GOLDMAN SACHS (INDIA) SECURITIES PVT.LTD,MUMBAI V. ACIT CIR 7 (1) (1) , MUMBAI

ITA 2436/MUM/2022

AI Insights

The case involves Goldman Sachs (India) Securities Private Limited appealing against the assessment order for the assessment year 2018-19, which included various transfer pricing adjustments and disallowances related to employee stock option plans (ESOP) and other expenses. The primary issues revolved around the validity of the final assessment order, adjustments made under transfer pricing, and disallowances related to ESOP costs and other expenses deemed as penalties or fines. The Tribunal considered previous rulings in similar cases and the specific provisions of the Income Tax Act, leading to a decision favoring the assessee on most grounds.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 398457 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2018-2019
• Other Referred Cases: Income-tax officer vs Reliance Share and Stock Brokers Private Limited, DCIT v. Anil Dhirajlal Ambani, Deputy Commissioner of Income-tax v. VLS Finance Ltd., DCIT vs VLS Finance Ltd., DCIT vs Anil Dhirajlal Ambani, ITO vs Reliance Share & Stock Brokers (P) Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: NEENA JEPH
• Assessee Lawyers: MADHUR AGRAWAL
• Keywords: Opportunity of being heard; Transfer pricing; International transaction; Business expenditure; Principle of natural justice; Valuation report; Non compliance; Procedural lapse
• Section: 143(3); 37; 115JB; 37(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “K” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER &GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 2436/MUM/2022 (AY : 2018-19) (Physical hearing) Goldman Sachs (India) Securities Private Limited, 951-A, Rational House, Appasaheb Marathe Marg, Prabhadevi, Mumbai-400025. [PAN No. AAFCA6819F] Vs ACIT, Circle-7(1)(1), AayakarBhawan, Mumbai- 400020. Appellant / Assessee Respondent / Revenue Assessee by Shri Madhur Agrawal, Advocate Revenue by Ms. Neena Jeph, CIT-DR Date of institution of appeal 22.09.2022 Date of hearing 07.05.2025 Date of pronouncement 03.06.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the assessment order dated 28.07.2022 passed under section 143(3) r.w.s. 144C(13) passed in pursuance of direction of Dispute Resolution Panel (DRP)-1, Mumbai for A.Y. 2018-19. The assessee has raised the following grounds of appeal: Grounds Challenging validity of final order 1. In contravening the provisions of section 144B of the Act by passing the final assessment order under section 143(3) r.w.s 144C(13) dated 28 July 2022 without appreciating that the National Faceless Assessment Centre should have passed the final assessment order, thereby making the entire assessment proceedings void-ab-initio and is liable to be quashed. Transfer pricing grounds - Adjustment under Section 92CA of the Act 2. In making an upward transfer pricing adjustment to the extent of Rs 19,80,000 by re-computing the Arm's Length Price (ALP) of the international transaction pertaining to provision of non-binding investment advisory and support services (IA services) by the Appellant to its associated enterprises (AEs), inter alia, on following grounds: ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 2 a) Rejecting the transfer pricing documentation maintained by the Appellant in accordance with provisions of the Act read with the Income-tax Rules, 1962 (Rules); and b) Including the carried interest received by the employees of the Appellant in the cost base of the Appellant for the purpose of charging cost plus mark- ups for provision of IA services; 3. In making an upward transfer pricing adjustment to the extent of Rs 23,32,37,536 by re-computing the Arm's Length Price (ALP) of the international transaction pertaining to provision of Information Technology enabled Services (ITeS) by the Appellant to its associated enterprises (AEs), inter alia, on following grounds: a) Rejecting the transfer pricing documentation maintained by the Appellant in accordance with provisions of the Act read with the Rules, b) Cherry picking and not following a scientific search process in identifying companies and not providing the search criteria/ strategy adopted for identifying such additional comparable companies, c) Rejecting the following functionally similar companies selected as comparables by the Appellant in the transfer pricing documentation: • Crystal Hues Limited • iSN Global Solutions Private Limited • Sundaram Business Services Limited • Datamatics Business Solutions Limited (previously Datamatics Financial Services Limited) • Microland Limited (Segmental) • Vitae International Accounting Services Private Limited • Ultramarine & Pigments Limited (Segmental) d) Rejecting R Systems International