In Brief
Berger Paints India Ltd., a paint manufacturer, claimed tax deduction under Section 35D of the Income Tax Act based on "capital employed in business" that included share premium. The Revenue contested this, arguing share premium is not part of "capital employed." The Tribunal and High Court upheld the Revenue's position. The Supreme Court dismissed the company's appeal, holding that "capital employed in the business of the company" is expressly defined in Section 35D(3) to comprise only issued share capital, debentures, and long-term borrowings. Since Parliament did not explicitly include share premium in this definition, it cannot be treated as part of capital employed, and no deduction is allowable with reference to share premium received from shareholders.
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