TaxTMI 
TaxTMI 
TaxTMI 
2017 (3) TMI 1531
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....Year 1996-97) and I.T.A. No.1434/Del/2001(Assessment Year 1997-98) respectively. 2) In order to appreciate the issue involved in these appeals, it is necessary to state few relevant facts infra. 3) The appellant is a Limited Company engaged in the business of manufacture and sale of various kinds of paints. For the Assessment Year 1996-97, the appellant (assessee) filed their income tax return and declared the total income at Rs. 3,64,64,527/-. It was, however, revised to Rs. 3,58,92,771/- and then again revised to Rs. 3,57,26,644/-. The return was then processed by the Assessing Officer(in short "A.O.") under Section 143 (1B) of the Income Tax Act (hereinafter referred to as "the Act") at an amount of Rs. 3,63,03,128/-. 4) A notice was ....
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.... it should also be included in the said expression and be treated 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 Rs. 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 ....
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....an amount calculated at two and one-half percent- (a) of the cost of the project, or (b) where the assessee is an Indian company, at the option of the company, of the capital employed in the business of the company, the excess shall be ignored for the purpose of computing the deduction allowable under sub-section(1); [Provided that where the aggregate amount of expenditure referred to in sub-section(2) is incurred after the 31st day of March, 1998, the provisions of this sub-section shall have effect as if for the words "two and one-half per cent", the words "five percent" had been substituted.]* *Ins. by the Finance(No.2) Act, 1998(2) of 1998), sec,14(b)(w.e.f. 1-4-1999)" 15) The expression "capital employed in the business o....
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....ount 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 above clearly shows that 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 t....
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....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." 17) We are in complete agreement with 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 ....
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....r paid up capital for the purpose of allowing the assessee to claim rebate under Paragraph D of Part II of the first Schedule to the Indian Finance Act 1956. 21) It was noticed therein that Part II - paragraph D while specifying the rates of super tax had added an Explanation, which reads as under: Explanation.-For the purposes of para D of this part- (i) the expression 'paid-up capital' means the paid-up capital (other than capital entitled to a dividend at a fixed rate) of the Company as on the first day of the previous year relevant to the assessment for the year ending on 31st day of March, 1957, increased by any premiums received in cash by the company on the issue of its shares, standing to the credit of the share premium accoun....