPLANATION, RELEVANT POR TION IS REPRODUCED BELOW:- DURING THE COURSE OF HEARING ON 19.11.2011, YOUR HO NOUR HAD RAISED A QUERY AS TO WHY PREMIUM ON REDEMPTION OF DEBENTURES AMOUN TING TO RS.42,94,250/- ITA NO.1786/AHD/2012 UNIMED TECHNOLOGIES LTD. VS. ITO, BARODA A.Y. 2009-10 - 3 - SHOULD NOT BE DISALLOWED. IN THIS REGARD, WE WISH T O SUBMIT TO YOUR HONOUR AS UNDER: THE SAID AMOUNT WAS DEBITED FOR THE REASON AND IN V IEW OF THE FACT THAT THE OFCDS, BEING CONVERTIBLE INTO SHARES, WE (I.E. NEW UNIMED TECHNOLOGIES LTD.) WERE NOT INTERESTED TO TAKE THE LIABLILITY OF REDEMPTION OF OFCDS, BUT IN CASE OF CONVERSION INTO SHARES, WE WERE VISUALIZING THE ADVANTAGE BY HAVING EQUITY. HENCE, IT WAS DECIDED BY THE BOARD OF DIREC TORS PRIOR TO DEMERGER THAT THE LIABILITY OF REDEMPTION PREMIUM OF 5%, IF AT ALL ARISES, WILL BE BORNE BY PHARMA UNDERTAKING. THIS WAS DECIDED IN VIEW OF THE INTEREST, THE PHARMA UNDERTAKING HAD IN EQUITY INVESTMENT IF AND WHEN CO NVERSION 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 OPTI ON OF REDEMPTION/CONVERSION, OFCD HOLDERS DID NOT EXERCIS E THE OPTION OF CONVERSION INTO EQUITY BUT OPTED FOR REDEMPTION. HE NCE, WE HAD TO BEAR THE EXPENSES OF REDEMPTION PREMIUM 5% AMOUNTING TO RS.4 2.94 LAKHS. IT IS THEREFORE SUBMITTED THAT THE EXPENDITURE, BEI NG RELATED TO PHARMA DIVISION AND SPECIFICALLY AGREED UPON, IS ALLOWABLE AS DEDUC TION 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 TH E 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 TENA BLE. 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 THE HANDS OF THE ASSESSEE COMPANY BECAUSE THE SAID EXPENDITUR E HAS NOT BEEN INCURRED FOR THE PURPOSE OF EARNING ANY INCOME ACCRUED TO TH E ASSESSEE RATHER IT IS EVIDENT THAT THE EXPENDITURE WAS INCURRED ON ACCOUN T OF PREMIUM ON REDEMPTION OF DEBENTURES WHICH HAS NOT BEEN RECEIVE D 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. 27 1(1)(C) OF THE ACT IS INITIATED ON THIS ISSUE. 2.2 BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE T HE FIRST APPELLATE AUTHORITY. ITA NO.1786/AHD/2012 UNIMED TECHNOLOGIES LTD. VS. ITO, BARODA A.Y. 2009-10 - 4 - 3. BEFORE LEARNED CIT(A), THOSE VERY FACTS AS DISCU SSED (SUPRA) WERE REITERATED. ON EXAMINATION OF THE FACTS AND LAW, LE ARNED CIT(A) HAS AFFIRMED THE ACTION OF THE AO IN THE FOLLOWING MANN ER:- I HAVE CONSIDERED THE FACTS OF THE CASE AS ALSO TH E OBSERVATION OF THE AO. HERE IT IS WORTH NOTING THAT THE APPELLANTS ORIGIN AL NAME WAS MILMET PHARMA LTD. ON MERGER OF PHARMACEUTICAL UNDERTAKING OF UNI MED TECHNOLOGIES LTD. THE APPELLANTS NAME WAS CHANGED TO UNIMED TECHNOL OGIES LTD. AND THE NAME OF ORIGINAL UNIMED TECHNOLOGIES WAS CHANGED TO UNIMED INVESTMENTS LTD. FROM THE ORDER OF HONBLE HIGH CO URT OF GUJARAT IN THE MATTER OF SCHEME OF ARRANGEMENT IN THE NATURE OF DE MERGER AND TRANSFER OF PHARMACEUTICAL DIVISION OF UNIMED TECHNOLOGIES LTD. MILMET PHARMA LTD. DATED 26.11.2009 IT IS SEEN THAT AS PER ANNEXURE A TO THIS ORDER, THE