Limited (BPO Segment) merely on account of different financial year (FY); e) Rejecting Cosmic Global Limited, Allsec Technologies Ltd and Jindal Intellicom Private Limited, by applying export turnover filter, f) Rejecting Informed Technologies India Limited, Suprawin Technologies Limited, iSN Global Solutions Private Limited and Microland Limited, by applying turnover filter, g) Rejecting Informed Technologies Limited and Cosmic Global Limited, on account of negative margin earned by the comparable company: h) Considering MPS Limited, as comparable companies to the Assessee without recording the reason for rejecting Assessee's contentions as submitted during the TP proceedings. i) Adopting MPS Limited in the final set of comparables whose functions are different to those performed by the Assessee and despite it having insufficient segmental information: j) Considering the MPS Limited with supernormal profits as comparable to the Assessee ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 3 Corporate tax grounds 4. In disallowing the amortization cost in respect of employee stock option plans (ESOP) granted to its employees [hereinafter collectively referred as 'ESOP cost) amounting to Rs 20,32,10,414 incurred by the Appellant, on the basis that the ESOP costs are notional/contingent in nature. In disregarding the order of Hon’ble ITAT in the appellant’s own case for AY 2008-09, AY 2009-10, AY 2010-11 AY 2011-12, AY 2012-13, AY 2014-15 and AY 2015-16 where the amount of ESOP cost was allowed as a deductible expenditure in the year of amortization Without prejudice to the above, where your Honours seek to uphold the action of the learned AO. a deduction with respect to the amount actually paid for the value of shares delivered should be granted to the Appellant. In this regard, the learned AO has erred in disregarding the directions of the Hon'ble DRP with respect to allowability of the amount actually paid by the Appellant for the ESOP cost during the year under consideration. 5. In disallowing an amount of INR 14,22,465 paid to Bombay stock exchange and National stock exchange (stock exchanges) for non-confirmation of clearing house trades, client code modification etc. on the basis that the payment made is in the nature of penalties/ fine which cannot be allowed as an expenditure under section 37 of the Act, relying on the DRP directions issued for AY 2016-17. In disregarding the Hon'ble Bombay High Court's decision in Appellant's own case for AY 2008-09 and AY 2009-10 and the decisions by the Hon'ble ITAT in appellant's own case for AY 2008-09, AY 2009-10, AY 2010-11, AY 2011-12, AY 2012-13, AY 2014-15 and AY 2015-16. In not following the method prescribed under section 144B and section 143(3A) of the Act while making the above adjustment in the final assessment order and in not proposing such adjustment in the show cause notice dated 26 September 2021 issued for the adjustments proposed in the draft assessment order and accordingly, draft assessment order has been passed without giving an opportunity of being heard to the Appellant regarding this issue which is in violation of principal of natural justice. In mentioning in the final assessment order at paragraph 7.2 that show cause notice was issued regarding the payment made to stock exchanges without proposing such adjustment in the show cause notice dated 26 September 2021. 6. In disallowing an amount of INR 20,80,242 debited to the profit and loss account pertaining to settlement charges paid to Securities and Exchange Board of India (SEBI) in connection with Yes Bank's Qualifies Institutional Placement ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 4 (QIP) observing that the payment made is in the nature of penalties/ fine which cannot be allowed as an expenditure under section 37 of the Act without appreciating the fact that settlement charges were paid pursuant to settlement application and not for breach of any statutory law or provision. In erroneous relying on the DRP directions issued for AY 2016-17 stating that the disallowance is recurring in nature without appreciating the fact that no such disallowance was made in the assessment proceedings for AY 2016-17 or any other year. In disregarding the order of Hon'ble Mumbai ITAT in the case of Income-tax officer vs Reliance Share and Stock Brokers Private Limited (51 taxmann.com 215) and DCIT v. Anil DhirajlalAmbani (ITA No. 3676/Mum/2016) and order of Hon'ble Delhi ITAT in case of Deputy Commissioner of Income-tax v. VLS Finance Ltd. [2019] 104 taxmann.com 294 where such settlement charges have been allowed as a deductible expenditure. 