TMI Blog2014 (2) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... on on capital work in progress – Held that:- The Tribunal is clear that the depreciation is allowable to the assessee – thus, the AO is directed to grant depreciation to the assessee. Claim of exemption u/s 10A of the Act – Held that:- The decision in of CIT vs.Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] followed – the assessee is entitled to exemption under section 10A with reference with reference to addition of disallowance of PF/ESIC payments as the plain consequence of the disallowance and add back made by the AO has increased the business profits of the assessee - the exemption under section 10A is to be calculated accordingly. Transfer Pricing Adjustment – Held that:- The decision in 3i Infotech Ltd. Versus Deputy Commissioner of Income-tax, Circle 10(3) Mumbai [2010 (7) TMI 843 - ITAT MUMBAI] followed -The determination of ALP in respect of the transaction by which the Assessee deputed three of its employees to ICICI infotech, USA, by the TPO is therefore non est to that extent and cannot form the basis for making an addition to the total income - The AO therefore could not have made the impugned addition on the basis of the order of the TPO - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, compensation received by the assessee was in the nature of capital – Decided against Revenue. Disallowance u/s 14A of the Act r.e Rule 8D of the Rules – Held that:- The decision in Godrej & Boyce Mfg. Company Ltd vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] followed - the provisions of Rule 8D are prospective and can be applied from A.Y 2007-08 onwards, however, disallowance 14A is to be made in the earlier years based on reasonable basis for computation of expenses relating to earning of exempt income – thus, the matter remitted back to the AO for fresh adjudication – Decided in favour of Revenue. - IT Appeal Nos. 2616, 3354, 3355, 9131 & 9011 (Mum) of 2010 & 128 (Mum.) of 2011 - - - Dated:- 21-8-2013 - I.P. BANSAL And N.K. BILLAIYA , JJ. For the Appellant : P.J. Pardiwala. For the Respondent : Ajit Kumar Jain. ORDER:- PER BENCH: Appeals for assessment year 2003-04 are cross appeals and are directed against the order passed by Ld. CIT(A)-15, Mumbai dated 11/1/2010. Appeal for assessment year 2004-05 is assessee's appeal, which is directed against order passed by Ld. CIT(A)-15, Mumbai dated 11/1/2010. Appeals for A.Y 2005-06 are cross appeals and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, and in law, the Ld. CIT(A) was not correct in holding that both on fact and in law the compensation received by the assessee company of Rs.15.00 Crores is a capital receipt and directed to delete such addition. 2. at on the facts and in the circumstances of the case, and in law, the Ld. CIT(A) could not appreciate the fact that the agreement dated 10.10.2002 between the assessee company and ICICI bank entails compensation to be paid to the assessee for the loss of business/futures earnings and such compensation received by the assessee company of Rs.15.00 Crores is a revenue receipt as held by the A.O. and in that view of the matter erred in directing the A.O. to delete the same." Grounds of ITA No.3355/Mum/2010,A.Y.2004-05-Assessee's Appeal: "The appellant objects to the order of the Commissioner of Income-tax (Appeals) -15, Mumbai ('CIT(A)') dated 11 January 2010 for the aforesaid assessment year on the following among other grounds: Software development expenses 1. The learned CIT(A) erred in confirming the disallowance of expenses of Rs. 12,76,66,915 incurred on developmental up-gradation of various software products. 2. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovember 2010 ) passed by the Assistant Commissioner of Income-tax, Range - 10(3), Mumbai ('ACIT') for the aforesaid assessment year on the following among other grounds: 1. The learned ACIT erred in assessing the total income of the appellant at Rs. 12,46,11,66/-. 2. The order of the learned ACIT is bad in law, contrary to the provisions of law and facts of the case and without following the directions of the Dispute Resolution Panel ('DRP') in the right perspective. Disallowance of Software Expenses 3.1 The learned ACIT erred in disallowing a sum of Rs.22,24,13,341 incurred on software development. 3.2 The learned ACIT erred in not appreciating the fact that the said expenditure was incurred by the appellant mainly on account of salary, electricity, printing and stationary, rent, etc. which was primarily revenue expenditure incurred on a particular software product and hence allowable as a deduction. 3.3 The learned ACIT erred in observing that the expenses for research and development of computer software are nothing but capital in nature as the appellant has been deriving the enduring benefit. 3.4 The learned ACIT erred in not all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2008-09 and not retrospectively and therefore it would not be applicable to assessment year under consideration. 4.3 The learned ACIT erred in not appreciating the fact that the assessee has not obtained any loan for making investments and therefore no interest can be attributable to tax free income. 