LIABILITY ON ACCOUNT OF DEBENTURES REMAINED IN THE BALANCE SH EET OF ERSTWHILE UNIMED TECHNOLOGIES LTD. AS ON 31.03.2008, AND IT WAS NOT TRANSFERRED TO THE APPELLANT ON ACCOUNT OF TRANSFER TO IT OF THE PHARM ACEUTICAL UNDERTAKING. THIS IS ALSO EVIDENT FROM THE BALANCE SHEET OF THE APPEL LANT AS ON 31.03.2008, IN WHICH NO SUCH LIABILITY ON ACCOUNT OF DEBENTURES IS EXISTING. IN FACT AS ON 31.03.2008, THERE IS NO LOAN FUND IN THE BALANCE SH EET OF THE APPELLANT. THUS, THE LIABILITY ON ACCOUNT OF DEBENTURES WAS NEVER TH E LIABILITY OF THE APPELLANT. THE APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY EVID ENCE TO SHOW THAT THERE WAS NAY AGREEMENT BETWEEN THE APPELLANT AND ERSTWHI LE UNIMED TECHNOLOGIES LTD., AS WAS EXISTING PRIOR TO THE DEMERGER, THAT A NY LIABILITY ON ACCOUNT OF THIS OPTIONALLY CONVERTIBLE DEBENTURES WOULD BE OWNED BY THE APPELLANT. THUS, THE PAYMENT MADE BY THE APPELLANT ON ACCOUNT OF PREMIUM ON REDEMPTION OF DEBENTURES IS NOT A PAYMENT MADE FOR THE PURPOSE OF THE BUSINESS OF THE APPELLANT, BUT RATHER IT IS A PAYMENT MADE FOR HE P URPOSES OF BUSINESS OF SOME OTHER ENTITY AND IT CAN AT BEST BE HELD TO BE GRATU ITOUS IN NATURE. MOREOVER, THE DEFINITIONS OF THE DEMERGED UNDERTAKING AND REM AINING 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 DEMERGE D UNDERTAKING HAS BEEN TRANSFERRED TO THE APPELLANT AND BALANCE LIABILITIE S OF THE BUSINESS AND OTHER DIVISIONS OF ERSTWHILE UTL, EXCEPT PERTAINING TO PH ARMACEUTICAL 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 O F ARRANGEMENT, HENCE, THE APPELLANTS CLAIM FOR ALLOWANCE OF REDEMPTION CHARG ES PAID ON DEBENTURES ARE AGAINST THIS SCHEME OF ARRANGEMENT ALSO WHICH H AS BEEN APPROVED BY HONBLE GUJARAT HIGH COURT. ACCORDINGLY, THE AOS A CTION OF DISALLOWANCE OF PAYMENT ON REDEMPTION OF DEBENTURES IS UPHELD AND T HIS 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 DEMERG ER PETITION, DATED ITA NO.1786/AHD/2012 UNIMED TECHNOLOGIES LTD. VS. ITO, BARODA A.Y. 2009-10 - 5 - 26 TH OF NOVEMBER, 2009, THE HONBLE GUJARAT HIGH COURT HAS APPROVED THE SCHEME OF DEMERGER. AS PER THE SAID SCHEME, PHARMACEUTICAL BUSINESS DIVISION OF UNIMED TECHNOLOGIES WAS TRANSF ERRED 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 C ONFINED HIS ARGUMENT ON THE FACT THAT 0% OPTIONAL FULLY CONVERT IBLE DEBENTURES WERE ISSUED ON 20 TH OF OCTOBER, 2003 FOR RS.100/- OF UNIMED TECHNOLOGI ES LTD. THE APPOINTED DATE WAS 1 ST 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 PE RIOD OF 5 YEARS FROM THE DATE OF ALLOTMENT. AFTER THE END OF FIVE Y EARS, THE OFCDS WERE EITHER TO BE REDEEMED OR CONVERTED INTO EQUITY SHAR ES. THERE WAS AN OPTION OF REDEMPTION AFTER EXPIRY OF THREE YEARS FR OM THE DATE OF ALLOTMENT. THE OFCD HOLDERS WERE ENTITLED TO A PREM IUM OF 5% ON THE FACE VALUE. SINCE, THE BOARD OF DIRECTORS OF THE OR IGINAL COMPANY, I.E., UNIMED TECHNOLOGIES, (LATER ON NAMED AS UNIMED INVE STMENTS LTD.) HAVE DECIDED AND APPROVED THE SCHEME OF DEMERGER, H