LAW FOR ALL

whether "premium" collected by the appellant-Company on its subscribed share capital is “capital employed in the business of the Company" within the meaning of Section 35D of the Act so as to enable the Company to claim deduction of the said amount as prescribed under Section 35D of the Act? = Section 35D(3) of the Act with which we are concerned in these appeals reads as under: “Where the aggregate amount of the expenditure referred to in sub- section(2) exceeds an amount calculated at two and one-half percent- (a) of the cost of the project, or 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 of the company" is defined in the Explanation appended to the Section in clause (b) which reads as under: “(b) “capital employed in the business of the company” means- (i) in a case referred to in clause(i) 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 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 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;”- 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. In the light of foregoing discussion, we find no merit in these appeals. The appeals thus fail and are accordingly dismissed.