Case Law Details

Case Name : DCIT Vs. Axis & T. Ltd. (ITAT Delhi)
Appeal Number : I.T.A. Nos. 211 & 823/Del/2010
Date of Judgement/Order : 29/07/2010
Related Assessment Year : 2002- 03

CASE LAWS DETAILS

DECIDED BY: ITAT DELHI BENCH `A’: NEW DELHI,

IN THE CASE OF: DCIT Vs. Axis & T. Ltd., APPEAL NO: I.T.A. Nos. 211 & 823/Del/2010, DECIDED ON July 29, 2010

In the present assessee’s case, it is nobody’s case that the premium collected by the assessee company on the issue of shares is a long-term borrowing within the meaning of clause (c) to the Explanation, either on fact or by a fiction of law. It is also not the case of the assessee that the premium 9 collected by the assessee company on the issue of shares is in any where near or akin to the debentures. The assessee has made out a case only that premium collected by the assessee company on the issue of shares is a part of share capital issued and in support thereof, they relied upon the decision of ITAT, Ahmedabad Bench in the case of Sirhind Steel Ltd. (supra). In other words, what was reviewed by the assessee before the authorities below was that the premium collected by the company on the issue of shares was a part of the share capital and is therefore, to be reckoned as “capital employed in the business of the company”.

This aspect of the matter as to whether the premium collected by the company on the issue of shares is a part of the share capital and is therefore, to be reckoned as “Capital employed in the business of the company” has been considered by the Hon’ble Delhi High Court in the case of Berger Paints India (supra) where the Hon’ble Delhi High Court after analyzing the provisions of section 35D, has held that the Explanation to section 35D 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. They held that they did not find any merit in the contention of the assessee that the premium collected on issue of shares is a part of share capital and, is therefore, to be reckoned as capital employed in the business of the company. The Hon’ble High Court further observed that 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 and 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 was 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 the purposes of deduction under section 35D of the Act.

In the light of the aforesaid binding decision of Hon’ble High Court of Delhi in the case of Berger Paints India (supra), we therefore, uphold the Assessing Officer’s order in excluding the premium collected by the assessee on the issue of its share capital for the purpose of determining the amount of capital employed in the business of the company while computing deduction under section 35D(3) of the Act. The order of the CIT(A) is thus, set aside and that of the Assessing Officer is restored. In other words, this issue raised by the revenue is decided in favour of the revenue and against the assessee.

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