ENCE, THE ASSETS AND LIABILITIES OF THE PHARMACEUTICAL BUSINESS DIVI SION STOOD TRANSFERRED AND VESTED WITH THE ASSESSEE COMPAY, W.E.F. THE APP OINTED DATE. LD. AR HAS THEREFORE ARGUED THAT THE AFORESAID LIABILITY WAS UNDERTAKEN BY THE ASSESSEE. IT WAS FOUND BENEFICIAL TO PAY THE PREMIU M INSTEAD OF ALLOWING THE CONVERSION INTO SHARES. HE HAS PLEADED THAT THE LIABILITY ACCRUED ON ITA NO.1786/AHD/2012 UNIMED TECHNOLOGIES LTD. VS. ITO, BARODA A.Y. 2009-10 - 6 - REDEMPTION WAS BORNE BY THE ASSESSEE COMPANY WHICH WAS UNDERTAKEN ON DEMERGER. HE HAS FINALLY CONCLUDED THAT THIS EXP ENDITURE IS ALLOWABLE U/S. 37(1) OF IT ACT. 5. FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R. MR . O.P. BATHEJA APPEARED AND SUPPORTED THE VIEW TAKEN BY THE AO. HE HAS ARGUED THAT IN A SITUATION WHEN THE CONVERTIBLE DEBENTURES HAVE NO T BEEN TRANSFERRED TO THE ASSESSEE COMPANY THEN IT WAS NOT THE LIABILITY OF THE ASSESSEE COMPANY BUT THE LIABILITY OF THE DEMERGED COMPANY. THE LIABILITY OF A THIRD PARTY CANNOT BE ALLOWED AS AN ADMISSIBLE EXPE NDITURE U/S 37(1) OF THE IT ACT. 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 HONBLE GUJARAT HIGH COURT, DATED 26 TH 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 DEMERG ED COMPANY, I.E., UTL WAS HAVING A SEPARATE PHARMACEUTICAL BUSI NESS. ON THE APPOINTED DATE, I.E. 1 ST DAY OF APRIL, 2008, THE DEBTS/LIABILITY AND OBLIGATION OF THE SAID PHARMACEUTICAL DIVISION OF U TL GOT DEMERGED. THE REMAINING BUSINESS OF THE UTL REMAINED UNCHANGED. AS PER CLAUSE 11, I.E. CHANGE OF NAME, UPON THE SCHEME BEING EF FECTIVE, THE NAME OF THE RESULTING COMPANY CHANGED TO UNIMED INVESTMENT LTD., HOWEVER, THE NAME OF THE DEMERGED COMPANY REMAINED TO BE U NIMED TECHNOLOGIES LTD. THESE FACTS, IN RESPECT OF CHANG E OF NAME, ARE HEREBY ITA NO.1786/AHD/2012 UNIMED TECHNOLOGIES LTD. VS. ITO, BARODA A.Y. 2009-10 - 7 - MENTIONED ONLY FOR THE SAKE OF CLARITY BECAUSE IT A PPEARS THAT THE CLAUSES IN THIS REGARD ABOUT THE CHANGE IN NAME WERE NOT AP TLY DRAFTED BEING SOMEWHAT SIMILAR TYPE OF NAMES WERE GIVEN, MAY BOUN D TO CREATE SLIGHT CONFUSION. IN ANY CASE, IF THERE IS SOME FAULT IN O UR UNDERSTANDING ABOUT THE NAMES SO CHANGED, THE SAME IS NOT GOING TO EFFE CT OUR DECISION ON THE MAIN CONTROVERSY. THE ISSUE BEFORE US IS ABOUT THE ADMISSI BILITY OF A DEDUCTION IN RESPECT OF ALLEGED REDEMPTION EXPENDITURE RELATED T O 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 H AVE NOTED THAT AS PER CLAUSE 9 OF THE SCHEME THE REMAINING BUSINES S AS WELL AS THE ASSETS AND LIABILITIES WERE CONTINUED TO BE VESTED AND MANAGED BY THE DEMERGED COMPANY. THE ASSESSEE WAS UNABLE TO DISCAR D THE AFORESAID FINDING OF THE AO. WE HAVE NOTED THAT AS PER THE SC HEDULE FORMING PART OF THE RETURN FILED FOR THE YEAR ENDED 31 ST 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 25 TH MARCH, 2009 APPROVED THE SCHEME OF DEMERGER (SCHEME) BETWEEN UNIMED TECHNOLO GIES LTD. (NOW KNOW AS UNIMED INVESTMENTS LTD.) (DEMERGED