MONSANTO HOLDINGS P. LTD, MUMBAI V. ADDL CIT RG 8(2), MUMBAI

ITA 8081/MUM/2010

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8637 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 08-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 23-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A MOHAN CIR
• Keywords: Related party transaction; Capital asset; Transfer pricing; Opportunity of being heard; International transaction; Earning of tax free income
• Section: 143(3); 234B; 14A; 37(1); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 8081/MUM/2010 ASSESSMENT YEAR: 2006 - 07 MONSANTO HOLDINGS P. LTD. 5 TH FLOOR, AHURA CENTRE, 96, MAHAKALI CAVES RD, ANDHERI (E) MUMBAI - 400093. VS. ADDL. CIT RG 8(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020. PAN NO. AAACM5981H APPELLANT RESPONDENT ASSESSEE BY : MR. RAJAN VORA, AR REVENUE BY : MR. A. MOHAN, CIR DR DATE OF HEARING : 18/09/2018 DATE OF PRONOUNCEMENT : 14/12/2018 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2006 - 07. THE APPEAL IS DIRECTED AGAINST THE ORDER PASSED U/S 144C(13) R.W.S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT) PASSED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE - 8 (2) , MUMBAI [IN SHORT THE AO ] IN PURSUANCE OF THE DIRECTION OF THE DISPUTE RESOLUTION PANEL - II MUMBAI , [DRP]. MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 2 2. THE 1 ST GROUND OF APPEAL A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSING OFFICER ERRED IN DISALLOWING PART OF THE INTEREST EXPENDITURE AMOUNTING TO RS.2,50,657/ - UNDER SECTION 14A IN ACCORDANCE WITH RULE 8D, AS PER THE DIRECTIONS OF DISPUTE RESOLUTION PANEL. B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSING OFFICER ERRED IN DISALLOW ING PART OF THE ADMINISTRATIVE EXPENDITURE AMOUNTING TO RS.1,64,21,075/ - UNDER SECTION 14A IN ACCORDANCE WITH RULE 8D, AS PER THE DIRECTIONS OF DISPUTE RESOLUTION PANEL. C) WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL THE APPELLANT SUBMITS THAT SINCE R ULE 8D HAS BEEN INTRODUCED ONLY W.E.F. 24 MARCH 2008 IT SHOULD NOT BE APPLIED TO AY 2006 - 07. 2.1 THE ASSESSEE HAS ALSO FILED A SUPPLEMENTARY GROUND OF APPEAL IN RESPECT OF THE 1 ST GROUND, WHICH IS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/TPO/DRP : A ) O UGHT TO HAVE EXCLUDED THE LONG TERM STRATEGIC INVESTMENTS AGGREGATING TO RS.3,21,68,35,782/ - MADE BY THE APPELLANT IN VARIOUS GROUP/ASSOCIATE COMPANIES FROM THE AMOUNT OF INVESTMENT, WHILE MAKING DISALLOWANCE UNDER SECTION 14A OF THE ACT. B ) O UGHT TO HAVE EXCLUDED INVESTMENT MADE IN MONSANTO DMCC ENVIRO - TECH & ENGINEERING LIMITED AND MAHARASHTRA HYBRIDS SEEDS COMPANY LIMITED AGGREGATING TO RS.1,67,68,79,632/ - SINCE NO DIVIDEND WAS RECEIVED FROM THE SAID INVESTMENTS DURING THE YE AR. 2.2 AS THE ABOVE SUPPLEMENTARY GROUND OF APPEAL IS INTRINSICALLY LINKED WITH THE 1 ST GROUND OF APPEAL, WE ADMIT IT FOR ADJUDICATION. MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 3 3 . BRIEFLY STATED THE FACTS ARE THAT D URING THE FINANCIAL YEAR UNDER CONSIDERATION, THE ASSESSEE EARNED DIVIDEND INCO ME OF RS.68,12,19,797/ - FROM LONG TERM STRATEGIC INVESTMENTS AND RS.54,09,154/ - FROM MUTUAL FUNDS WHICH HAVE BEEN CLAIMED EXEMPT FROM TAX U/S 10(34) AND SECTION 10(35) OF THE ACT RESPECTIVELY IN THE COMPUTATION OF INCOME. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSEE MADE SUBMISSION BEFORE THE AO THAT NO DISALLOWANCE U/S 14A SHOULD BE MADE SINCE NO EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME. WITHOUT PREJUDICE TO THE ABOVE CONTENTION, THE ASSESSEE SUBMITTED THAT CONSIDER ING THE FACT THAT SOME TIME SPENT BY EMPLOYEES OF TREASURY DEPARTMENT OF GROUP COMPANY, MONSANTO INDIA LTD. (MIL) FOR INVESTMENT ACTIVITY OF THE ASSESSEE, IT SUO MOTU OFFERED TO DISALLOW EXPENSES AMOUNTING TO RS.3,37,236/ - (15% COST OF THE TREASURY DEPAR TMENT OF MIL) AS EXPENSES INCURRED IN RELATION TO EARNING EXEMPT INCOME. IN THE FINAL ASSESSMENT ORDER, THE AO BASED ON THE DIRECTIONS OF DRP MADE A DISALLOWANCE OF RS.1.67 CRORE U/S 14A R.W. RULE 8D. 4 . BEFORE US, THE LD. COUNSEL SUBMITS THAT NO DISALL OWANCE SHOULD BE MADE U/S 14A SINCE NO EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF EARNING EXEMPT INCOME. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT THE ASSESSEE SUO MOTU OFFERED TO DISALLOW RS.3,37,436/ - ON REASONABLE BASIS U/S 14A OF THE ACT . THE ONUS WAS ON THE AO TO RECORD THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE AS REGARDS THE EXPENDITURE INCURRED IN RELATION TO EARNING EXEMPT INCOME, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE. FURTHER IT IS MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 4 SUBMITTED T HAT THE APPLICATION OF RULE 8D TO COMPUTE DISALLOWANCE U/S 14A IS NOT AUTOMATIC. RELYING ON THE RECENT DECISION BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. ESSAR TELEHOLDINGS LT D. [90 TAXMANN.COM 2], THE LD. COUNSEL SUBMITS THAT RULE 8D IS PROSPECTI VE IN OPERATION AND CANNOT BE APPLIED TO ANY ASSESSMENT YEAR PRIOR TO AY 2008 - 09. IN THIS REGARD RELIANCE IS ALSO PLACED ON THE DECISION IN GODREJ & BOYCE MFG. CO. LTD. V. DCIT 328 ITR 81 (BOM). IT IS STATED THAT AS PER THE BALANCE SHEET, THE ASSESSEE HA D SUFFICIENT OWN FUNDS AT ITS DISPOSAL FOR THE PURPOSE OF MAKING INVESTMENTS. IT IS ALSO STATED THAT OUT OF TOTAL INTEREST OF RS.55,52,501/ - APPEARING IN THE PROFIT AND LOSS ACCOUNT, AN AMOUNT OF RS.52,49,863/ - HAS NO NEXUS WITH INVESTING ACTIVITIES. THE SAME HAS BEEN UPHELD BY THE DRP AND ACCORDINGLY THE AO, IN THE FINAL ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 144C(13) COMPUTED DISALLOWANCE U/S 14A AFTER REDUCING FROM TOTAL INTEREST, AN AMOUNT OF RS.52,49,863/ - . IT IS STATED THAT THE BALANCE INTEREST O F RS.3,07,755/ - IS OF GENERAL IN NATURE AND HAS NO NEXUS WITH INVESTMENT ACTIVITIES. HOWEVER, OUT OF THE SAID AMOUNT, THE AO BY APPLYING RULE 8D(1) HAS PROPORTIO NATELY DISALLOWED RS.2,50,657/ - . FURTHER IT IS SUBMITTED THAT CURRENT INVESTMENT WAS MADE IN A SINGLE MUTUAL FUND VIZ. HSBC CASH FUND DAILY DIVIDEND SCHEME OUT OF SURPLUS FUND. HENCE IT IS SUBMITTED THAT NO INTEREST EXPENDITURE COULD BE ATTRIBUTED TOWARDS EARNING EXEMPT INCOME. ACCORDINGL Y, THE MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 5 DISALLOWANCE MADE U/S 14A OF RS.2,50,657/ - TOWARDS INTEREST OUGHT TO BE DELETED. REFERRING TO THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN CHEMINVEST LTD. V. ITO 124 TTJ 577 AND VIREET INVESTMENT PVT. LTD . (2018) 165 ITD 27, IT IS SUBMITTED TH AT THE INVESTMENTS MADE BY THE ASSESSEE IN MONSANTO DMCC ENVIRO - TECH & ENGINEERING LTD. AND MAHARASHTRA HYBRIDS SEEDS COMPANY LTD. AGGREGATING TO RS.1,67,68,79,632/ - OUGHT TO BE EXCLUDED WHILE COMPUTING DISALLOWANCE U/S 14A OF THE ACT, SINCE NO DIVIDEND WA S RECEIVED FROM THE SAID INVESTMENTS DURING THE YEAR. 5 . PER CONTRA THE LD. DR SUBMITS THAT THE AO, BASED ON THE DIRECTION OF THE DRP, HAS RIGHTLY MADE A DISALLOWANCE OF RS.1.67 CRORES U/S 14A R.W. RULE 8D. 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIALS ON RECORD. IT IS FOUND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAD ASKED THE ASSESSEE TO SHOW - CAUSE AS TO WHY EXPENDITURE SHOULD NOT BE DISALLOWED U/S 14 A R.W. RULE 8 D. IN RESPONSE TO IT, THE ASSESSEE HAD FILE D A SUBMISSION. IT HAS BEEN HELD IN THE DECISION IN ESSAR TELEHOLDINGS LT. (SUPRA) AND GODREJ & BOYCE MFG. CO. LTD . (SUPRA) THAT RULE 8D OF THE INCOME TAX RULES, 1962 I S APPLICABLE ONLY PROSPECTIVELY I.E. FROM AY 2008 - 09. AS FURTHER HELD BY THE HONBLE BOM BAY HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. (SUPRA), THE QUANTUM OF DISALLOWANCE U/S 14A FOR THE YEARS EARLIER TO AY 2008 - 09 HAS TO BE WORKED OUT BY ADOPTING SOME REASONABLE METHOD. MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 6 WE FIND THAT IN THE CASE OF M/S GODREJ AGROVET V. ACIT (ITA NO. 1629/MUM/2009) FOR