4.4 The learned ACIT erred in not appreciating the fact that the investment made in SDG Software Technologies Pvt. Ltd. was for the purpose of amalgamation effective from 1 April 2006. Therefore, investment in SDG Software Technologies Pvt. Ltd. shall not generate any exempt income and hence it should not be considered for working out average investment for computing disallowance under section 14A r. w. rule 8D. 5. Adjustment in respect of international transaction of transfer of employees 5.1 The learned ACIT / Transfer Pricing Officer ("TPO") erred in making the adjustment of Rs. 24,26,618 to the total income of the appellant, as consideration for transferring certain employees to its associated enterprises without appreciating the fact that these employees were neither highly qualified nor significant cost was incurred for training them. 6. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him that one has to see the nature of business of the Assessee. In the hands of the Assessee who is a software developer the expenditure cannot be said to be capital expenditure. He referred to be decision of the Special Bench of ITAT Delhi in the case of Amway India Ltd. 111 ITD 112 (SB)(Del), wherein at page-168 the Special Bench has explained that the expenditure on software, whether capital or revenue will depend on the nature of business of an Assessee. He referred to the details of the expenses which were claimed by the Assessee as deduction and submitted that those expenses were salary, rent etc., for development of software and by their nature they were revenue expenditure. He drew our attention to para 1.3 (b) of the Significant Accounting Policies and Notes to Accounts. The same relates to method of depreciation/amortization. In so far as business and commercial rights and software products are concerned the accounting policy adopted by the Assessee was as follows: "Business and Commercial Rights and Software Products are amortized over a period of five years, as considered appropriate by the management" His submission was that treatment of a particular ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also be allowed on the capitalised cost of the computer software. In such cases an Assessee instead of ammortization gets the benefit of depreciation, which is one way allows deduction of expenses/costs, just as one would get deduction by ammortization of cost. We have already seen that in respect of some expenditure incurred on development/up-gradation of software in the earlier assessment year a sum of Rs.3,92,90,000/- had been treated as capital work-in-progress in the earlier assessment year. This year the said expenditure was capitalized on reaching commercialization. The AO allowed depreciation at 60% on such capitalized value of expenditure and the Assessee has accepted the same. However in respect of the expenditure treated as work- in-progress in the present assessment year, the Assessee wants a different treatment. It is true that entries in the books of accounts are not conclusive when it comes to computing income under the Income Tax Act, 1961 but it cannot be said that they are totally irrelevant. The method of accounting adopted by the Assessee goes well with the matching concept of accounting which mandates that incomes shall, as far as possible, be matched with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ience including agriculture, animal husbandry or fisheries; (iii) references to scientific research related to a business or class of business include (a) any scientific research which may lead to or facilitate an extension of that business or, as the case may be, all businesses of that class; As per section 35(2), where such capital expenditure [referred to in section 35(1)(iv)] is incurred after March 31, 1967, the whole of such capital expenditure incurred in any previous year is deductible for that previous year, with exception being expenditure incurred on acquisition of land. It is the plea of the Assessee that even if the expenditure is considered as of capital nature the same would be eligible for deduction under section 35, provided such expenditure is incurred on scientific research. The submission of the Assessee is based on the decision of the Income Tax Appellate Tribunal (Delhi), in the case of DCIT v. TCIL Bellsouth Ltd. 89 TTJ 851, wherein it has been recognized that the expenses incurred on software product development would qualify as being in the nature of scientific research and thus, be admissible deduction under the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The allowability of such expenses will be governed by the provisions of Sec.37(1) of the Act because there is no other provision under Chapter-IV section 28 to 44 of the Act under which the allowability of the aforesaid expenditure can be considered. 