7. In disallowing an amount of INR 91,15,316 pertaining to gratuity without appreciating the fact that the amount of Rs 91,22,591 relates to payment made by the Appellant towards gratuity liability which has already been disallowed in computing the income chargeable to tax in the previous AY'S under section 40A(7) of the Act. In disregarding the actuarial valuation report submitted by the Appellant during the assessment proceedings evidencing the payment of gratuity and not following the directions of the Hon'ble DRP with respect to verification of the amount paid by the Appellant towards gratuity during the year under consideration. 8. In mentioning the incorrect amount of deemed total income under section 115JB of the Act and tax thereon in the computation sheet attached with the final assessment order. 9. In levying the additional interest under section 234C of the Act without appreciating that the interest under section 234C of the Act is to be calculated on the returned income filed by the Appellant as per the provisions of the Act. 10. In initiating penalty proceedings under section 270A of the Act.” 2. Rival submissions of both the parties have heard and record perused. The learned authorised representative (ld. AR) of the assessee submits that he is not pressing ground no. 2 & 3 of the appeal and same may be dismissed as not pressed. Considering the submissions of ld AR of the assessee ground No. 2 & 3 of the appeal are dismissed as not pressed. ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 5 3. Ground no. 4 relates to disallowance of ESOP (Employee stock ownership plan) of Rs. 20,32,10,414/-. The ld. AR of the assessee submits that this ground of appeal is covered in favour of the assessee in assessee’s own case for A.Y. 2008-09, 2009-10, & 2011-12 to 2015-16 which has been recently followed in A.Y. 2010-11 in order dated 17.02.2022, copy of which is placed on record. While explaining the facts leading to the additions, the ld. AR of the assessee submits that amount of ESOP accrued and claim as expenses in computation of total income while filing return of income. During draft assessment proceeding, the assessing officer proposed for disallowance by taking view that same is notional and contingent in nature. The amount of proposed disallowance was Rs. 48.74 crore being ESOP cost paid during the year. The ld. DRP following the past precedence disallowed ESOP expenses claimed on accrual basis amounting to Rs. 20,32,10,414/-, however it was held that a deduction on the basis of actual payment made. The assessing officer ultimately made additions in final assessment order in accordance with direction of DRP. The ld. AR of the assessee submits that on similar set of fact, in earlier year such allowance is consistently allowed by Tribunal in assessee’s own case. The ld. AR of the assessee submits that recent decision in A.Y. 2010-11 is already placed on record. 4. On the other hand, d. Sr. DR for the Revenue supported the order of DRP. 5. We have considered the rival submissions of both the parties and have perused the order of lower authorities carefully. On careful perusal of the facts, we find that ld. AR of the assessee correctly explained the basis of disallowance and restricting thereof to the extent of Rs. 20.32 crore on the direction of DRP. We find that on similar grounds of appeal in assessee’s own ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 6 case for A.Y. 2010-11 in ITA No. No. 1115 and 1546/M/2015 dated 17.02.2022, similar relief was allowed to the assessee by passing the following order: “47. The issues agitated in ground Nos. 2, 3 and 4 are set out in para 5 to 5.2.5 at pages 43 to 52 of the DRP’s order. A perusal of the record shows that the AO relying upon 2008-09 and 2009-10 assessment year wherein on similar facts and circumstances in regard to ESOP cost incurred by the assessee in respect of Restricted Stock Units (RSUs) granted to the assessee stood confirmed by the DRP. The AO accordingly proceeded to make a similar addition as per discussion in the order at pages 3 to 11 vide paras 5 to 5.6. The AO noticed that it is a recurring issue. He, accordingly, disallowed the net amount on account of amortization of RSU expenses. The DRP relying upon the judicial precedent as available in the case o f P VP V e n t u r e s L t d .( 2 0 12 ) 2 1 1 t a xm an 5 54 of the Madras High Court, decision of the Special Bench, Bangalore in Biocon; and Delhi Bench in Ranbaxy Laboratory 124TTJ 771 etc. considering the specific facts deleted the addition. Revenue is aggrieved. 48. The ld. CIT-DR relies upon the order of the AO. 49. The ld. AR relies upon the impugned order. 