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TMI Blog2016 (7) TMI 1495X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer finds them not to be comparable to the assessee, he may conduct a search process himself to find out comparables in the aforesaid category. Selection / rejection of comparable in the investment banking service segment and certain adjustments for computing the margin as proposed by assessee - we must observe, in the earlier part of the order, we have disapproved the approach of the Transfer Pricing Officer in rejecting the transfer pricing analysis of the assessee without proper application of mind and clubbing the investment advisory and investment banking services and treating it as investment banking segment for bench marking the price charged to A.E. For this reason alone, the transfer pricing adjustment by the Transfer Pricing Officer and confirmed by the DRP even in respect of investment banking services needed to be set aside. However, as learned Counsels appearing for the respective parties were heard at length on investment banking issues, it is necessary to deal with the submissions made on behalf of the parties with regard to certain adjustments claimed by the assessee in the investment banking segment while computing the margin of the assessee / comparables as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities. Necessary facts have to be examined to find out whether the low employee cost is due to out sourcing of activities or any other factor and necessary adjustment accordingly is to be made to the margin of the comparable / assessee.The assessee has also raised issue of super normal profit earned by the company. This factor, in our view, also requires examination as to whether there is any special reason for earning such profit may be as a result of merger or acquisition or due to any other factor. EDELWEISS CAPITAL LIMITED - RPT filter of 25% applied by DRP is reasonable and hence, needs no interference. If Edelweiss Capital Ltd. is functionally similar to the assessee, only because it has started its operation earlier compared to the assessee, it cannot be excluded for that reason alone. Of–course, necessary adjustment can be made to the margin of the comparable / assessee keeping in view relevant factors which might have influenced the margin of the comparable. However, it is for the assessee to establish such facts with cogent evidence. With the aforesaid observations, we restore the issue to the file of the A.O. / Transfer Pricing Officer for fresh consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionally dissimilar with that of assessee need to be deselected from final list. Disallowance of cost relating to ESOP - Held that:- As decided in assessee's own case [2015 (12) TMI 966 - ITAT MUMBAI] we hold that discount on issue of employees stock options is allowable as deduction in computing the income under the head profits and gains of business of profession Deduction claimed of an amount paid to Bombay Stock Exchange and National Stock Exchange - Deduction u/s 37 - Held that:- As decided in assessee's own case [2015 (12) TMI 966 - ITAT MUMBAI] payment made by the assessee to stock exchanges were not for infraction of any law in view of the judgment of in the case of Angel Capital & Debitt Market Ltd. [2014 (5) TMI 584 - BOMBAY HIGH COURT] deleted the addition. Computing deduction under section 10A - treatment to telecommunication charges - Held that:- This issue is no more res integra, as different High Courts including the Hon'ble Jurisdictional High Court in CIT v/s Gem Plus Jewellery India Ltd., [2010 (6) TMI 65 - BOMBAY HIGH COURT] as well as different benches of the Tribunal including Mumbai Benches have held that telecommunication charges have to be exclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormal profits as comparable to the Appellant which is in its full first year of operations. vii. Not granting an adjustment on account of employee cost. viii. Not granting an adjustment on account of difference in risks assumed by comparable companies selected by the TPO vis- -vis the Appellant. 2. In making an upward transfer pricing adjustment to the extent of ₹ 42,181,115 for the international transaction pertaining to provision of Information Technology enabled services to its AE and in re-computing the arm's length price under the Transactional Net Margin Method, inter alia, on following grounds: i. Rejecting the functional analysis, search process adopted and documentation maintained by the Appellant for the international transaction; ii. Adopting a set of comparable companies for the international transaction whose functions are not similar to that of the Appellant; iii. Considering companies with exceptional year of operation as comparable to the Appellant; iv. Using of information obtained under Sec 133(6) of the Act; vi. Rejecting the multiple year data and relying only on data for the year ended 31 March 2008 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned AU erred in reducing the telecommunication charges only from the export turnover and not from both, i.e total turnover and export turnover, in computing the deduction u/s 10A of the Act. 9. The Appellant craves leave to add, alter, vary, omit, substitute or amend any or all of the above grounds of appeal, at any time before or at, the time of the appeal, so as to enable the Hon'ble Income-Tax Appellate Tribunal to decide this appeal according to law. 2. Grounds no.1 to 4 are on transfer pricing issues, whereas grounds no.5 to 8 are on corporate tax issues. 