17. For the reasons given above, we dismiss ground No.1to 3 raised by the Assessee. ' 5. It may be further mentioned that against the aforementioned order of the Tribunal an appeal was filed by the assessee before the Hon'ble Bombay High Court which has been admitted vide order dated 18/1/2012 in Income Tax Appeal No.1013 of 2011 and following substantial questions of law have been admitted with the following observations: "1. Heard. Admit on the following substantial questions of law. "(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal erred in holding that expenditure of Rs.12,59,33,429/-incurred by the appellant on development / upgradation of software is capital in nature? (ii) Whether on the facts and in the circumstances of the case and in law the Tribunal erred in denying the appellant's alternative claim for deduction of Rs.12,59,33,429/-as scientif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On appeal it was observed by their Lordships that no question of law arose out of the appeal decided by the Tribunal. Their Lordships have also observed that Special Bench decision was considered by the High Court in the case of CIT vs. Amway India Enterprises and it was held that entire expenditure was liable to be allowed as revenue expenditure. 7. We have carefully considered such submission of Ld. AR in the light of aforementioned two decisions of Hon'ble High Court. However, we are of the opinion that none of the aforementioned two decisions are applicable to the facts of the case of the assessee as the expenditure incurred by the assessee on development of software relates to assessee's own business activity of development of computer software and all processes thereon, assembling and recording of programmes on any tapes, disc, perforated media etc. Assessee's range of offerings includes software products and solutions for the Banking, Financial Services and Insurance (BFSI) industries. The assessee company has also range of enterprise software solutions and it develops and keep ready best version of software products and customizes it based on customers specific requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(1)(iv), respectfully following the aforementioned decision of Tribunal in assessee's own case we reject such claim. 10.1 The above adjudication will cover Ground No.1,2 3 of assessee's appeal for A.Y 2003-04, ground No.1 2 of assessee's appeal for A.Y 2004-05 and ground Nos.1 2 of assessee's appeal for A.Y 2005-06 and these grounds are treated to be partly allowed. 11. So far as it relates to assessee's similar claim in respect of A.Y 2006-07, it may be mentioned here that certain additional aspects on this issue have been raised which are as under: (1) Depreciation has not been allowed by the AO on capitalized software expenses. (2) The assessee is entitled for additional deduction under section 10A on the disallowed portion of software expenses. 12. So far as it relates to allowability of depreciation on capital work in progress which has been capitalized in the books of account in the year of commercialization, the aforementioned order of the Tribunal is clear that the depreciation is allowable to the assessee. Therefore, we direct the AO to grant such depreciation to the assessee. 13. So far as it relates to claim of exemption under section 10A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y promoted by ICICI Group. 29.5% of the equity is held by ICICI Bank, 63% by ICICI Ventures, a subsidiary of ICICI Bank and the balance is held by the Dubai based group. The Assessee is a software developing company. The four key business lines are software Development consultancy services, software product, IT Infrastructure, Networking Facilities Management services ltd. and business process outsourcing. The Assessee entered into some international transactions with associated enterprises. The following are the details of associate enterprises. (i) ICICI Infotech Inc. (hereinafter Infotech, USA), incorporated in Delaware, USA is a wholly owned subsidiary of the Assessee. (ii) ICICI Infotech Pte. Ltd., Singapore is also a wholly owned subsidiary of the Assessee and is engaged in the business of Information Technology related products and services. (iii) Tricolor Infotech International Inc, Mauritius is a joint venture company of the Assessee (50% equity) and Emirates Bank Group (50% equity). The company is engaged in the sales, marketing and business development activities for software development in UAE West Asia 27. The Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted. The agreements with all the three associated enterprises, details of costs incurred by Infotech USA with regard to marketing services and as a contract service provider were also submitted. 29. The AO by his letter dated 29/9/03 had referred for computation of arm's length price to the TPO the transactions referred to Form No.3CEB filed by the Assessee pursuant to provisions of Sec.92E of the Act. The TPO considering the facts of the international transactions for the year and economic analysis carried out by him was of the view that no adjustment requires to be made to the value of the international transactions entered into by the assessee. 30. The TPO after having held that the value at which the international transactions reported by the Assessee in its Form No.3CEB u/s.92-E read with Rule 10-E of the Rules, carried out by the Assessee does not require any adjustment, however proceeded to make an adjustment in respect of an issue which was not reported by the Assessee as an international transaction in Form No.3CEB filed pursuant to Sec.92-E of the Act. The following were the relevant observations of the TPO in his report in this regard: 'The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 92C(4) of the I.T. Act, 1961.' 