S. 35D: Premium collected by a company on subscribed share capital is not “capital employed in the business of the Company" within the meaning of s. 35D so as to enable the claim of deduction of the said amount as prescribed u/s 35D

Berger Paints India Ltd vs. CIT (Supreme Court)

Capital employed in the business of the company is the aggregate of three distinct components, namely, share capital, debentures and long term borrowings as on the dates relevant under sub-clauses(i) and (ii) of Clause(b) of the explanation extracted above. The term ‘long term borrowing’ has been defined in clause (c) to the explanation. It is nobody’s else that the premium collected by the Company on the issue of shares was a long term borrowing either in fact or by a fiction of law. It is also nobody’s case that the premium collected by the Company was anywhere near or akin to a debenture. What was all the same argued by the counsel for the appellant was that premium was a part of the share capital and had therefore to be reckoned as ‘capital employed in the business of the company’. There is, in our view, no merit in that contention.