TMI Blog2017 (3) TMI 1531X X X X Extracts X X X X X X X X Extracts X X X X ..... It was, however, not said. Second, on the other hand, non-mentioning of the words does indicate the legislative intent that the Legislature did not intend to extend the benefit of Section 35D to such sum. As rightly pointed out, Section 78 of the Companies Act which deals with the issue of shares at premium and discount requires a Company to transfer the amount so collected as premium from the shareholders and keep the same in a separate account called securities premium account . It does not anywhere says that such amount be treated as part of capital of the company employed in the business for one or other purpose, as the case may be, even under the Companies Act. - Decided against assessee. - R. K. Agrawal And Abhay Manohar Sapre, JJ. JUDGMENT Abhay Manohar Sapre, J. 1) These appeals are filed against the final judgment and orders dated 15.05.2006 passed by the High Court of Delhi at New Delhi in Appeal Nos. ITA No. 799 of 2004 and 797 of 2004 whereby the High Court dismissed the appeals filed by the appellant herein arising out of the order dated 26.04.2004 and 25.08.2004 passed by the Income Tax Appellate Tribunal, New Delhi(hereinafter referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated as the capital contributed by the shareholders. The Commissioner also was of the view that the share premium account, which is shown as reserve in the balance sheet of the Company, was in the nature of the capital base of the Company and hence deduction under Section 35D of the Act was admissible with reference to the said amount also. Accordingly, the Commissioner allowed the appeals, set aside the order of A.O and disallowance of ₹ 5,08,257/- made by the A.O. and, therefore, deleted the said sum. In other words, the Commissioner allowed the deduction claimed by the appellant of the entire amount under Section 35D of the Act. 8) The Revenue, felt aggrieved, filed appeals before the Tribunal. The Tribunal allowed the appeals and reversed the view taken by the Commissioner of Income Tax (Appeals). The Tribunal held that the premium collected by the appellant-Company on the share capital did not tantamount to capital employed in the business of the Company within the meaning of Section 35D(3) of the Act. 9) It is against these orders, the Company-assessee felt aggrieved and filed two separate appeals under Section 260A of the Act before the High Court. By impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l undertaking is completed or, as the case may be, the new industrial unit commences production or operation, in so far as such capita, debentures and long term borrowings have been issued or obtained in connection with the extension of the industrial undertaking or the setting up of the new industrial unit of the company; 16) The Division Bench of the High Court in the impugned order examined the question lucidly. The learned Judge T.S. Thakur, J. (as His Lordship then was and later became CJI) speaking for the Bench held as under: 6. A careful reading of the above would show that in the case of an Indian company like the appellant, the aggregate amount of expenditure cannot exceed 2.5% of the capital employed in the business of the Company. The crucial question, therefore, is as to what is meant by capital employed in the business of the Company for it is the amount that represents such capital that would determined the upper limit to which the amount of allowable deduction can go. The expression has been given a clear and exhaustive definition in the explanation to sub-section 3. It reads as: (b) 7. The abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view taken by the High Court quoted supra as, in our considered opinion, the well-reasoned judgment/order of the High Court correctly explains the true meaning of the expression employed in sub-section3(b) of Section 35D read with Explanation (b) quoted above, calling no interference in the appeals. 18) In our considered opinion also, the premium amount collected by the Company on its subscribed issued share capital is not and cannot be said to be the part of capital employed in the business of the Company for the purpose of Section 35D(3)(b) of the Act and hence the appellant-Company was rightly held not entitled to claim any deduction in relation to the amount received towards premium from its various shareholders on the issued shares of the Company. 19) This we say for more than one reason. First, if the intention of the Legislature were to treat the amount of premium collected by the Company from its shareholders while issuing the shares to be the part of capital employed in the business of the company , then it would have been specifically said so in the Explanation(b) of sub-section(3) of Section 35D of the Act. It was, however, not said. 20) Second, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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