50. In the light of the submissions of the parties before the Bench we find that the specific findings of facts have not been upset by the Revenue. The facts as enumerated and the position qua the specific plan as appreciated by the DRP in para 5.2.1 we note remains unrebutted. Considering the judicial precedent in para 5.2.2 to para 5.2.4 which also remaining unrebutted, we find no infirmity with the conclusions drawn. For the sake of completeness, we reproduce the relevant findings on facts being upheld by us : 5.2 Discussion & Direction of the DRP : The AO had discussed the issue in para 5.1 to 5.5 of the draft assessment order. He has noticed from note 2(vii) of Schedule 14 to final accounts that employee costs include the cost of restrictive stock unit (RSU) and stock option plan under the Goldman Saohs Groups Inc. The assessee was directed to furnish RSU/Option agreement vide order sheet noting of the AO dated 17.02.2014. Expenditure along with exchange difference on the same was charged to the P & L account. The AOs in the earlier year i.e. A.Y.2008-09 and 2009-10 had disallowed the expenditure and it was also confirmed by the DRP in both the years. Therefore, the show cause was issued to disallow the expenditure charged during the current assessment year. The AO was of the view that the employees will be issued shares free of cost without the employees actually exercising the same and therefore the cost pertaining to RSU should not be regarded as contingent/notional and should be allowed as deduction in the year of vesting u/s 37(1) of the Act. The AO had referred to the decision of ITAT in the case of Ranbaxy Laboratories Ltd. On an identical issue the DRP has confirmed the action of the AO in A.Y. 2008-09 and 2009-10 and since there is no change in the facts in the current year and hence amount debited to P & L account amounting to Rs.60,63,49,187/- was disallowed and added as income. ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 7 5.2.1 We have carefully considered the submission of the assessee. There are several types of RSU plans for instance in one of the plan issued during year 2006 (2006 year end plan) provides for option vesting of 40% of the stocks granted and the balance 60% vested after a period of 3 years i.e. in the year 2007 (20%) 2008 (20%) and 2009 (20%). Accordingly the assessee amortized 40% oi the cost in the first year of the plan and the balance 60% cost is amortized over the vesting period of three years. As per the accounting policy the grant price on the date of grant of RSU is amortized in the books of assessee in accordance with vesting schedule as laid down in the plan. The method of accounting is in accordance with the accounting standards in India. The facts in the present case reveal that: • The Assessee pays a sum to GSGI upon the delivery of the RSUs (pertaining to shares of GIGI) to employees of the Assessee. • The sum payable by the Assessee to GSGI is determined with reference to the value of the shares of GSGI as on the date of vesting of the RSUs. • As the Assessee is required to pay aforesaid sum to GSGI on account of the grant of the RSUs to its employees, such payment being an actual expenditure for the Assessee is considered as part of the compensation cost of the employees in the year in which it is incurred in accordance with the method of accounting followed 5.2.2 Therefore, the ESOP expenses should not be regarded as contingent or notional and it should be allowed as deduction u/s 37(1) of the IT. Act. The appellant had relied on the decision of DCIT v Accenture Services P Ltd [ITA No. 4540/M/08 order dated 23rd March 2010] and Novo Nordisk India Private Limited v DCIT -12(2) (ITA No.1275/Bang/2011) (Bang Trib). 51. The departmental grounds, accordingly, fail. 52. In the result, appeal of the Revenue is dismissed. 53. In the result, appeal of the assessee is partly allowed for statistical purposes and the appeal of the Revenue is dismissed.” 6. Considering the consistent decision of Tribunal in favour of assessee in its own case and respectfully following the same, we direct the Assessing officer to allow as deduction of ESOP expanses to the assessee. In the result, this ground of appeal raised by the assessee is allowed. 7. Ground no. 5 relates to disallowance of charges paid to Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) of Rs. 14,22,465/-. The ld. AR of the assessee submits that the aforesaid charges were paid to BSE & NSE in respect of non-confirmation of clearing house trades and client code modification which was claimed by assessee in its return of income. The auditor of assessee reported such amount in ‘other penalty or fine’ under Clause 21(a) of tax audit report, copy of which is placed on record at page ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 8 no. 518 of paper book. The assessing officer while passing the draft assessment order disallowed such expenses by taking view that such payment is in the nature of penalties / fine as per Form 3CD. Though, such proposed adjustment was not a