AY 2005 - 06, THE ITAT G BENCH MUMBAI DIRECTED THE AO TO RESTRICT THE DISALLOWANCE OUT OF COMMON ADMINISTRATIVE EXPENSES TO 2% OF THE TOTAL EXEMPT INCOME . THE HONBLE BOMBAY HIGH COURT ALSO IN THE CASE OF CIT VS. M/S. GODREJ AGROVET LTD VIDE INCOME TAX APPEAL NO. 934 OF 2011, DATED 8.1.2013 , HAS HELD THAT PERCENTAGE OF THE EXEMPT INCOME CAN CONSTITUTE A REASONABLE ESTIMATE FOR MAKING DISALLOWANCE IN THE YEARS EARLIER TO THE ASSESSMENT YEAR 2008 - 09. THE RELEVANT PORTION OF THE SAID JUDGMEN T OF THE BOMBAY HIGH COURT (SUPRA) READS AS UNDER: '4. SO FAR AS QUESTION (B) IS CONCERNED, THE TRIBUNAL IN ITS IMPUGNED ORDER DATED 17.9.2010 WHILE APPLYING THE DECISION OF THIS COURT IN THE MATTER OF GODREJ (SUPRA) HAS DISALLOWED THE EXPENDITURE ONLY TO THE EXTENT OF 2% OF THE TOTAL EXEMPT INCOME EARNED BY THE RESPONDENT - ASSESSEE ON THE BASIS ITS ORDER DATED 27.2.2009 FOR THE ASSESSMENT YEAR 2002 - 2003 AND ORDER DATED 10.9.2009 FOR THE ASSESSMENT YEARS 2003 - 2004 AND 2004 - 2005 WHEREIN DISALLOWANCE WAS RESTR ICTED TO 2% OF THE EXEMPT INCOME. FURTHER; THE TRIBUNAL HAS REMANDED THE MATTER TO THE AO TO VERIFY THE DISALLOWANCE CLAIMED AND RESTRICT THE DISALLOWANCE ONLY TO THE EXTENT TO 2% OF THE TOTAL EXEMPT INCOME. WE FIND NO FAULT WITH THE ORDER OF THE TRIBUNAL. ' 6 .1 SIMILARLY, WE REMIT THE MATTER TO THE FILE OF THE AO TO VERIFY THE DISALLOWANCE CLAIMED AND RESTRICT THE DISALLOWANCE ONLY TO THE EXTENT TO 2% OF THE TOTAL EXEMPT INCOME. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. NEEDLESS TO SAY, THE AO WOULD GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE FINALIZING THE ORDER. THUS THE 1 ST GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 7 7 . THE 2 ND GROUND OF APPEAL A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSING OFFICER ERRED IN RULING THAT THE FOLLOWING EXPENSES WERE INCURRED BY THE APPELLANT FOR MANAGING THE DOWNSTREAM INVESTMENTS AND WERE NOT INCURRED FOR EARNING OF THE ROYALTY INCOME, AS PER THE DIRECTIONS OF DISPUTE RESOLU TION PANEL: TECHNICAL DEVELOPMENT COST OF RS.5,138,952 GOVERNMENT AFFAIRS COST OF RS.11,030,147 PUBLIC AFFAIRS COST OF RS.10,699,178 REGULATORY COST OF RS.2,053,055 B) WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL AND WITHOUT ADMITTING THE FACT THAT EX PENSES ARE INCURRED FOR MANAGING THE DOWNSTREAM INVESTMENTS, HAVING REGARD TO THE FACT THAT DISALLOWANCES WAS ALREADY MADE BY THE ASSESSING OFFICER UNDER SECTION 14A AS PER RULE 8D TOWARDS INVESTMENT ACTIVITIES, NO FURTHER DISALLOWANCE OUGHT TO BE MADE BY THE ASSESSING OFFICER FOR MANAGING THE DOWNSTREAM INVESTMENTS. 8. THE FACTS ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO VIDE LETTER DATED 06.10.2008 ASKED THE ASSESSEE TO FURNISH DETAILS OF EXPENSES INCURRED (TECHNICAL DEVELOPMENT COST, G OVERNMENT AFFAIR COST, PUBLIC AFFAIRS COST) AGAINST ROYALTY INCOME AND ALSO TO EXPLAIN AS TO WHY SUCH EXPENDITURE SHOULD NOT BE DISALLOWED AS PER ASSESSMENT ORDER FOR THE AY 2005 - 06. THE ASSESSEE VI DE ITS LETTER DATED 04.11.2009 FILED THE DETAILS/EXPLANATI ON WHICH HAS BEEN EXTRACTED BY THE AO AT PARA 6.2 TO 6.6 OF HIS ASSESSMENT ORDER. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SAID DETAILS/EXPLANATION FILED BY THE ASSESSEE FOR THE REASON THAT IN THE ASSESSMENT COMPLETED FOR AY 2005 - 06, IT WAS HELD THAT THE SE EXPENSES WERE NOT ONLY IN RELATION TO THE ROYALTY INCOME BUT ALSO FOR MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 8 MANAGING THE DOWN STREAM INVESTMENTS MADE BY THE ASSESSEE IN VARIOUS SUBSIDIARIES/GROUP COMPANIES IN INDIA. RELYING ON THE DECISION IN KHIMLINE PUMPS LTD . 