COMPANY) AND MILMET PHARMA LTD. (NOW KNOWN AS UNIMED TECHNOLOGIES LTD.) (RESULTING COMPANY) AND THEIR RESPECTIVE SHAREHOLDERS AND CREDITORS U/S 391-394 OF THE COMPANIES ACT, 1956 WHICH WAS SANCTIONED BY THE HONBLE HIGH COURT OF JUDICATURE AT AHMEDABAD, GUJARAT ON 24 TH DECEMBER, 2009. ON GIVING EFFECT OF THE SCHEME, WITH EFFECT FROM THE APPOINTED DATE OF 1 ST APRIL, 2008 ALL THE ASSETS AND LIABILITIES OF THE PHARMACEUTICAL BUSINESS STANDS T RANSFERRED AND VESTED IN THE COMPANY WITH EFFECT FROM THE APPOINTED DATE. THE SC HEME HAS BEEN GIVEN EFFECT TO IN THESE FINANCIAL STATEMENTS AND ACCORDI NGLY, NET ASSETS OF RS.3,23,86,584/- (COMPRISING ASSETS OF RS.3,84,65,7 76/- AND LIABILITIES OF RS. 60,79,192) SO TRANSFERRED BY UNIMED TECHNOLOGIES LT D. (NOW KNOWN AS UNIMED INVESTMENTS LTD.) HAS BEEN CREDITED TO GENER AL RESERVE OF THE COMPANY, PURSUANT TO THE SAID COURT ORDER. THE EXIS TING SHARE CAPITAL OF THE COMPANY WAS CANCELLED AND CREDITED TO GENERAL RESER VE. ITA NO.1786/AHD/2012 UNIMED TECHNOLOGIES LTD. VS. ITO, BARODA A.Y. 2009-10 - 8 - 6.1 THEREFORE, THE NUMBER OF ASSETS THUS REMAINED W ITH THE UNIMED INVESTMENTS LTD. THE ASSESSEE WAS NOT CONCERNED ABO UT THOSE ASSETS. ALTHOUGH IT IS TRUE THAT OFCD WERE EITHER TO BE RED EEMED OR TO BE CONVERTED INTO EQUITY SHARES AFTER THE EXPIRY OF TH REE YEARS BUT THAT WAS TO BE EXECUTED BY UNIMED INVESTMENTS LTD. RATHER, AO H AS ALSO GIVEN A FINDING THAT THOSE FULLY CONVERTIBLE DEBENTURES WER E 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 T HERE WAS A CLEAR DEMARCATION OF DEMERGED UNDERTAKING WHICH WAS DEA LT AS PROVISIONAL BALANCE SHEET OF UTL. MEANING THEREBY THE ENTIRE BU SINESS 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 PH ARMA 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 WA Y BE CONCERNED ABOUT THAT ASSET, SO EVEN CAN NOT CLAIM EXPENDITURE . ON ACCOUNT OF THESE FACTS, WE HEREBY HOLD THAT THE PREMIUM ON REDEMPTIO N OF DEBENTURE WAS NOT THE LIABILITY OF THE ASSESSEE. HENCE, IT WAS WR ONGLY CLAIMED FOR YEAR UNDER CONSIDERATION. THE PROVISION OF SECTION 37(1) ARE UNAMBIGUOUS THAT AN EXPENDITURE IS ALLOWABLE ONLY IF THE EXPEND ITURE IS LAID OUT OR EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. BECAUSE OF THESE REASONS, THE CASE LAW OF MADRAS INDUSTRIAL INVESTMENT CORP. (SUPRA) IS ALSO NOT APPLICABLE BECAUSE THE ALLEGED EXPENDITURE IN QUESTION DID NOT PERTAIN OR RELATE T O THE ASSESSEE. ITA NO.1786/AHD/2012 UNIMED TECHNOLOGIES LTD. VS. ITO, BARODA A.Y. 2009-10 - 9 - RESULTANTLY, WE HEREBY AFFIRM THE FINDINGS OF THE A UTHORITIES BELOW AND DISMISS THE GROUNDS OF THE REVENUE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. SD/- SD/- (A.K. GARODIA) (MUKUL KR. SHRAW AT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 16/09/2013 PRABHAT KR. KESARWANI, SR.P.S. TRUE COPY COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A)-III, AHMEDABAD 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, (DY./ASSTT.REGISTRAR) ITAT, AHMEDABAD