3. Ground no.1, relates to transfer pricing adjustment made in respect of investment advisory and investment banking service segment. 4. Brief facts are, the assessee an Indian company is engaged in the business of securities broking, investment banking, underwriting and other financial services business in India. It is a wholly owned subsidiary of Goldman Sachs (Mauritius) LLC and its nominees. For the assessment year under consideration, assessee filed its return of income on 30th September 2008, declaring income of Rs. 169,13,92,530. In the course of assessment proceedings, the Assessing Officer no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment advisory service in respect of listed Indian securities amounting to Rs. 21,55,87,341; ii) Provisions for investment advisory in connection with making strategic investment in India amounting to Rs. 79,70,71,410; iii) Provisions of investment banking services of Rs. 33,56,74,029. 6. The Transfer Pricing Officer after analysing the activity of the assessee and the nature of business in the aforesaid three categories was of the view that the functions are basically in the nature of merchant banking service for the Associate Enterprise (A.E). Though, the assessee tried to impress upon the Transfer Pricing Officer that the aforesaid categories of transactions are different in nature, hence, were bench marked separately the Transfer Pricing Officer, however, was not agreeable to such proposition. After analysing the nature of services provided by the assessee in each of these categories, Transfer Pricing Officer in Para 5 of his order observed, the functions performed in each of these categories are quite similar and overlapping. He opined, though the assessee had classified the services to three categories, but, they are more or less relating to investment banking se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the assessee submitted revised margin and also inclusion of one company i.e., ICRA Management Consulting Service, but, the Transfer Pricing Officer did not accept the contention of the assessee and finally selected the following comparables: S.no. Name of Company Margin for the year ended 31.3.2008 1. Centrum Capital Ltd. (Segmental) 102.32% 2. Chartered Capital Investment Ltd. 209.20% 3. Edelweiss Capital Ltd. 66.00% 4. IDC India Ltd. 13.88% 5. L T Capital Co. Ltd. 184.91% 6. SERI Capital Markets Ltd. 6.51% 7. Sumedha Fiscal Service Ltd. (segmental) 48.84% 8. Keynote Corporate Services Ltd. (segmental) 209.19% Arithmetic mean 105.10% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer Pricing Officer. He submitted, the approach of the Transfer Pricing Officer to combine both the segments for bench marking by applying margins of investment banking companies is totally incorrect. The learned Sr. Counsel submitted, the Transfer Pricing Officer in assessee s own case for assessment year 2007 08 and 2009 10 had combined the investment advisory (listed and unlisted) segment for bench marking purpose, hence, the same approach should be followed in the impugned assessment year. The learned Sr. Counsel further submitted in assessee s own case for the assessment year 2007 08 and 2009 10, the Tribunal had also upheld bench marking of investment advisory as a separate segment by selecting comparables from that segment. Learned Sr. Counsel submitted, the assessee had bench marked the price charged for investment advisory service segment by selecting comparables from that segment which were rejected by the Transfer Pricing Officer by combining the investment advisory services to investment banking segment and selecting comparables from investment banking segment. Learned Sr. Counsel submitted, the comparable selected by Transfer Pricing Officer were rejected by the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of bench marking the margin. In our view, bench marking of the price charged for investment advisory service segment should have to be independently undertaken. As the Transfer Pricing Officer has not undertaken such exercise, we are inclined to restore the issue back to the file of the Transfer Pricing Officer to undertake such exercise by treating investment advisory service as a separate segment. The Transfer Pricing Officer must carefully examine the comparables selected by the assessee in its transfer pricing study and decide whether they are functionally similar, hence, suitable to be selected as comparable in respect of investment advisory segment. In case, the Transfer Pricing Officer finds them not to be comparable to the assessee, he may conduct a search process himself to find out comparables in the aforesaid category. Of course, while doing so the Transfer Pricing Officer must assign cogent reasons for selecting / rejecting a comparable. While selecting comparables, he must keep in view the decisions of the Tribunal in assessee s own case as well as other cases cited before us by examining whether the facts and reasons on which the comparables were selected or rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iss Capital Ltd. and L T Capital Co. Ltd., after verifying whether RPT has exceeded the threshold limit of 25% of the total sales. 