part of show cause notice given to the assessee thereby no opportunity was giving by assessing officer. Before, ld. DRP, the assessee furnished detail written submission and explained that such expenses were paid on account of procedural lapses and not penal in nature. The ld. DRP rejected the submission of assessee on the ground that assessee will get opportunity of hearing before them (DRP). The DRP held that case laws relied by assessee are not relevant on the facts of the case and the payments made to BSE & NSE are in the nature of penal charges. Consequent upon direction, assessing officer disallowed such expenses. The ld. AR of the assessee submits that this ground of appeal is also covered by the decision of Hon’ble Jurisdiction High Court in assessee’s own case for A.Y. 2008-09 and A.Y. 2009-10 and by the decision of Tribunal in 2011-12, 2012- 13, 2014-15 & 2016-17 which was recently relied in A.Y. 2010-11, copy of which is already placed on record. 8. On the other hand, ld. Sr. DR for the Revenue supported the order of lower authorities. The ld. Sr. DR for the Revenue submits that auditor in its report clearly mentioned that such payment are penal in nature. 9. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We find that on similar disallowance in assessee’s own case for A.Y. 2010-11, the assessee was allowed relief by following decision of Jurisdiction High Court in assessee’s ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 9 own case for A.Y. 2008-09 and 2009-10 in ITA No. No. 30 of 2017 dated 10.06.2019 by passing the following order: “38. We have heard the submissions and seen the record. It is seen that the facts are discussed in para 6 to 6.6 at pages 11 to 17 by the AO in the draft assessment order wherein for payment of Rs.10,21,507/- to the Stock Exchange as fine for non compliance of clearing house trades, code modification etc. the amount was added to the computation of income of the assessee. The AO relying upon similar factual position Considering the decision of Hon’ble Jurisdictional High Court in assessee’s own case on similar disallowance and respectfully following the same, ground no. 5 of the appeal is allowed in favour of the assessee.as available in 2008-09 and 2009-10 assessment years. This position stood confirmed by the DRP also and hence it was directed that the addition of the said amount should be maintained. The submissions advanced on behalf of the assessee that it was not a fine/penalty in the true sense of the word and that infact these were payments for procedural lapses occuring on account of non confirmation of clearing house trades etc. were overruled. Various decisions of the ITAT relied upon to show that in almost all various similarly situated assessees who are members of NSE/BSE they also have been exposed to these routine payments for procedural lapses and these expenses have been allowed u/s 37(1) stand ignored. It has been argued that these violations are not in the nature of any penalty for contravention of any law and is only to ensure that errors beyond a point are not made. However, these submissions did not find favour either with the AO or with the DRP. The DRP has considered the issue at pages 52 to 55 of their order in paras 6 to 6.2.1. Considering the legal precedent and the nature of the payments, we have seen that these are not charges for any Statutory violations. The payment we have seen are charges where the facility provided to rectify the errors committed at the time of placing the order are exceeded beyond a limit. The charges are levied to encourage the brokererrors and consequently fewer modifications. It is seen that in terms of the Rules/conditions for trading at the Stock Exchanges all transactions in respect of institutional trades executed are required to be settled by the custodian of the institutional client at the Stock Exchange within the prescribed time limit. At times the custodian may reject the institutional trade after the cut off time prescribed by the Stock Exchange for settlement. The obligation for settlement is then passed on by the Stock Exchange to the Broker. The payments made for such non-acceptance of settlement by a custodian results into “non custodial settlement” which attracts a charge in the hands of the broker. We have seen that these are not instance of violations of statutory requirements inviting penalty. Circular No. NSCCL/SEC/2007/0102 dated 26.07.2007 issued by NSCCL in pursuance to the Bye-Laws and Regulations of NSE and circular No. NSE/CL/C&S/242 dated 27.03.2003. Specific point No. 8.9 of NSCC circulars NSCC/CMP/248 dated 09.06.2007 alongwith their copies attached as Annexures relied before ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 10 the DRP have been seen. Accordingly, we hold that the DRP was incorrect in sustaining the addition in para 6.2 of their order relying on the past history. 