258 ITR 459 (BOM), THE AO HELD THAT SUCH EXPENSES ARE NOTHING BUT CAPITAL IN NATURE AS THE ASSESSEE HAS BEEN DERIVING ENDURING BENEFIT BY INCURRING SUCH EXPENDITURE BY MAINTAINING CONTROL OVER ITS DOWNSTREAM INVESTMENTS IN VARIOUS SUBSIDIARIES/GROUP COMPANIES . THUS THE AO BASED ON THE DISALLOWANCES MADE IN EARLIER YEAR I.E. AY 2005 - 06 DISALLOWED PART OF THE EXPENSES DEBITED TO THE FOLLOWING COST CODES: COST CODE AMOUNT (RS) TECHNOLOGY DEVELOPMENT COST 51,38,952 GOVERNMENT AFFAIRS COST 1,10,30,147 PUBLIC AFFAIRS COST 1,06,99,178 REGULATORY COST 20,53,055 TOTAL 2,89,21,332 9 . BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE APPELLANT HAD ENTERED INTO A MEMORANDUM OF UNDERSTANDING (MOU) WITH MAHYCO MONSANTO BIOTECH INDIA LTD. (MMBIL), A 50:50 JOINT VENTURE SET UP BY THE ASSESSEE WITH MAHARASHTRA HYBRID SEEDS LTD. FOR SUB - LICENSING OF THE MONSANTO TECHNOLOGY. MMBIL SUB - LICENSES TH E MONSANTO TECHNOLOGY TO VARIOUS SUB - LICENSEES. MMBIL PAYS ROYALTY AND ONE - TIME TECHNOLOGY FEES RECEIVED FROM THE SUB - LICENSEES. THE ASSESSEE EARNS SIGNIFICANT ROYALTY INCOME FROM THIS ARRANGEMENT WITH MMBIL. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE EARNED ROYALTY INCOME OF RS.32,48,15,139/ - FROM MMBIL. AS PER THE MOU, THE ASSESSEE MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 9 IS SUPPOSE TO UNDERTAKE VARIOUS FUNCTIONS IN RELATION TO EARNING OF ROYALTY INCOME WHICH INCLUDES EDUCATING FARMERS, JOURNALISTS AND SENIOR OFFICIALS TO ENSURE THAT THE TECHNOLOGY IS WELL ADAPTED. THE ASSESSEE ALSO UNDERTAKES EDUCATION AND AWARENESS PROGRAMMES AND POST RELEASE MONITORING ACTIVITIES. IN THIS REGARD THE ASSESSEE HAS INCURRED EXPENSES AGGREGATING TO RS.11,73,87,885/ - FOR THE PU RPOSE OF EARNING ROYALTY INCOME . IT IS FURTHER SUBMITTED THAT IT WAS ONLY FOR MANAGEMENT INFORMATION SYSTEM (MIS) PURPOSE THAT EXPENSES WERE CLASSIFIED TO THE COST CODES - TECHNOLOGY DEVELOPMENT, GOVERNMENT AFFAIRS, PUBLIC AFFAIRS AND REGULATORY COST. IT IS STATED THAT ALL THESE EXPENSE S ARE OF REVENUE IN NATURE AS CONTEMPLATED U/S 37(1) OF THE ACT. IT IS ALSO STATED THAT BY INCURRING SUCH EXPENDITURE, NO CAPITAL ASSET OR RIGHT/ADVANTAGE OF AN ENDURING NATURE HAS BEEN DERIVED BY THE ASSESSEE. IT IS STATED THAT THE ASSESSEE HAS TO INCUR S UCH EXPENDITURE ON YEAR TO YEAR BASIS AND SUCH COSTS ONLY ACCOUNT FOR 8.9% OF THE TOTAL ROYALTY INCOME EARNED. SUCH EXPENSES ARE RECURRING/ROUTINE IN NATURE AND NO ENDURING BENEFIT COULD BE SAID TO BE DERIVED BY THE ASSESSEE OUT OF THE SAID EXPENDITURE. RE FERRING TO THE DECISION IN THE CASE OF KHIMLINE PUMPS (SUPRA) RELIED ON BY THE AO, THE LD. COUNSEL SUBMITS THAT IN THE ABOVE CASE, THE ISSUE BEFORE THE COURT WAS WHETHER PAYMENT MADE BY THE APPLICANT TO M/S APV LTD. FOR ASSIGNMENT OF LEASE CONSTITUTED CAPI TAL EXPENDITURE OR REVENUE IN NATUR E. IT IS STATED THAT IN THE PRESENT CASE, THE PAYMENT IS NOT MADE FOR ACQUIRING ANY CAPITAL ASSET BUT FOR CARRYING ON HIS BUSINESS MORE PROFITABLY AND ADVANTAGEOUSLY. THUS THE LD. COUNSEL SUBMITS THAT MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 10 THE EXPENSES AGGREGA TING TO RS.2,89,91,332/ - ARE REVENUE IN NATURE, INCURRED FROM EARNING ROYALTY INCOME AND OUGHT TO BE ALLOWED AS A DEDUCTION U/S 37(1) OF THE ACT. 10. ON THE OTHER HAND, THE LD. DR SUBMITS THAT THE AO HAS RIGHTLY FOLLOWED THE ASSESSMENT OF EARLIER YEAR I.E . AY 2005 - 06 AND AS THESE EXPENSES WERE NOTHING BUT CAPITAL IN NATURE AS THE ASSESSEE HAD BEEN DERIVING ENDURING BENEFIT BY INCURRING SUCH EXPENDITURE BY MAINTAINING CONTROL OVER ITS DOWNSTREAM INVESTMENTS IN VARIOUS SUBSIDIARIES/GROUP COMPANIES, THE ADDIT ION OF RS.2,89,21,332/ - BE CONFIRMED. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE ABOVE DISALLOWANCE HAS BEEN MADE BY THE AO FOLLOWING THE ORDER OF THE EARLIER ASSESSMENT YEAR I.E. AY 2005 - 06. WE W ONDER HOW EXPENSES OF AN ASSESSMENT YEAR CAN BE DISALLOWED FOLLOWING SIMILAR DISALLOWANCE OF EXPENSES IN ANOTHER YEAR. THE AO HAS MENTIONED AT PARA 3 OF HIS ASSESSMENT ORDER THAT THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURNISHED THE DETAILS CALLED BY HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. INSTEAD OF EXAMINING THOSE DETAILS AND ARRIVING AT A SPECIFIC FINDING, THE AO HAS JUMPED INTO THE CONCLUSION THAT THE ASSESSEE HAS DERIVED ENDURING BENEFIT BY INCURRING SUCH EXPENDITURE BY MAINTAINING CONTR OL OVER ITS DOWNSTREAM INVESTMENTS IN VARIOUS SUBSIDIARIES/GROUP COMPANIES. THE AO COULD HAVE SPECIFIED THOSE DOWNSTREAM INVESTMENTS IN SPECIFIC SUBSIDIARIES/GROUP COMPANIES. HE HAS NOT DONE SO. AS THE ADDITION OF RS.2,89,21,332/ - MADE BY THE AO IS NOT B ASED ON ANY MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 11 SUPPORTING MATERIAL, WE DELETE IT. THUS THE 2 ND GROUND OF APPEAL IS ALLOWED. 