16. Learned Authorised Representative contesting the rejection of its transfer pricing study submitted, investment banking industry is highly cyclical in nature. Through a chart submitted, learned Authorised Representative made an attempt to demonstrate the volatile nature of business in this segment. It was submitted, the effect of sub prime crisis in the developed economy had started affecting the investment banking industry worldwide including India by the last quarter of the financial year 2007 08. Therefore, a multiple year analysis of the margin of the comparables has to be considered to get a correct analysis. He submitted, closure of investment banking mandates are dependent on various factors such as economic condition in the country financial stability of the corporate industry, change in regulation relating to M A deals, global financial environment, changes in taxation laws, political environment, regulatory approvals, etc. It was submitted, investment banking mandates are generally spread over more than one year and the companies are gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration, is not comparable to other established players. In this context, he relied upon the decision of the Tribunal in Scoda Auto India Pvt. Ltd. v/s ACIT, [2009] 30 STO 319 (Pn.) He also relied upon the decision of the Tribunal in Cummins Turbo Technologies Ltd., ITA no.161 and 269/Pn./2013, wherein a comparable was excluded with the reasoning that the margin shown by that company lacks credibility and does not show a normal business trend if financial results of either three preceding financial year or succeeding financial year is taken. He, therefore, submitted rejection of the comparables selected using multiple year data is not proper. 17. Learned Departmental Representative referring to the observations of the Transfer Pricing Officer / DRP submitted assessee is required to demonstrate that earlier year data has an impact on the profits of the current financial year of the assessee as well as the comparable companies which have not been done by the assessee. He further submitted, assessee s contention cannot be accepted as details for later years were not available with the Transfer Pricing Officer and law provides use of only one year data. He submitted, in respect of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition, he relied upon the decision of the Tribunal, Delhi Bench, in Haworth (I) Pvt. Ltd. v/s DCIT, [2011] 131 ITD 215 (Del.). Learned Departmental Representative submitted, though, it is the first year of operation of investment banking activity, however, the assessee must have leveraged on the existing client relationship from investment advisory to seek mandate for investment banking. He submitted, the skill set required for investment advisory and investment banking are same and many professional would render both types of services. Learned Departmental Representative submitted, in any case of the matter, filter of 25% to 50% of the employee cost can be considered. 20. In the rejoinder, it was submitted by the learned Authorised Representative that the allegation of the Department that assessee had leveraged on the existing client relationship from investment advisory to seek mandate from investment banking is incorrect. He submitted, skill set required for investment advisory and investment banking are not same as investment advisory services are rendered by the assessee only to A.E., whereas, investment banking service are rendered to third part clients in co ordination w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st to operating cost ratio of the company is only 19.54% compared to assessee s employee cost of 71.5%. For this reason also, the company cannot be treated as comparable. For such proposition, learned Sr. Counsel relied upon the following decisions: i) Maersk Global Service Centre (India) Pvt. Ltd., ITA no.3774/ Mum./2011; ii) Stream International Services Pvt. Ltd., ITA no.8997/Mum./ 2010, ITAT, Mumbai; iii) Stream International Services Pvt. Ltd. ITA no.8290/Mum./ 2011; iv) Maersk Global Services Centre v/s DCIT, ITA no.2492/Mum./ 2014, ITA no.2594/Mum./2014. EDELWEISS CAPITAL LIMITED 24. Objecting to the selection of this company, learned Sr. Counsel submitted, this company has number one ranking in both Bloomberg and Prime Database League Tables for Mid Market Private Equity Placements. It is an established player in the market unlike assessee who is in its first year of operation. He submitted, the RPT ratio of this company is 24.9%, hence, it cannot be considered as comparable. 25. Learned Departmental Representative referring to the observations of Transfer Pricing Officer submitted that the Transfer Pricing Officer has applied RPT filt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no.1105/Bang./2012; and L T LIMITED 27. Objecting to this company, learned Sr. Counsel submitted, unlike assessee, interest free debt funding is available to this company. Further, RPT exceeds 25%. 