38.1 We have seen that the ITAT has had an occasion to examine this issue in assessee’s own case in the earlier years and the addition has been deleted. The DRP has categorically held while denying relief that there is no change in fact and circumstance. Nor has the ld. D R made any submission to show that there is a change in facts in the year under consideration. No contrary view on behalf of the Revenue to justify overlooking the legal precedent in assessee's case has been cited considering the settled legal position on this issue in assessee’s own case itself. Accordingly, We are of the view that the ground raised has to be allowed. 38.2 We are further fortified by the decision of the jurisdictional High Court in assessee's case itself in ITA 30 of 2017 dated 10th June , 20 19 placed on record wherein the Hon’ble Court considering the following additional question raised by the Revenue in Question No. (vii) has settled the issue. The following question was raised by the Re venue for consideration before the Court : “vii. Whether on the facts and in the circumstances of the case and in law, the ITAT was right in holding that the penalty was on account of irregularities committed by the assessee's client without appreciating the facts that non compliance to clearing house trades and trades and client code modification are default attributable to the assessee company majorly and not to its client?\" 38.2.1 It is seen that it has been answered by the Hon'ble Court in para 11 & 12 as under : 11. The question No.vii pertains to disallowing an expenditure which the revenue argues was in the nature of penalty. We notice that similar issue was considered by this Court in case of The Income Tax Commissioner Mumbai City- 4 Vs. Angel Capital & Debit Market Ltd. (Income Tax Appeal (L) No.475 of 2011) in the order dated 28th July, 2011, following question was examined:- \"Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the disallowance made by the Assessing Officer of claim of the Assessing Company for a deduction of payment of Rs.6,51,240/-towards penalty paid to Stock Exchange even though the penalty payment was clearly disallowable under Explanation to Section 37(1) of the Income Tax Act? 12. The question raised by the revenue was rejectedmaking following observations:- \"3. 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 ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 11 a case the explanation to section 37 would not apply. Accordingly question (C) raised by the Revenue cannot be entertained.\" • In that view of the matter, this question is also not entertained. 38.3 Accordingly, respectfully following the precedent, the addition is directed to be deleted..” 10. Considering consistent decisions of Tribunal and High Court in favour of assessee on similar issue and respectfully following the same, this ground of appeal is allowed. 11. Ground no. 6 relates to disallowance of settlement charges paid to Security & Exchange Board of India (SEBI). The ld. AR of the assessee submits that the assessee paid Rs. 20,80,242/- towards settlement charges pursuant to show cause notice of SEBI. Such amount was claimed by assessee in its computation of income. The assessing officer disallowance such expenditure/settlement charges on the ground that auditors of assessee in Clause 21(a) in tax audit report categorised such amount as ’penalty or fine’. The assessing officer while passing the draft assessment order disallowed the same on the basis of earlier years. The DRP confirmed the order of assessing officer. Though, before ld. DRP, the assessee filed detail written submission in explaining that such expenses were paid towards settlement charges as per settlement application filed by assessee, hence there was no breach of statutory provision. On confirming the order of assessing officer by ld. DRP, the assessing officer passed final assessment order disallowing an amount of Rs. 20,80,242/-. The ld. AR of the assessee submits that in a series of decision, the Mumbai Benches of Tribunal held that consent fees paid by assessee stock broker to SEBI for some technical violation without admitting ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 12 guilt was an allowable business expenditure. To support his submission, the ld. AR relied upon the following decision;  DCIT vs VLS Finance Ltd. (2019) 104 taxmann.com 294 (Mumbai – Trib),  DCIT vs Anil Dhirajlal Ambani (2018) 93 taxmann.com 492 (Mumbai – Trib),  ITO vs Reliance Share & Stock Brokers (P) Ltd. (2014) 51 taxmann.com 215 (Mumbai – Trib) 12. On the other hand, ld. Sr. DR for the Revenue submits that auditor of assessee has clearly classified such charges