12. THE 3 RD GROUND OF APPEAL ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSING OFFICER ERRED IN MAKING TRANSFER PRICING ADJUSTMENT IN RESPECT OF THE PROVISION OF ITES TO THE EXTENT OF RS. 13,8 2,631 / - TO THE TOTAL INCOME, AS PER THE DIRECTIONS OF DISPUTE RESOLUTION PANEL. 12.1 THE ASSESSEE HAS ALSO FILED A SUPPLEMENTARY GROUND ON THE ABOVE ISSUE, WHICH IS AS UNDER: ON THE FACTS AND CIRCUMSTANCE S OF THE CASE AND IN LAW, THE AO/TPO/DRP : A. ERRED IN ARBITRARILY IDENTIFYING THE COMPARABLES AND SUMMARILY REJECTING THE COMPARABLE ADOPTED BY THE APPELLANT IN RESPECT OF BENCHMARKING OF THE PROVISION OF ROUTINE IT ENABLED SERVICES. B. ERRED IN USING I NFORMATION NOT AVAILABLE IN PUBLIC DOMAIN FOR THE PURPOSE OF BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE APPELLANT. C. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED AO/TPO/DRP HAVE ERRED IN COMPUTING THE ERRONEOUS MARGIN OF THE COMPARABLES COMPANIES ADOPTED BY THE LEARNED TPO. D. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED AO/TPO/DRP ERRED IN NOT GRANTING THE RISK ADJUSTMENTS FOR DIFFERENCE IN RISK PROFILE OF THE COMPARABLES AND THE APPELLANT. E. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED AO/TPO/DR P ERRED IN NOT GRANTING THE WORKING CAPITAL ADJUSTMENT FOR DIFFERENCES IN ASSET PROFILE OF THE COMPARABLES AND THE APPELLANT. MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 12 F. THE LEARNED AP/DRP OUGHT TO HAVE GRANTED +/ - 5% VARIATION FROM THE ARMS LENGTH PRICE PERMITTED TO THE APPELLANT AS PER THE PR OVISIONS OF SECTION 92C(2) OF THE ACT. 13. IN ITS TRANSFER PRICING DOCUMENTATION, THE ASSESSEE HAD SELECTED 13 COMPARABLE COMPANIES TO DETERMINE THE ARMS LENGTH NATURE OF THE INTERNATIONAL TRANSACTION OF PROVISIONS OF ITES TO ITS AES. BASED ON SUCH ANALYSIS, THE ARITHMETIC MEAN OF THE OPERATING MARGINS OF THE COMPARABLE COMPANIES WAS 14.43% ON OPERATING COST, WHEREAS THE OPERATING MARGIN OF THE ASSESSEE WAS 14.69% OF OPERATING COST. ACCORDINGLY, THE SAID TRANSACTION WAS CONSIDERED TO BE AT ARMS LENG TH FROM AN INDIAN TRANSFER PRICING PERSPECTIVE. DURING THE TRANSFER PRICING ASSESSMENT PROCEEDINGS, THE TPO SUMMARILY REJECTED THE COMPARABLE COMPANIES BY THE ASSESSEE IN ITS TRANSFER PRICING DOCUMENTATION AND CONDUCTED A FRESH SEARCH FOR COMPARABLE COMPAN IES IN THE PROWESS AND CAPITALINE DATA BASE. BASED ON THE SAME, 13 COMPARABLE COMPANIES WERE CONSIDERED BY THE TPO FOR THE PURPOSE OF ARRIVING AT THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION OF PROVISIONS OF ITES (4 OUT OF 13 COMPANIES WERE COMM ON TO THE COMPARABLE COMPANIES IDENTIFIED BY THE ASSESSEE IN ITS TRANSFER PRICING DOCUMENTATION). AS PER THE TPO, THE ABOVEMENTIONED COMPARABLE COMPANIES SELECTED BY HIM WERE FUNCTIONALLY COMPARABLE TO THE ASSESSEE. HENCE, THE ARITHMETIC MEAN OF THE OPERAT ING MARGINS OF THE COMPARABLE COMPANIES IDENTIFIED BY THE TPO WAS 24% OPERATING COST, WHEREAS THE OPERATING MARGIN OF THE ASSESSEE WAS 14.69% OF OPERATING COST. HENCE, AN ADJUSTMENT OF RS. 21,02,277/ - WAS MADE BY THE TPO. DURING THE DRP PROCEEDINGS, THE MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 13 ASS ESSEE MAINLY CHALLENGED THE EXCLUSION OF (I) NUCLEUS NETSOFT (INDIA) LTD. AND (II) VISHAL INFORMATION TECHNOLOGIES LTD. DUE TO NON - COMPARABLE FUNCTION. THE CONTENTIONS OF THE ASSESSEE VIS - A - VIS THE ABOVE TWO COMPARABLE COMPANIES WERE ACCEPTED BY THE DRP AN D THE RESULTANT ADJUSTMENT WAS REDUCED TO RS.13,82,631/ - . 14. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT IT DOES NOT CONCUR WITH THE SELECTION OF MAPLE E - SOLUTIONS LTD. (MAPLE) AS A COMPARABLE TO BENCHMARK THE SAID TRANSACTION. IT IS STATED THAT MAPLE IS CARRYING OUT CALL CENTRES SERVICES (VOICE - BASED) WHICH IS QUITE DISTINCT FROM THE PROVISIONS OF ITES SERVICES RENDERED BY THE ASSESSEE TO ITS AES. SIMILARLY, MAPLE WAS ALSO UNDER SERIOUS INDICTMENT AND IT WAS REJECTED AS COMPARABLE AS ITS DI RECTOR WAS INVOLVED IN FRAUD. REFERENCE WAS MADE TO THE ORDER PASSED BY THE ITAT DELHI BENCH IN CRM SERVICES INDIA PVT. LTD. [ITA NO.4068/DEL/2009] AND OTHER DECISIONS. IT IS THEREFORE, SUBMITTED THAT MAPLE SHOULD BE EXCLUDED FROM THE FINAL LIST OF COMPARA BLES ON THE GROUND OF FUNCTIONAL DISSIMILARITY AND UNRELIABILITY OF FINANCIAL DATA. SECONDLY, IT IS STATED THAT THE ASSESSEE DOES NOT CONCUR WITH THE SELECTION OF GOLDSTONE INFRATECH LTD. (GOLDSTONE) AS A COMPARABLE TO BENCHMARK THE SAID TRANSACTION. T HE FOREIGN EXCHANGE REVENUE OF GOLDSTONE IS LESS THAN 1% OF THE TOTAL TURNOVER OF THE COMPANY. THIRDLY, IT IS STATED THAT THE ASSESSEE DOES NOT CONCUR WITH THE SELECTION OF DATAMATICS FINANCIAL SERVICES LTD. (DATAMATICS) AS A COMPARABLE TO BENCHMARK TH E SAID TRANSACTION. RELATED PARTY MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 14 TRANSACTION OF DATAMATICS IS NEITHER AVAILABLE ON PUBLIC DOMAIN NOR IS THERE ANY MENTION OF IT IN THE ANNUAL REPORT. REFERRING TO THE CASE LAWS, IT IS STATED THAT THE RELATED PARTY TRANSACTIONS OF DATAMATICS FOR AY 2006 - 07 ARE MORE THAN 25% OF ITS OPERATING REVENUE. IT IS STATED THAT THE TPO HAS CONSIDERED SEGMENTAL INFORMATION WHILE CALCULATING THE MARGINS, WHEREAS THE ANNUAL REPORT AVAILABLE ON PUBLIC DOMAIN DOES NOT PROVIDE SEGMENTAL INFORMATION. IT IS FURTHER STATED THA T THE REVENUE OF DATAMATICS FROM ITES SERVICES IS LESS THAN 75% OF THE TOTAL REVENUE OF THE FIRM AND THEREFORE, THE ACTIVITIES ARE FUNCTIONALLY DISSIMILAR FROM THE ASSESSEE WHICH IS ENGAGED IN PROVIDING ROUTINE IT ENABLED SUPPORT SERVICES. FOURTHLY, IT IS SUBMITTED THAT THE ASSESSEE DOES NOT CONCUR WITH THE SELECTION OF APEX KNOWLEDGE SOLUTIONS PVT. LTD. (APEX) AS A COMPARABLE BECAUSE OF INSUFFICIENT SEGMENTAL INFORMATION AND DISSIMILAR FUNCTIONS. FURTHER, THE LD. COUNSEL SUBMITS THAT THE ASSESSEE VIDE ITS SUBMISSION DATED 11.09.2009 TO TPO AND ALSO IN SUBMISSION BEFORE DRP HAD STATED THAT THERE WERE SUBSTANTIAL DIFFERENCES IN THE WORKING CAPITAL EMPLOYED BY THE COMPARABLES VIS - A - VIS THE ASSESSEE AND IN ORDER TO ELIMINATE THE DIFFERENCES ON ACCOUNT OF THE ABOVE, SUITABLE ADJUSTMENT SHOULD BE UNDERTAKEN. HOWEVER, THE TPO DID NOT PROVIDE ANY BASIS IN HIS ORDER NEGATING THE AFORESAID CONTENTIONS OF THE ASSESSEE. REFERRING TO THE SUPPLEMENTARY GROUND OF APPEAL, IT IS STATED THAT THE ASSESSEE IS A RISK FREE ENTITY, WHILE THE COMPARABLES ARE RISK BEARING MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 15 ENTITIES. THE COMPARABLES SELECTED FOR THE ANALYSIS INCLUDE COMPANIES WHICH HAVE FAIRLY DIVERSIFIED AREAS OF SPECIAL ISATION , PERFORM ADDITIONAL FUNCTIONS VIZ. MARKETING ETC AND BEAR MORE RISKS AKIN TO AN Y THIRD PARTY INDEPENDENT SERVICE PROVIDER VIS - A - V IS THE ASSESSEE. IN CONTRAST, IT IS STATED THAT THE ASSESSEE BEARS LESSER/NO BUSINESS RISK AS COMPARE D TO INDEPENDENT COMPARABLE ENTERPRISES DUE TO THE NATURE OF ITS REVENUE MODEL I.E. COST PLUS BASIS. AL SO IT IS STATED THAT THERE IS NO TAX BASE EROSION IN THE INSTANT CASE AS THE ASSESSEE AVAILS BENEFIT OF SECTION 10A IN RESPECT OF ITS ITES INCOME. 15. ON THE OTHER HAND, THE LD. DR SUBMITS THAT AN ADJUSTMENT OF RS.21,02,277/ - WAS MADE BY THE TPO. THEREAFT ER, THE DRP, AFTER ACCEPTING THE CONTENTIONS OF THE ASSESSEE REDUCE D IT TO RS.13,82,631/ - . THUS THE LD. DR SUPPORTS THE ORDER PASSED BY THE AO. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE ARE OF THE CONSIDERED V IEW THAT THE CONTENTIONS OF THE ASSESSEE AS MENTIONED AT LENGTH AT PARA 14 ABOVE NEED TO BE EXAMINED BY THE AO TO ARRIVE AT A PROPER FINDING. THEREFORE, WE RESTORE THE MATTER TO THE AO TO MAKE A FRESH ORDER, AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE 3 RD GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 16 17. THE 4 TH GROUND OF APPEAL A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSING OFFICER ERRED IN RULING THAT THE CORPORATE MANAGEMENT EXPENSES ARE REQUIRED TO BE ALLOCATED IN THE RATIO OF TURNOVER OF THE 10A UNDERTAKING TO THE TOTAL TURNOVER WHILE COMPUTING DEDUCTION UNDER SECTION 10A, AS PER THE DIRECTIONS OF DISPUT E RESOLUTION PANEL. B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSING OFFICER ERRED IN RULING THAT THE RECOVERY OF BPCS LICENSE FEES MADE BY THE APPELLANT AMOUNTING TO RS.57,44,481/ - WOULD NOT BE ELIGIBLE FOR DEDUCTION UNDER SEC TION 10A, AS PER THE DIRECTIONS OF DISPUTE RESOLUTION PANEL. 18. THE FACTS ARE THAT AS PER THE RETURN OF INCOME, THE ASSESSEE HAD CLAIMED A DEDUCTION OF RS.38,80,782/ - IN FORM 56F U/S 10A OF THE ACT. WHILE COMPUTING TOTAL PROFITS OF THE UNDERTAKING ELIGIBL E FOR DEDUCTION U/S 10A, COST INCURRED FOR BPCS LICENSE FEES OF RS.49,95,202/ - AND RECOVERY THEREOF MADE BY THE ASSESSEE FROM AES WITH A MARK - UP OF 15% (RS.57,44,481/ - ) WERE INADVERTENTLY EXCLUDED FROM THE COST AND TURNOVER. THE ASSESSEE HAD ALSO ADDED BAC K RECOVERY MADE OF RS.57,44,481/ - (INADVERTENTLY NOT RECORDED IN ITS BOOKS OF ACCOUNTS) TO ITS TOTAL INCOME IN THE RETURN OF INCOME FILED FOR AY 2006 - 07, BUT THE COST INCURRED FOR BPCS LICENSE FEES OF RS.49,95,202/ - WAS NOT CLAIMED. SINCE THE COST AND REVE NUE PERTAINS TO THE CURRENT FINANCIAL YEAR, THE ASSESSEE, DURING THE COURSE OF DRP HEARING SUBMITTED THAT COST INCURRED FOR BPCS LICENSE FEES AND RECOVERY THEREOF IS REQUIRED TO BE CONSIDERED WHILE COMPUTING SECTION 10A DEDUCTION. HOWEVER, THE AO HELD TH AT AS THE ASSESSEE HAS NOT EXPLAINED WHETHER THE LICENSE FEE RECOVERED BY IT HAS ACTUALLY BEEN DERIVED FROM MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 17 THE STP UNIT DURING THE YEAR, NO DEDUCTION IS ELIGIBLE THEREON U/S 10A. THE DRP UPHELD THE ORDER OF THE AO AND HELD THAT LICENSE FEES RECEIVED CANNO T BE CONSIDERED AS PART OF ITES SERVICES. ACCORDINGLY, THE AO HELD THAT THE RECOVERY OF BPCS LICENSE FEES MADE BY THE ASSESSEE AMOUNTING TO RS.57,44,481/ - WOULD NOT BE ELIGIBLE FOR DEDUCTION U/S 10A OF THE ACT. 19. BEFORE US, THE LD. COUNSEL OF THE ASSESS EE SUBMITS THAT THE 10 A UNIT IS ENGAGED IN PROVIDING INFORMATION T ECHNOLOGY ENABLED BACK - OFFICE OPERATIONS TO ITS AES AND DOES NOT DEVELOP ANY SOFTWARE. AS PER THE MASTER SERVICE AGREEMENT ENTERED BY THE ASSESSEE WITH AES, THE ASSESSEE WAS TO PROVIDE IT EN ABLED SERVICES RELATING TO ACCOUNTS AND FINANCE, INCLUDING INVOICE DOCUMENTATION, INVOICE PROCESSING AND ACCOUNTING, VENDOR PAYMENT PROCESSING, MIS REPORTING ON ACCOUNTS AND FINANCE. IT IS SUBMITTED THAT FOR PROVISION OF THE IT ENABLED SERVICES, THE ASSE SSEE IS PAID COMPENSATION ON COSTS PLUS 15% MARK UP BASIS. COSTS, FOR THIS PURPOSE, INCLUDE ALL SUCH DIRECT AND INDIRECT COSTS THAT ARE INCLUDED BY THE ASSESSEE FOR PROVIDING THE SAID IT ENABLED SERVICES. THE COSTS INCURRED TOWARDS BPCS LICENSE FEES FORM A N INTEGRAL PART OF THE 10A DIVISION AND HENCE THE ASSESSEE HAD RECOVERED THE SAME FROM CUSTOMERS AT A COST PLUS MARK UP BASIS IN ACCORDANCE WITH THE TERMS OF THE MASTER SERVICE AGREEMENT. IT IS STATED THAT WITHOUT INCURRING SAID COSTS, IT IS NOT POSSIBLE F OR THE ASSESSEE TO UNDERTAKE ITES SERVICES. IT IS STATED THAT SINCE THE COSTS INCURRED TOWARDS BPCS LICENSE FORMS INTEGRAL PART OF THE COST AND THE SAME PERTAINS TO THE FINANCIAL YEAR 2005 - 06, THE COST INCURRED AND RECOVERY THEREOF ARE REQUIRED TO BE CONSI DERED WHILE COMPUTING DEDUCTION U/S 10A OF THE ACT. MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 18 WITHOUT PREJUDICE TO THE ABOVE, IT IS STATED THAT IF