28. Learned Departmental Representative on the other hand submitted, before the Transfer Pricing Officer assessee has not objected to inclusion of the company as a comparable. He submitted, assessee while computing RPT had included the interest cost on interest free unsecured loan obtained by L T Capital Ltd. from its holding company. He submitted, interest cost is outside the computation of PLI being non operating in the nature, accordingly should be excluded from RPT computation. He also referred to the observations of the DRP wherein Assessing Officer / Transfer Pricing Officer was directed to compute RPT by applying RPT filter of 25%. 29. In the rejoinder, Learned Sr. Counsel submitted, even excluding the interest cost while computing RPT it works out to more than 15%, therefore, company cannot be treated as a comparable. He further submitted, employee cost to operating cost of this company is 13.66% compared to employee cost of assessee at 71%. Therefore, it cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies earned margin of more than 100% during the year. Learned Authorised Representative submitted, earning of such high margin is possible only because of the fact they are in the field of investment banking for about 10 to 15 years, whereas assessee is in its first year of operation. Therefore, it cannot be expected to earn such profit margin. 35. Learned Authorised Representative challenging the rejection of comparable selected by the assessee in the transfer pricing study submitted that neither the Transfer Pricing Officer nor the DRP have assigned any reason while rejecting those comparables without considering their functional similarity to the assessee. He, therefore, submitted that the companies selected by the assessee must also be considered as comparable as there is no basis provided by the Departmental Authorities for rejecting them. 36. We have heard the rival contentions carefully in the light of the facts and material on record as well as the decisions relied upon by both the parties. At this stage, we must observe, in the earlier part of the order, we have disapproved the approach of the Transfer Pricing Officer in rejecting the transfer pricing analysis of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished themselves in the investment banking segment as they are in operation for substantial period. It is the submission of the assessee that the employee cost of the assessee was 71.5% of the total operating cost, whereas, the average employee cost of the comparable companies selected by the Transfer Pricing Officer is 29.43%. In this context, a reference can be made to a working of the average employee cost of comparables at Page 47 of the paper book. The assessee has also submitted a working as per which if employee cost is taken at 29% then assessee s margin would be 110% which is more than the margin of 105% computed by the Transfer Pricing Officer. In our view, the aforesaid contention of the assessee needs to be examined in detail after verifying the employee cost of both the assessee and comparable companies. It is evident from the order of the Transfer Pricing Officer and DRP, they have not examined the issue of adjustment towards employee cost in a proper perspective. 37. As far as use of multiple year data is concerned, in our view, one has to adhere to provisions of rule 10B(4) and proviso thereunder. As per the aforesaid provision use of multiple year data is not en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the company. This factor, in our view, also requires examination as to whether there is any special reason for earning such profit may be as a result of merger or acquisition or due to any other factor. As these facts have not been examined either by the Transfer Pricing Officer or the DRP, we are inclined to restore the issue relating to comparability of this company to the file of the Assessing Officer / Transfer Pricing Officer for examination afresh. EDELWEISS CAPITAL LIMITED 40. As could be seen from the order of the DRP, a direction has been issued to the Assessing Officer to examine the RPT and exclude if it is found to be above 25%. It is the contention of the assessee before us that a company having RPT above 15% cannot be considered as comparable. It has been further submitted that Edelweiss Capital Ltd. being an established player in investment banking cannot be treated as comparable. However, we are not convinced with the aforesaid submissions of the assessee. In our view, RPT filter of 25% applied by DRP is reasonable and hence, needs no interference. If Edelweiss Capital Ltd. is functionally similar to the assessee, only because it has started its operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to selection of these two companies, we are inclined to restore the issue to the file of Assessing Officer / Transfer Pricing Officer for examining afresh after providing due opportunity of being heard. 43. Insofar as five other companies selected by the assessee viz. Aryaman Financial Services Ltd., Excess India Advisors India Ltd., ICRA Management Consulting Services Ltd., ICRA On line Limited, Kinetic Trust Ltd., on a perusal of the order of the Transfer Pricing Officer, we find, he has neither made any discussion on these companies nor has assigned any reason why they are not comparable to the assessee. DRP s order is also totally silent on this issue. In the aforesaid view of the matter, we direct the Assessing Officer / Transfer Pricing Officer to examine the comparability of these five companies while considering the issue of comparability of other comparables objected by the assessee. 44. With the aforesaid observations, we restore the issue back to the file of the Assessing Officer. Consequently, ground no.1, is allowed for statistical purposes. 45. In ground no.2, assessee has challenged transfer pricing adjustment made in respect of information technology ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been considered for the period from 01-04-2007 to 31-03-2008. Companies whose IT enabled service income Rs. 1 cr. were excluded Companies whose IT enabled service revenue is less than 75% of the total operating revenues were excluded Companies who have more than 25% related puny transactions (sales as well as expenditure combined) of the operating revenues were excluded Companies who have less than 75% of the revenues as export sales were excluded Companies who have diminishing revenues/persistent losses for the period under consideration were excluded Companies having different financial year ending (i.e. not March 31, 2008) or data of the company does not fall within 12 month period i.e. 01-04-2007 to 31-03-2008, were rejected. Companies that are functionally different front that of taxpayer or working in Peculiar economic circumstances, after giving valid reasons, were excluded. 48. The Transfer Pricing Officer pointing out various defects in the transfer pricing analysis done by the assessee ultimately rejected it and applying the filters as noted above, undertook a search process independently to find ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 962042968 32.90 Infosys BPO Ltd. 8275563629 6895526075 1380037554 20.01 Iservices India Pvt. Ltd. 133954773 122242652 11712121 9.58 49. Applying the aforesaid margin of 27.53% to the operating cost mark up of Rs. 9,77,47,989 was computed as against mark up offered by the assessee @ 15.65% at Rs. 5,55,66,873, the resultant shortfall of Rs. 4,21,81,115, was treated as transfer pricing adjustment. Though, the assessee objected to selection of certain comparables before the DRP, but the DRP mostly rejected the contention of the assessee and retained the comparables selected by the TPO. Hereafter, we will deal with each of the comparable objected by the assessee. MOLD TEK TECHNOLOGIES LIMITED 50. Learned Sr. Counsel for the assessee submitted, this company cannot be selected as comparable as it is involved in providing high end engineering and design service to its clients which is in the nature of Knowledge Process Outsourcing (KPO). He further submitted, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the company cannot be treated as comparable as it is involved in providing KPO service which is functionally different from low end ITES service provider. Further, it is seen that in case of Symphony Marketing Solutions India Pvt. Ltd. (supra) this company has been rejected on the ground of more than 25% RPT as well as merger and acquisitions made during the relevant previous year. In view of the aforesaid decisions of the Tribunal including the Special Bench decision, we are persuaded to hold that this company cannot be treated as comparable to the assessee. Accordingly, we direct the Assessing Officer / Transfer Pricing Officer to exclude the same from the list of comparables. eCLERX SERVICES LIMITED 54. Objecting to this comparable, learned Sr. Counsel submitted, the company is engaged in providing high end service involving specialised knowledge and domain expertise in the field, which is in the nature of KPO service. Further, during the relevant previous year, there was acquisition by the company. Further, though it was engaged in diversified activities, segment wise details are not available in public domain. The functional profile of the company is not sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old that Eclerx Services Ltd. being functionally different cannot be treated as comparable to the assessee. VISHAL INFORMATION TECHNOLOGIES LIMITED 57. This company, earlier known as Coral Hubs Ltd., was objected by the assessee primarily on the ground that it out sources the entire ITES activity to third party vendors and it is not carrying out any activity itself. He submitted, this fact is evident from the low employee cost to sales ratio of 2.93%. He, therefore, submitted as the business profile of this company is completely different from the assessee, it cannot be treated as a comparable. In support, assessee relied upon a number of decisions as under: i) Maersk Global Centres (I) Pvt. Ltd., ITA no.3774/Mum./2011; ii) Capital IQ Information Systems India P. Ltd. ITA no.1961/Hyd./2011; iii) Stream International Services P. Ltd., ITA no.8290/Mum./ 2011; and iv) Symphony Marketing Solutions India P. Ltd., ITA no.1316/ Bang./2012; v) Zavata India P. Ltd., ITA no.1781/Hyd./2011; vi) Avineon India P. Ltd., ITA no.1989/Hyd./2011 vii) Hapag Lloyd Global Services P. Ltd., ITA no.8499/Mum./ 2010; viii) Cognizant Technology Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyee cost of the company. Compared to the aforesaid practice of this company, the assessee claims to have carried out the ITES activities all by itself, thereby, has incurred a comparatively higher employee cost. We have also noted that the Tribunal in a number of decisions including the Special Bench decision in Maersk Global Centres India Pvt. Ltd. has held the company as not comparable on account of low employee cost. In fact, the Hon'ble Delhi High Court in Rampgreen Solutions Pvt. Ltd. has upheld the rejection of this company on account of low employee cost. We, therefore, direct the Assessing Officer / Transfer Pricing Officer to examine this aspect by verifying the annual report of the company and other relevant documents and if assessee s claim of low employee cost of this company is found to be correct, this company should not be treated as comparable keeping in view the judicial authorities referred to herein before. ACCENTIA TECHNOLOGIES LMITED 62. Objecting to this company, it was submitted that this company cannot be treated is comparable to the assessee as it is engaged in rendering software development and medical transcription services unlike ITES pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65. Learned Sr. Counsel for the assessee, objecting to this company submitted, it is functionally different from the assessee as it rendered software development and engineering design service. In support of such contention, the assessee relied upon the following decisions: i) Mindcrest India P. Ltd., ITA no.7289/Mum./2012; ii) Market Tools Research P. Ltd., ITA no.1811/Hyd./2012; iii) Capital IQ Information Systems India P. Ltd. ITA no.1961/ Hyd./2011; iv) Excellence Data Research, ITA no.159/Hyd./2014; v) Maersk Global Centres (I) P. Ltd., ITA no.7466/Mum./ 2012; vi) Symphony Marketing Solutions India P. Ltd., ITA no.1316/ Bang./2012; 66. Learned Departmental Representative, however, submitted that the functions / services rendered by this company broadly fits into ITES segment, hence, it was treated as comparable. Learned Departmental Representative referring to the observations of the Transfer Pricing Officer in Page 37 of his order submitted, assessee also provides high end information technology enabled services, hence, assessee s objections should not be accepted. 67. We have considered the submissions of the parties and perused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esting of RSU. The value of RSU is amortized over three years and assessee marks to market the value of such RSU over a three year period in its books of account. The Assessing Officer, however, did not accept the contention of the assessee. Relying upon the decision of the Tribunal, Delhi Bench in Ranbaxy Laboratories Ltd., he disallowed assessee s claim of deduction. Though, assessee challenged the disallowance before the DRP, the Panel also sustained the disallowance agreeing with the Assessing Officer that it is a contingent liability till such time assessee actually pays it. 71. We have considered the submissions of the parties and perused the material available on record. We have noted that identical issue of deduction claimed on account of ESOP arose for consideration in assessee s own case for assessment year 2009 10 before the Tribunal in ITA no.222/Mum./2014. The Tribunal vide order dated 30th November 2015, held as under: 12.3. Before us, the Ld. Senior Counsel drew our attention to the decision of the Special Bench of the Bangalore Tribunal in the case of Biocon Ltd 144 ITD 21 (Bang) wherein on similar facts the discount on issue of ESOP was allowed as deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel drew our attention to the decision of the Hon'ble High Court of Bombay in the case of Angel Capital Debitt Market Ltd. in Income Tax Appeal (L) No. 475 of 2011 wherein the Hon'ble Court had the opinion to consider the following question of law. Whether on the facts and in the circumstances of the case and in law the Hon'ble Tribunal was justified in deleting the disallowance made by the Assessing Officer of claim of the Assessing Company for a deduction of payment of ₹ 6,51,240/- towards penalty paid to Stock Exchange even though such penalty payment was clearly disallowable under Explanation to Section 37(1) of the Income Tax Act? and the same was answered by the Hon'ble High Court as under: As regards question (C) is concerned, the finding of fact recorded by the ITAT is that the amount paid as penalty was on account of irregularities committed by the assessee's clients. Such payments were not on account of any infraction of law and hence allowable as business expenditure. In such a case the explanation to Sec. 37 would not apply. Accordingly question (C) raised by the revenue cannot be entertained. Respectfully followi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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