as penal in nature which is otherwise covered by Explanation to section 37 as well as violation of provision of SEBI. The assessee has not placed on record copy of order of settlement of assessee with SEBI. 13. We have considered the rival submissions of both the parties. We find that there is no dispute of payment of settlement charges paid to SEBI of Rs. 20,80,242/-. The assessee claimed such charges as allowable business expenditure. The assessing officer disallowed the same on the basis of adverse report in tax audit report. We find that co-ordinate bench of Mumbai Tribunal in a series of decision held that when settlement fees was paid to SEBI for some technical violation without admitting their guilt is allowable business expenditure. Considering the consistent decision of co-ordinate bench of Mumbai Tribunal in DCIT Vs VLS Finance Ltd. (supra), DCIT Vs Anil Dhirajlal Ambani (supra) and in ITO Vs Reliance Share & Stock Brokers (P) Ltd.(supra) and respectfully following the same, this ground of appeal is allowed in favour of assessee. 14. Ground no. 7 relates to disallowance of gratuity payment / reversal. The ld. AR of the assessee submits that assessee has claimed a deduction of Rs. 91,15,682/- on account of payment for gratuity liability while filing return of ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 13 income. The ld. AR invited our attention on actuarial valuation report on page no. 558 of paper book showing payment of Rs. 83,56,556/-. Out of the total payment of Rs. 83,56,556/- a deduction of Rs. 19,58,435/- was claimed in A.Y. 2019-20 and balance of Rs. 65,26,826/- was claimed in A.Y. 2018-19 and payment of Rs. 65,26,826/- was made in A.Y. 2019-20. Aggregate amount of total payment of gratuity in 2018-19 and 2019-20 were of Rs. 1.48 crore out of which Rs. 57,67,700/- was claimed in A.Y. 2017-18 and effective amount of deduction in A.Y. 2018-19 were of Rs. 91,15,682/-. The assessing officer not verified the claim. The DRP directed to verify the fact and allow expenses claimed by assessee. In final assessment order, the assessing officer disregarded the actuarial report and concluded that deduction shall not be allowed as required evidence were not furnished. The ld. AR of the assessee submits that assessing officer may be directed to verify the fact. Keeping in view that similar ground was allowed in favour of the assessee in A.Y. 2017- 18 in order dated 09.12.2024 by Tribunal. 15. On the other hand, the ld. CIT DR submits that assessing officer may be directed to verify the fact. 16. Considering the submissions of both the parties as well as direction of ld. DRP, the assessing officer is directed to verify the fact and allow appropriate relief to the assessee. The assessee is also directed to provide all required details of the assessing officer. In the result, this ground of appeal is allowed for statistical purpose. 17. Ground no. 8 relates to incorrect amount of deemed total income under section 115JB. The ld. AR of the assessee submits that while issuing computation sheet with the final assessment order, the assessing officer ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 14 mentioned incorrect amount of deemed total income under section 115JB. Similarly, for ground no. 9, the ld. AR of the assessee submits that assessing officer while issuing computation sheet with final assessment order, computed additional interest under section 234C, without appreciating the fact that interest under section 234C is to be calculated on the return income. 18. On the contrary, the ld. CIT, DR submits that direction may be given to the assessing officer to rectification thereof if any. 19. Considering the submission of assessee, the ld. AR of the assessee and Sr. DR for the Revenue, the assessing officer is directed to verify the fact and correct the computation sheet, issued with final assessment order. In the result, ground no. 8 and 9 are allowed for statistical purpose. 20. Ground no. 10 is consequential and need no adjudication at this stage. 21. Ground no. 1 relates to validity of passing the assessment order being time barred. At the time of hearing, the ld. AR of the assessee submits that this ground of appeal may be kept open as the assesse is likely to succeed on merit. Considering the fact that we have allowed relief to the assessee, therefore, ground no. 1 of the appeal has become academic. 22. In the result, the appeal of assesseeis allowed.- Order pronounced in the open Court on 03/06/2025. Sd/-S S/- GIRISH AGRAWAL ACCOUNTANT MEMBER - S/- Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 03/06/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; ITA No. 2436/Mum/2022 Goldman Sachs (India) Securities Private Limited 15 (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "