“Capital Employed in the Business of the Company” for the Purposes of Section 35D(3) Premium Collected by a Company Issuing Shares Cannot be Treated “Capital Employed in the Business of the Company” for the Purposes of Section 35D(3)

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The Tax Publishers Premium Collected by a Company Issuing Shares Cannot be Treated Capital Employed in the Business of the Company for the Purposes of Section 35D(3) Akhilesh Kumar Sah In Berger Paints India Ltd. v. CIT Civil Appeal No. 2162 of 2007 with Civil Appeal No. 2163 of 2007, decided on 28-3-2017 [ 2017 TaxPub(DT) 739 (SC)] the question was whether share premium can be treated as part of capital employed for the purposes of Section 35D. The Supreme Court held that the premium amount collected by the company on its subscribed issued share capital was not and could not 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 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. 1. Preamable Section 35D of the Income Tax Act, 1961 (the Act, for short) deals with amortisation of certain preliminary expenses. In Berger Paints India Ltd. v. CIT [Civil Appeal No. 2162 of 2007 with Civil Appeal No. 2163 of 2007, decided on 28-3-2017 ( 2017 TaxPub(DT) 739 (SC) : (2017) 247 Taxman 1 (SC) : (2017) 393 ITR 113 (SC))], briefly, these appeals were filed against the final judgment and orders dated 15-5-2006 passed by the High Court of Delhi at New Delhi in ITA Nos. 799 of 2004 and 797 of 2004, whereby the High Court dismissed the appeals filed by the appellant arising out of the order dated 26-4-2004 and 25-8-2004 passed by the Income Tax Appellate Tribunal, New Delhi (Hereinafter referred to as the Tribunal) in I.T.A. No. 2307/Del/2000 (Assessment Year 1996-97) and I.T.A. No. 1434/Del/2001 (Assessment Year 1997-98), respectively. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Premium Collected by a Company Issuing Shares Cannot be Treated Capital Employed in the Business of the Company for the Purposes of Section 35D(3)

Akhilesh Kumar Sah

In Berger Paints India Ltd. v. CIT Civil Appeal No. 2162 of 2007 with Civil Appeal No. 2163 of 2007, decided on 28-3-2017 [ 2017 TaxPub(DT) 739 (SC)] the question was whether share premium can be treated as part of capital employed for the purposes of Section 35D. The Supreme Court held that the premium amount collected by the company on its subscribed issued share capital was not and could not 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 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.

1. Preamable

Section 35D of the Income Tax Act, 1961 (the Act, for short) deals with amortisation of certain preliminary expenses. In Berger Paints India Ltd. v. CIT [Civil Appeal No. 2162 of 2007 with Civil Appeal No. 2163 of 2007, decided on 28-3-2017 ( 2017 TaxPub(DT) 739 (SC) : (2017) 247 Taxman 1 (SC) : (2017) 393 ITR 113 (SC))], briefly, these appeals were filed against the final judgment and orders dated 15-5-2006 passed by the High Court of Delhi at New Delhi in ITA Nos. 799 of 2004 and 797 of 2004, whereby the High Court dismissed the appeals filed by the appellant arising out of the order dated 26-4-2004 and 25-8-2004 passed by the Income Tax Appellate Tribunal, New Delhi (Hereinafter referred to as the Tribunal) in I.T.A. No. 2307/Del/2000 (Assessment Year 1996-97) and I.T.A. No. 1434/Del/2001 (Assessment Year 1997-98), respectively.