TMI Blog2006 (5) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... is taken as part of shareholders' fund but the same was not a part of the issued, subscribed and paid up capital of the company. The Explanation to section 35D(3) of the Act does not include the reserve and surplus of the company as a part of the capital employed in the business of the company. If the intention was that any amount other than the share capital, debentures and long-term borrowings of the company ought to be treated as part of the capital employed in the business of the company, Parliament would have suitably provided for the same. So long as that has not been done and so long as the capital employed in the business of the company is restricted to the issued share capital, debentures and long-term borrowings, there is no r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of the company . It was, inter alia, argued by the assessee that it had issued shares on a premium which premium was according to the assessee, a part of the capital employed in the business of the company. The Assessing Officer did not think so. He was of the view that the expression capital employed in the business of the company did not include the premium received on share capital, as contended by the assessee. He accordingly calculated the allowable deduction under section 350 at Rs. 1,95,049/- only, disallowing and adding back the rest of the amount claimed to be taxable income of the assessee. 3. Aggrieved by the above order, the assessee filed an appeal before the Commissioner of Income-tax who took the view that since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion with the setting up of a new industrial unit, the assessee shall be allowed a deduction of an amount equal to 1/10 th of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or the extension of the industrial undertaking is completed or the new industrial unit commences production or operation. Sub-section (2) enumerates the expenditure regarding which such amortisation can be claimed while sub-section (3) limits the aggregate amount of expenditure for purposes of computing the deduction allowable under sub-section (1) to section 35D. Sub-section (3) with which we are concerned may at this stage, be extracted to the extent the same is relevant for our purposes: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the last day of the previous year in which the business of the company commences; (ii) in a case referred to in clause (ii) of sub-section (1), the aggregate of the issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the extension of the industrial undertaking is completed or, as the case may be, the new industrial unit commences production or operation, in so far as such capital, 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; 7. The above clearly shows that capital employed in the business of the company is the aggregate of three distinct comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wings of the company ought to be treated as part of the capital employed in the business of the company, Parliament would have suitably provided for the same. So long as that has not been done and so long as the capital employed in the business of the company is restricted to the issued share capital, debentures and long-term borrowings, there is no room for holding that the premium, if any, collected by the company on the issue of its share capital would also constitute a part of the capital employed in the business of the company for purposes of deduction under section 35D. The Tribunal was, in that view of the matter, perfectly justified in allowing the appeal filed by the Revenue and restoring the order passed by the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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