In Brief
Berger Paints India Ltd, a paint manufacturer, claimed a deduction under Section 35D of the Income Tax Act based on 'capital employed in the business' including share premium received from shareholders. The Revenue and ultimately all authorities held that 'capital employed' comprises only issued share capital, debentures, and long-term borrowings as statutorily defined. Share premium, though a component of shareholders' funds, must be kept in a separate account under the Companies Act and is not part of 'capital employed' unless specifically included by statute. The Supreme Court dismissed the company's appeal, affirming that the statutory definition is exhaustive and omits share premium intentionally.
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