31. Following the above report of the TPO, the AO made an addition of Rs.2,71,773 to the total income of the Assessee. 32. Before CIT(A), the Assessee submitted that the first step, when applying the CPU method, is to find a comparable transaction. This could be done in two different ways. The easiest and most preferable way is to compare the controlled transactions (i.e. transaction between two related parties) with another transaction made by the same MNE but with an unrelated party. This is an "internal comparable". The reason why it is preferable is that the quality of the data is more accurate since the MNE is part of the transaction and thus has access to all the facts of the transactions. It was submitted that to test the arm's length pricing in the case of transfer/seconding of the employee's, it may be possible to use the CUP method where the same entity has undertaken similar transaction under comparable circumstances to independent enterprises (para 6.23 of OECD Guidelines on Transfer Pricing). CUP method could not be applied under the facts of the case as the Assessee Company has not transferred/seconded employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to help marketing of the Assessee's product by the wholly owned subsidiary US company and that the Assessee would generate income in the form of improved business and this factor has been completed lost sight by the TPO. 34. The CIT(A) however confirmed the order of the AO for the following reasons: "I have carefully considered the findings of the Assessing Officer and submissions of the appellant. The argument of the appellant that no substantial amount was incurred for training and development of employees is not acceptable. The employees transferred were recruited and trained by the appellant company before they were actually interest the work of software development. Generally most qualified employees are transferred to foreign location. By aforesaid transfer the transferee entity was benefited because they have not incurred any expenses on such employees. I agree with the observations of the Assessing Officer that the transferee company should compensate the transferor for using the valuable resources. Therefore TPO/Assessing Officer was fully justified in making adjustment of Rs. 2,71,773/-in view of the proviso of section 92C(4) of I.T. Act, 1961. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termination of arm's length price in relation to the international transactions referred to him by the AO and if during the course of proceedings before him it is found that there are certain other transactions which have not been referred to him by the AO, he will have to take up the matter with the AO so that a fresh reference is received with regard to such transaction. The Board has further opined that reference to the TPO is transaction and not enterprise specific. His further submission was that since the AO made the impugned addition by relying on the order of the TPO the same cannot be sustained. 37. The learned D.R. submitted that the definition of international transaction is wide enough to include the act of deputation of three employees by the Assessee to Infotech US. According to him, the Assessee ought to have disclosed this transaction in the report in Form No.3CEB. Having failed to do so, the Assessee cannot take advantage of its own wrong. Another submission made by him was that two of the transactions reported in Form 3CEB between the Assessee and Infotech US related to (a) marketing services provided by Infotech Inc to Infotech India (Assessee) and (b) Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Commissioner, refer the computation of the arm's length price in relation to the said international transaction under section 92C to the Transfer Pricing Officer. (2) Where a reference is made under sub-section (1), the Transfer Pricing Officer shall serve a notice on the assessee requiring him to produce or cause to be produced on a date to be specified therein, any evidence on which the assessee may rely in support of the computation made by him of the arm's length price in relation to the international transaction referred to in sub-section (1). (3) On the date specified in the notice under sub-section (2), or as soon thereafter as may be, after hearing such evidence as the assessee may produce, including any information or documents referred to in sub-section (3) of section 92D and after considering such evidence as the Transfer Pricing Officer may require on any specified points and after taking into account all relevant materials which he has gathered, the Transfer Pricing Officer shall, by order in writing, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next question is whether the report of the TPO can be considered as material, information or document based on which the addition made by the AO could be sustained. U/S.92C(3) the AO has power to determine ALP on the basis of material or information or document in his possession. But exercise of such power is conditional on the AO being satisfied that : (a) the price charged or paid in an international transaction has not been determined in accordance with sub-sections (1) and (2); or (b) any information and document relating to an international transaction have not been kept and maintained by the assessee in accordance with the provisions contained in sub-section (1) of section 92D and the rules made in this behalf; or (c) the information or data used in computation of the arm's length price is not reliable or correct; or (d) the assessee has failed to furnish, within the specified time, any information or document which he was required to furnish by a notice issued under sub-section (3) of section 92D, The provisions of clause (a) (b) and (d) above would not apply because no price had been charged by the Assessee in this case, in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company. It was his submission that there is no basis for these assumptions. The three personnel transferred by the Assessee on deputation to Infotech Inc. USA had the following experience: Name Experience with the Assessee Per month cost to the Assessee K.N. Madhava 2 years Rs. 1,36,141 Vivek Pillai 1 and years Rs.24,821 Mr. Alex -do- Rs.20,220 According to him the personnel transferred to Infotech Inc. USA cannot be said to possess any of the skills as assumed by the AO. (b) He drew attention to page-33 of the Assessee's paper book which contains note 2.18 being notes to the Accounts of the Assessee for the previous year relevant to AY 02-03. It has been mentioned therein that the Assessee has engaged ICICI Infotech Inc. USA the wholly owned subsidiary for providing market development and sales support in the US for project software and implementation services for onsite projects. That the Assessee remunerates Infotech Inc. on a cost plus basis for the aforesaid services and all the project revenues accures to the Assessee. The learned counsel submitted that, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LP of this transaction and determine income which the Assessee ought to have earned on the transaction. 43. In the present case, we find that the arrangement between the Assessee and Infotech USA was that the Assessee remunerates Infotech Inc. on a cost plus basis for the aforesaid services and all the project revenues accures to the Assessee. If the Assessee charges Infotech USA the cost of deputation of employees, the cost of Infotech USA will go up and on such increased cost the Assessee will have to remunerate them the fixed percentage. In that event there will be erosion of tax base of India. In such cases, we feel that the AO ought not to resort to the provisions of Sec.92 to determine income of international transactions. There may be cases where apparently there is no erosion of Indian tax base but the AO may find the value of the benefit is part of some other international transaction and determination of ALP of the other transaction will depend determination of ALP of the benefit, in such cases he may resort to the provisions of Sec.92. We therefore agree with the submission of the learned counsel for the Assessee that on the facts and circumstances of the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese activities independently. Therefore, the Bank proposed to appoint senior personnel of the assessee, who was handling these activities on their rolls. It is in these circumstances it was mutually agreed between the assessee and the Bank that the Bank shall discontinue the arrangement of RFCO activities being handled by the assessee w.e.f. 1/9/2002. As mentioned earlier that the assessee had already put in place adequate resources mentioned above to handle these activities, the Bank agreed to pay a sum of Rs.15.00 crores to the assessee as compensation for the loss of business/future earning/ transfer of knowledge, which is subject to confirmation through valuation of RFCO business activities by the two independent agencies. Copy of the agreement dated 9/10/2002 was filed which was entered into between the assessee and bank alongwith a copy of valuation report in respect of retail asset business of the assessee. 18.2 The aforementioned amount of Rs.15.00 crores was treated as capital receipt by the assessee on the ground that after having pre-determined the contract with the Bank, the assessee has given up one source of income completely for which the compensation has been rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue in nature. In this regard it was the submission of the assessee that in the case of the assessee, as a result of cancellation of agreement the assessee has incurred a loss of a source of income and therefore, the compensation received is capital in nature. All these issues have been discussed in the order of Ld. CIT(A) in para No.3. Apart from aforementioned arguments assessee has also relied upon other decisions also and after considering all of them Ld. CIT(A) has arrived at a conclusion that the compensation received by the assessee is capital receipt. Ld. CIT(A) has mentioned that the business of the assessee can be broadly segregated into two main activities viz. (a) software development; (b) providing back office support services in respect of retail lending business of the Bank. Admittedly, assessee does not provide such support services to any other company other than ICICI Bank. The assessee also did not enter into other similar agreement with any other company. Due to termination of contract with the Bank, the assessee had to close its retail asset business division which essentially managed retail asset portfolio of the Bank. Therefore, it has to be accepted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19% 36.76 3% - - IT Infra Networking and Facilities Management 493.43 27% 274.00 15% 229.09 16% 158.93 15% Business Processing Outsourcing Services 244.64 14% 454.12 25% 661.97 45% 496.35 46% Compensation pertaining to BPO Division - - 150 8% - - - - Total 1797.17 100% 1793.67 100% 1467.23 100% 1078.52 100% 19.1 Ld. DR further submitted that there was no transfer of asset as assets of the assessee has never decreased. For this he relied upon the figures of fixed assets given in financial report, copy of which was placed on our record and was also given to Ld. A.R. 19.2 Ld. DR further submitted that the decision of Hon'ble Supreme Court in the case of Oberoi Hotels (P.) Ltd. (supra) mainly referred to the earlier decision of Hon'ble Supreme Court in the case of Kettlewell Bullen Co. Ltd. (supra). He referred to the following observations of Hon'ble Supreme Court to contend that simple termination of the contract is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed similar activity with other remaining agencies was not considered relevant. Ld. AR drew our attention towards observation of their Lordships in para-21 which have already been reproduced in the above part of this order where their Lordships of Hon'ble Supreme Court has observed that "It matters little whether the assessee did continue after the determination of its agency with the Fort William Jute Co. Ltd. to conduct the remaining agencies. The transaction was not in the nature of a trading transaction, but was one in which the assessee parted with an asset of an enduring value." 20.1 Coming to the decision of Hon'ble Supreme Court in the case of Oberoi Hotels (P.) Ltd. (supra), Sr. Counsel submitted that in that case also assessee was operating activities with various hotels and compensation was received by it in respect of operation of only one hotel namely Hotel Oberoi Imperial, Singapore and similar activity with other hotels were continued. It was held that the compensation received by the assessee was a capital receipt. He submitted that amount in the present case was received by the assessee because assessee has to give up its right to render services in respect of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso the case of the assessee that it has never rendered such services to any other person right from the inception and there is no material on record to contradict such argument of the assessee. Therefore, if he facts of the present case are seen in the light of aforementioned two decisions of Hon'ble Supreme Court namely Kettlewell Bullen Co. Ltd. (supra) and Oberoi Hotel (P.) Ltd. (supra), then we find no infirmity in the order passed by Ld. CIT(A) on this issue, whereby it has been held that the compensation received by the assessee was in the nature of capital. We decline to interfere and this ground of the revenue is dismissed. 22. Now we are left with the remaining grounds of assessee's appeal for A.Y 2006-07. 23. Ground No.4 is with respect to disallowance made under section 14A of the Act. The AO applied Rule 8D and disallowed a sum of Rs.1,14,52,987/- in the draft order and Ld. DRP after referring to the decision of Hon'ble Bombay High Court in the case of Godrej Boyce Mfg. Company Ltd vs. DCIT, 328 ITR 81(Bom) has given the following directions to the A.O. "3.1 The Bombay High Court has held that the provisions of Rule 8D are prospective and can be applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted on the payments made to the assessee which are accounted for as income during the year under consideration after verification of such TDS. We direct accordingly. This ground is also considered as allowed for statistical purposes in the manner aforesaid. 29. Ground No.7 of assessee's appeal for A.Y 2006-07 is regarding levy of interest under section 234D. It was submitted by Ld. AR that the levy of interest under section 234D is consequential and AO may be directed to re-compute interest leviable under section 234D as per income determined after giving effect to the present appeal. Therefore, after hearing both the parties we direct the AO to recompute interest under section 234D as per income computed after giving effect to this order. We direct accordingly. This ground is allowed in the manner aforesaid. 30. Ground No.8 of assessee's appeal for assessment year 2006-07 is regarding initiation of penalty proceedings under section 271(1)(c) of the Act. Such ground of the assessee is premature, therefore, the same is dismissed. 31. No other grounds were argued before us. 32. In the result, appeals filed by the assessee are partly allowed in the manner aforesaid and revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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