Answer as per Indian Income tax act 1961

Question 11: Rama Cements Ltd., is a company engaged in the manufacturing of cement. The company issued 20 lakh equity shares of 100 each to the general public. The shares were issued at a premium of 150 per share. The assessee claimed deduction under section 35D in respect of preliminary expenses at 5% of capital employed and added the amount of share premium to the capital employed to arrive at 5% as eligible amount of deduction under section 35D. The Assessing Officer, however, disallowed the said expenditure on the basis that capital employed does not include the share premium amount. Is the action of the Assessing Officer tenable in law