THE INCOME ARISING FROM BPCS LICENSE IS NOT ELIGIBLE FOR SECTION 10A DEDUCTION, THEN THE SAID INCOME SHOULD BE DIRECTED TO BE EXCLUDED FROM THE EXPOR T TURNOVER WHILE COMPUTING DEDUCTION U/S 10A OF THE ACT. FURTHER, THE COST INCURRED BY THE ASSESSEE SHOULD BE ALLOWED WHILE COMPUTING ITS TOTAL INCOME. IT IS STATED THAT ALL THE DIRECT COST AND INDIRECT COST INCURRED IN RELATION TO STP DIVISION IS IDENTIFI ED BY THE ASSESSEE AND CHARGED TO STP DIVISION. THE LD. COUNSEL SUBMITS THAT OUT OF TOTAL OPERATING AND OTHER ADMINISTRATIVE EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT AGGREGATING TO RS.28,74,65,441/ - , EXPENSES AGGREGATING TO RS.3,20,49,348/ - (IN THE NATURE OF LABORATORY EXPENSES AND CONSUMABLES, C OMMISSION, LOSS ON FIXED ASSETS SOLD AND FOREIGN EXCHANGE LOSS) HAVE NO NEXUS WITH THE STP DIVISION. ACCORDINGLY, THERE WAS NO QUESTION OF MAKING ANY ALLOCATION OF THE SAID EXPENSES TO THE 10A UNIT. IT IS ALSO STATED THAT INTEREST COSTS OF RS.55,57,618/ - D EBITED TO THE PROFIT AND LOSS ACCOUNT HAS DIRECT NEXUS WITH INTEREST RECEIVED AND THUS THERE IS NO REQUIREMENT OF ALLOCATION OF INTEREST EXPENSES TO 10A UNIT. IT IS STATED THAT OUT OF THE BALANCE EXPENSES OF RS.24,98,58,475/ - , THE ASSESSEE HAS ALREADY ALLO CATED EXPENSES AGGREGATING TO RS.2,18,42,729/ - TO THE 10A UNIT BEING COSTS ATTRIBUTABLE TO THE STP UNIT. 20. ON THE OTHER HAND, THE LD. DR SUBMITS THAT AS THE ASSESSEE HAS NOT EXPLAINED WHETHER THE LICENSE FEE RECOVERED BY IT HAS ACTUALLY BEEN DERIVED FRO M THE STP UNIT DURING THE YEAR, THE AO HAS RIGHTLY HELD THAT NO DEDUCTION IS ELIGIBLE THEREON U/S 10A OF THE ACT. IT IS STATED BY HIM MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 19 THAT THE DRP HAS RIGHTLY UPHELD THE ORDER OF THE AO AND HELD THAT LICENSE FEES RECEIVED CANNOT BE CONSIDERED AS PART OF IT ES SERVICES. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE ARE OF THE CONSIDERED VIEW THAT THE ABOVE ISSUE NEEDS TO BE EXAMINED BY THE AO ON THE BASIS OF ACCOUNTS AND FACTS. ALSO THE SUBMISSIONS OF THE LD. COUNSE L DELINEATED AT PARA 19 ABOVE NEED TO BE EXAMINED AS PER THE PROVISIONS OF THE ACT. THEREFORE, WE RESTORE THE MATTER TO THE AO TO MAKE A FRESH ORDER, AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE DIRECT THE ASSESSEE TO FILE THE REL EVANT DOCUMENTS/EVIDENCE BEFORE THE AO. THUS THE 4 TH GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 22. THE 5 TH GROUND OF APPEAL ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER WHILE COMPUTING INTEREST UNDER SECTION 234B, ERRED IN REDUCING FROM SELF - ASSESSMENT TAX PAID UNDER SECTION 140A, INTEREST OF RS.26,37,489/ - AS DETERMINED IN THE ORDER PASSED UNDER SECTION 144C (13) READ WITH 143 (3) INSTEAD OF REDUCING THE INTEREST ACTUALLY PAID BY THE APPELLANT UNDER S ECTION 234B OF RS.13,38,049/ - AT T HE T IME OF MAKING PAYMENT OF SELF ASSESSMENT TAX OF RS.1,67,25,607/ - ON 30 NOVEMBER 2006. 23. THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT THE AO ERRED IN REDUCING FROM THE SELF - ASSESSMENT TAX INTEREST PAYABLE BY THE ASSESSEE UPTO DATE OF ASSESSMENT ORDER INSTEAD OF REDUCING THE INTEREST ACTUALLY PAID BY THE ASSESSEE AS ON DATE OF PAYMENT OF SELF ASSESSMENT TAX. IT IS STATED THAT AS PER THE PROVI SIONS OF SECTION 234B(2)(I) OF THE ACT, ONLY THE AMOUNT OF INTEREST PAID ON SELF - ASSESSMENT UNDER THE RELEVANT MONSANTO HOLDINGS ITA NO. 8081/MUM/2010 20 PROVISIONS OUGHT TO BE REDUCED FROM TAX PAID U/S 140A WHILE COMPUTING INTEREST U/S 234B OF THE ACT. 24. WE HAVE PERUSED THE RELEVANT MATERIALS O N RECORD. THE LEVY OF INTEREST U/S 234B IS MANDATORY , THOUGH CONSEQUENTIAL. WE DIRECT THE AO TO LEVY INTEREST AS PER THE PROVISIONS OF THE ACT, AFTER GIVING EFFECT TO THIS ORDER. 25. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OP EN COURT ON 14/12/2018. SD/ - SD/ - ( SAKTIJIT DEY ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 14/12/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI