M/S. RELIGARE CAPITAL MARKETS LTD.,NEW DELHI vs. DCIT, NEW DELHI

4 | P a g e 6.1 That the assessing officer/ DRP erred on facts and in law in alleging that the appellant had not explained the basis of calculation of support service charges. 6.2 That the assessing officer/ DRP erred on facts and in law in not appreciating that the appellant had placed on record various documentary evidences which clearly justified that the support service charges paid by the appellant were reasonable as well as meant for business purposes only.

5 | P a g e 2.1 That on facts and in circumstances of the case and in law, the addition of Rs. 1,860,000,000 made by the Ld. AO to the returned loss of the assessee is bad in law and liable to be deleted. 2.2 That on facts and in circumstances of the case and in law, the Ld. AO has erred in treating Rs. 1,860,000,000 being the amount of preference share capital issued by the assessee to Cresswell Investments Limited ("CIL") as an unexplained cash credit under section 68 of the Act. 2.3 That on facts and circumstances of the case and in law, the Ld. AO while making an addition of Rs. 1,860,000,000 under section 68 of the Act on the ground that the assessee had neither proved the genuineness of the transaction nor the creditworthiness of CIL has erred in disregarding the following documentary evidence that were filed before him during the assessment proceedings proving the genuineness of the transaction and the creditworthiness of CIL: a. Letter from Reverse Bank of India giving registration no. to the foreign remittance of Rs 1,860,000,000 in respect of 3,7200,000 compulsorily convertible preference shares of Rs 10 each allotted at a premium of Rs 40 per share; b. Form FCGPRS filed by the assessee vide its letter dated September 28, 2010 with HDFC Bank informing it of the inward remittance of Rs 1,860,000,000; c. The valuation report of the preference shares having a face value of Rs 10 justifying the premium of Rs 40 furnished by the assessee; d. Copy of foreign inward remittance certificate (FIRC); and e. Letter given by CIL confirming the investment in preference shares of the assessee. 2.4 That on facts and in circumstances of the case and in law, the AO while making an addition of Rs 1,860,000,000 under section 68 of the Act erred in ignoring that the Act or the Rules do not prescribe any documents for determining the genuineness of the transaction nor the creditworthiness of subscriber to the share capital of the assessee. 2.5 That on facts and in circumstances of the case and in law, the AO during the course of assessment proceedings he did not direct the assessee to furnish specific documents to prove the creditworthiness of CIL.

6 | P a g e 2.6 That on facts and in circumstances of the case and in law, the AO did not ask the assessee to explain why share capital of Rs 1,860,000,000 subscribed by CIL. should not be added to the income assessee under 68 of the Act. DRP's Findings: Ground 2 alongwith sub grounds 2.1 to 2.6, which are either of corroborative or explanatory nature, are taken up together for disposal. The Panel perused the assessment order and the voluminous evidence and lengthy submissions made by the A' in juxtaposition. The main plank of the argument of the AO was that the A' failed to establish the capacity i.e. the credit worthiness and thereby the genuineness of the transaction involving receipt of Rs. 186,00,00,000/- by way of preference share capital from CRESSWELL INVESTMENTS LTD. To bolster up its action, the AO placed reliance on the decisions of Dharmavat Provision Stores Vs. CIT 1983, 139 ITR 700 (Bom )/ CIT VS. Sophia Finance Ltd. 1994. 205 ITR 98 to demonstrate that section 68 was attracted even in a case where money was received in the capital a/c, (The latter decision was followed by the Hon'ble High Court in CIT vs. Dhar Ispat (P) Ltd. (2003 180 CTR MP491)) and further strengthened by the decision of the High Court of Delhi in the case of Onassis Aales (P) Ltd. Vs. CIT. The AO also relied on the decision of Hon'ble AP High Court in the case of R.B. Mittal vs. CIT 165 CTR 366. In these cases Their Lordships took the view that the A was duty bound to prove the capacity of the creditors and the genuineness of the transactions in order to discharge the onus imposed by Section 68 of the Act. In both the above cases it was adjudged that confirmation letters, PAN numbers, income tax assessment status and ROC registration and filing of returns with ROC, acceptance of money by account payee cheques / drafts, and repayments of interest on loans by crossed cheques and the lenders' depositions before the AO did not at all go to tilt the balance in A's favour unless it was demonstrated with clinching and sound evidence that the transactions were genuine. Further reliance was placed by the AO on the cases of Saroagi Credit Corporation (Patna High Court), CIT vs. Gold Leaf Capital Corporation Ltd. (2012/8 taxmann.com, Aggarwal Coal Corporation (P) Ltd. Vs. Addl CIT, 2012, 19 taxmann.com to show that failure to produce the creditors served as a debilitating factor for the recipient of a deposit. Against the above decisions of the AO, our attention was drawn by the A' to page no. 124 of paper book 1 of 3 which was purportedly produced before the AO by the A' during assessment proceedings. The A' claimed to have produced the following before the AO at the stage of assessment proceedings:- a. "Letter from Reserve Bank of India giving registration no. to the foreign remittance of Rs 1,860,000,000 in respect of 3,7200,000 7 | P a g e compulsorily convertible preference shares of Rs 10 each allotted at a premium of Rs 40 per share; b. Form FCGPRS filed by the assessee vide its letter dated September 28, 2010 with HDFC Bank informing it of the inward remittance of Rs 1,860,000,000; c. The valuation report of the preference shares having a face value of Rs 10 justifying the premium of Rs 40 furnished by the assessee; d. Copy of foreign inward remittance certificate (FIRC); and e. Letter given by CIL confirming the investment in preference shares of the assessee." We gave our anxious consideration to the conflicting positions taken by the AO and the A'. The evidence filed by the A' were appraised carefully by us. There is no blinking the fact that the A' succeeded in proving the identity and the remittance of money into India. through government approved channels like RBI's Letter, Foreign Inward Remittance Certificate (FIRC) and letter given by Cresswell Investments Ltd. attesting purchase of 3,72,00,000/- compulsorily convertible preference shares of Rs. 186,00,00,000/-. The details of Cresswell Investments Ltd. were filed vide pages 61 to 132 of the paper book 1 of 3 filed by the A'. It was marked that the creditor was incorporated as a private limited company in the Republic of Mauritius on 13/8/2010 and was engaged in "Investment Holding". No comparative figures of this company were available since the financial statements were the first set of accounts (page 116). Page 115 of the paper book was worth referring to. The creditor suffered a loss of US $ 32,034.00. Net cash used in operating activities was shown as US$ 20,118.00 while purchase of preference shares was worth US$(39786,269) and net cash used in investing activities was the same. It generated cash of USS 3,98,06,387.00 only. There was no movement of any cash. The company disclosed loss of US$ 32,074. The Company had interest income of US$ 200 only as per page 112. However, on 2.09.2010, the said company was sold 3,72,00,00 shares of A's company (Page102). As per page no. 63 of the same paper book, the company confirmed that Enterprise Emerging Markets Fund BV was the sole corporate shareholder of the company (EEMF) and the same had injected funds in the account of Cresswell for the acquisition of the shares of Religare Capital Markets Ltd. EEMF is a broad based fund incorporated in Curacao having USD 1 Billion of assets under management. 8 | P a g e All the above evidence were incisively studied by us. The undisputed fact is that the company was not having any standing / position in the market in the year of incorporation. It did not have any income from its principal activity also as outlined above. In the face of this fact, the reason why EEMF took the route of Cresswell Investments Ltd. to purchase A's shares instead of directly purchasing the shares was not understandable. EEMF also did not issue any corroborative statement to substantiate the fact that the money was transferred from their account to the account of Cresswell. In such circumstances, we are not inclined to believe the version of the A' that Cresswell Investments Pvt. Ltd. had the capacity and the wherewithal to invest the sum of Rs. 186 Crores in 1% shares of the A' for a premium of 400%. Accordingly, it is held that the sum of Rs. 186 crores was an unexplained cash credit in the books of the A'. Hence the grounds 2.1 to 2.3 are dismissed. Ground 2.4 is based on a narrow and retrogressive interpretation of Section 68 of the Act. As a matter of fact it is a debatable ground having a bearing on the interpretation of a statutory provision. Hence this ground is not maintainable in law. Hence ground 2.4 is dismissed. Ground no. 2.5 is also dismissed in view of our appraisal of the facts stated in para 3.1 of the Asstt. order of the AO. The requirement of furnishing all the papers germane to proving the genuineness of the loan was implicit in the requisition made by him from the A' on this issue. Hence it is dismissed. Para 3.2 of the AO's order further negates the claim of the A' that the A' never asked the A to show-cause as to why the above amount should not be disclosed u/s 68. The AD did seek the A's explanation on this score. Hence ground 2.6 is also dismissed. Ground 3: Grounds of appeal related to disallowance of legal and professional expenses of Rs. 42,092,318: 3.1 That on facts and circumstances of the case and law, the AD has erred in disallowing legal and professional expenses of Rs. 42,092,318 incurred by the assessee on the ground that it is capital in nature. 3.2 That on facts and circumstances of the case and in law, the AO erred in ignoring the fact that the report issued by McKinsey & Co only contained recommendations for improving the efficiency of the assessee's existing businesses viz. investment banking and institutional broking divisions and has incorrectly held that the said 9 | P a g e report was issued for future business opportunities being explored by the assessee. 3.3 That on fact and circumstances of the case and in law, the AO has erred in not appreciating the fact that the said report issued by McKinsey & Co did not result in creation of any intangibles or a new business line nor resulted in benefits of enduring nature to the assessee. DRP's Findings: Ground no. 3 read with sub grounds 3.1 to 3.3 being interlinked are taken up together. The Panel took into consideration the entire material facts and evidence on record. The submissions of the A' and the AO's arguments were carefully analysed. Upon a reference to page no 122 read with pages 3 to 55 of paper book of 1 of 3 it was observed by us that the professional submitted a consolidated bill (page2) without any descriptions of specific services and specific charges for each such service for an amount of Rs. 4,10,24,718.00. After duly considering the bill and pages 3-55 of the same paper book we are of the firm opinion that the details of the advice / suggestions reflected on pages 3 to 55 were not sufficient to provide the basis for charging Rs. 4,10,24,718.00 from the A'. For want of a rational and logical nexus with the billed amount and the details as per 3-55 pages and the absence of the break up of services rendered and the basis of charge (Methodology) for each type of service / advice rendered by the professional, etc. and the specific rates for each type of specific professional / legal services, the Panel feels it proper to sustain the disallowance. Hence ground 3 with its sub grounds 3.1 to 3.3 are dismissed. Ground 4: Grounds of appeal related to disallowance of salary expenses including bonus of Rs. 690,114,864: 4.1 That on facts and circumstances of the case and law, the AO has erred in disallowing salary expenses of Rs. 690,114,864 paid by the assessee to its employees during the subject AY on the ground that it is capital in nature. 4.2 That on facts and in circumstances of the case and in law, the AO while disallowing the salary and bonus expenditure has failed to appreciate that the assessee is engaged in routine business of institutional broking services and investment banking which does not create or carry any intangible assets and that its employees are engaged in equity research business for servicing the institutional clients which does not result in any enduring advantage to the assessee.

10 | P a g e 4.3 That on facts and in circumstances of the case and in law, the AO while disallowing salary and bonus expenditure has erred in ignoring and appreciating that such payment of committed bonus and joining bonus is routine business practice of employee motivation and retention. 4.4 That on facts and in circumstances of the case and in law, the AO while disallowing salary and bonus expenditure has erred in ignoring the employment letters that were submitted by assessee per which the payment of committed and joining bonus is subject to continued employment of the employee(s) with the assessee. DRP's Findings: Ground 4 along with grounds 4.1 to 4.4 being interlocking are disposed off together. The Panel took into consideration the entire facts surrounding the issue. It was deciphered from the AO's draft order that the A' paid salary and bonus allowances to new 74 recruits for Rs. 69,01,14,864.00. It was admittedly an expenditure intended to increase the future business base of the A' company. These employees were engaged in doing research work which were useful for the company's future. The salary of these employees consisted of normal salary of Rs. 11,59,89,484.00, normal bonus of Rs.7,00,67,686.00, committed bonus of Rs. 39,27,43,690.00 and joining bonus of Rs. 11,13,16,010.00. On the basis of the above, it was concluded by the AO that the expenditure on account of salaries and bonuses of various types were of enduring nature, hence required to be capitalized. Per contra, it was argued by the A' that the salaries & bonus were of recurring nature and by no stretch of imagination capital expenditure. In support it made reference to the details furnished to the AO like names & addresses with profiles of new joinees, their designations, details of their salaries, etc, appointment letters and copies of Form 16, to prove that tax had also been deducted by the A' thereon. The rationale for paying joining and committed bonus as explained by the A' to us was that the said payments were to capture "Experienced Resources" as per global standard practice pursued by all investment banking companies across the world. In other words, it was admitted by the A' that to hire "internationally reputed investment bankers it paid joining and committed bonus who were to carry out research work in the interest of the A' company. Thus, it was clear that by paying joining and committed bonus, the A' did acquire "ASSETS" in the form of "HUMAN RESOURCES" who were to be retained by such lucrative offers. The Panel therefore is of the considered view that "joining and committed bonus" were in the nature of capital expenditure as they were incurred by the A' to "acquire & retain HUMAN ASSETS" in the form of researchers. Therefore, barring the salary and normal bonus, the joining and retention or committed 11 | P a g e bonus are held as of capital nature. The AO is directed to restrict the disallowance of joining and committed bonus only treating them as capital expenditure. The ground is thus partly allowed. The expenditure on research work shall also be determined if need be, & capitalized if not done by the A' as "Research Works would be conferring enduring benefit to the A'. Ground 5: Grounds of appeal related to disallowance of Rs. 6,774,348 under section 40(a)(ia) of the Act: 5.1 That on the facts and circumstances of the case and in law, the Ld. AO has grossly erred in disallowing Rs. 6,774,348 under section 40(a)(ia) of the Act without providing details/nature of the said disallowance and reasons thereof in the draft assessment order framed by him for the subject AY. DRP's Findings: Ground no. 5 was considered carefully by us. It was pointed out by the A' that there was no such issue involved in the year warranting disallowance u/s 40(a)(ia). We referred to the order and found that there was no discussion on 40(a)(ai) in the draft order. Considering the same to be inadvertent error, the ground of the A' is allowed. Ground 6: Grounds of appeal related to adhoc disallowance of support service of Rs. 10,409,222: 6.1 That on facts and circumstances of the case and in law, the disallowance of Rs. 10,409,222 made by the AO is arbitrary, bad in law and liable to be deleted. 6.2 That on facts and circumstances of the case and in law, the AO while making disallowance of Rs 10,409,222 has alleged that the assessee has not explained the basis of calculation of support service charges paid by it which is baseless and factually incorrect. 6.3 That on facts and circumstances of the case and in law, the AO while making disallowance of Rs 10,409,222 has erred in invoking the provisions of section 40A(2)(b) of the Act. 6.4 That on facts and circumstances of the case and in law, the AO while invoking the provisions of section 40A(2)(b) of the Act has ignored that group company to which support services charges has been paid by the assessee are not covered within the purview of the said section. 6.5 That on facts and circumstances of the case and in law and without prejudice to the above ground of appeal no. 6.3 and 6.4, the 12 | P a g e AO while invoking the provisions of section 40A(2)(b) of the Act has erroneously cast a responsibility on the Appellant to prove the reasonableness of support service charges paid by it to group companies. ORP's Findings: The ground 6 basically relates to disallowance of "Intragroup Services", though incorrectly dealt with by the A' u/s 40A(2)(b) of the Act. The page no. 17 of the AO's order was minutely read along with the computation of income on page 24, para

6. There was no mention of Section 40A(2)(b) of the Act by the AO. In fact the disallowance was made by the AD mainly u/s 37 of the Act as evident from para 6.2 of AO's order. Under para 6.7 section 40A(2)(b) was of course mentioned in passing by the AQ obviously to buttress his allegation of failure of the A on the front of reasonableness of expenditure received by the A The submissions and the documentary evidence filed by the A' were considered along with its submissions. Upon an analysis of the facts & evidence, we are of the considered view that the A' was required to furnish the basis of determination of expenditure on account of each type of service rendered by it to the A' and the prevailing market rate for each such service rendered by the AEs of the A'. The production of agreements/internal policy memo and the debit notes were not of much significance unless and until it was established at the threshold itself by the A' that there was a logical, scientific and rational methodology behind evaluating each such service and that the methodology was universally applied in the market for benchmarking/pricing such services. In the absence of the same, i.e. absence of a generally accepted methodology and the ALP of such services, the disallowance is sustained. Ground 7: Grounds of appeal related to disallowance of finance costs of Rs. 17,986,329: 7.1 That on the facts and circumstances of the case and in law, the Ld. AO has erred in attributing interest aggregating to Rs. 17,986,329 paid on ICDs taken by the assessee to the investment made by it in Religare Capital Markets International (Mauritius) Limited ("RCMI(M)") under section 36(1)(iii) of the Act. 7.2 That on facts and circumstances of the case and in law, the AO has erred in holding the ICDs, in relation to which interest of Rs 17,986,329 has been paid by the assessee, has been used by it for creation or purchase of assets which have not been put to use and hence should be disallowed under section 36(1) (iii) of the Act.

13 | P a g e 7.3 That on facts and in circumstances of the case and in law, the AO while disallowing interest of Rs 17,986,329 has erred in ignoring the assessee's submission where it has explained that the said interest is directly related to the ICDs taken for maintaining necessary security balance with the stock exchange and for meeting the working capital requirements. 7.4 That on facts and circumstances of the case and in law, the AO while making the aforesaid disallowance has erred in disregarding the ICD ledger account submitted by the assessee clearly evidencing the fact that on the date of making investments in RCMI(M) the assessee did not have any ICD and neither it had taken any ICDs after the making the said investment. 7,5 That on facts and circumstances of the case and in law, the AD has erred in disregarding the fact that ICDs are extremely short term borrowings which the assessee has repaid within a period of 1-5 days and hence, cannot be utilised for making long term investments. 7.6 That on facts and circumstances of the case and in law, the AO has erred in disregarding the assessee's submission detailing the business purpose for which the interest costs were incurred by it while incorrectly holding that the assessee was unable to demonstrate that the said cost has been incurred by it for business purposes. 7.7 That on facts and circumstances of the case and in law, the AO has erred in disregarding the information submitted by the assessee detailing the source of funds utilised by it for making investments in RCMI(M). DRP's Findings: Ground 7 alongwith sub grounds are taken up together for disposal. The Panel duly considered the objections. The AO's argument was that the A' incurred finance costs of Rs.4.54 crores against intercorporate investments by the A' of Rs. 250 crores in its foreign subsidiaries. No income was offered against such investment by the A' during the year. On appraising the evidence filed by the A', the AO concluded that the payable interest on inter corporate deposits amounting to Rs. 1,79,86,329.00 was not covered u/s 36(i)(i) of the Act. Hence it was disallowed by him. Before us it was contended by the A' that the AO went astray by invoking 36(i)(iii) as it was not a case of extension of business as misunderstood by the AO. All the facts and evidence on record were record were re-appreciated by us. It was noticed that the interest of Rs. 1,79,86,329.00 was paid by the A' on ICD5 taken towards margins mandatorily required to be maintained with stock exchanges for base and additional capital requirements. In order to establish the 14 | P a g e link of interest of Rs. 1,79,86,329.00 with the capital borrowed from margins to be placed with stock exchanges, relevant evidence were filed by the A' before the AO:- i) Copy of the party wise ICD ledger account duly reflecting the assessee's stand that ICDs taken by it have been repaid within a period of 1-5 days; ii) The said ICD ledger account also clearly reflected the fact that the assessee had not taken ICDs on or before the date(s) on which it had made fresh investments in RCMI(M) during the subject AY; iii) Relevant extract of the Auditor's Report certifying the fact that no short-term borrowings had been utilized by the assessee for funding long term Investments made by it during the subject AY. Upon an analysis of the above evidence, we are of the firm view that the A' successfully discharged its burden of proof by establishing a rational link between the interest & interest bearing ICD deposits. It was clear that the interest accrued on account of interest arising from ICDs paid towards Margin to be maintained with stock exchanges. Therefore, we have no hesitation in holding that interest of Rs. 1,79,86,320.00 was incurred by the A' in connection with its business, hence allowable u/s 36(1)(iii) of the Act. Ground 8: On the facts and in the circumstances of the case and in law, the Ld. AO has erred in proposing to initiate penalty under section 271(1)(c) of the Act. DRP's Findings: This ground is of consequential nature. Penalty proceedings are separate proceedings. Therefore, the objection of the A' is considered to be premature, liable to be dismissed at the threshold. Besides, initiation of penalty proceedings is the exclusive domain of authority of the AD. Hence the ground is dismissed.”

9. Learned senior counsel inter alia submits that the assessee has already placed on record its payee’s invoice(s) at pages 367 to 368 qua the impugned sum wherein it had appointed M/s. McKinsey & Co. to strengthen its existing institutional broking, investment banking business and for focusing on international markets in regular business activity. We make it clear that there is no dispute between the parties that the learned lower authorities have rejected the assessee’s impugned claim quoting it’s failure in 18 | P a g e providing detailed break-up of services on one hand and on account of its failure and methodology thereof qua each and every item on the other. This tribunal finds no merit in the Revenue’s vehement contentions supporting the same in principle. This is for the precise reason that given the fact that this assessee is a company registered as a Category-1 merchant banker with the Securities and Exchange Bank of India (“SEBI”) and is engaged in providing securities brokerage services to various institutions, investments bankers and financial advisor services, its action in engaging renowned consultant M/s. McKinsey & Co. for day-to-day regular professional advisory services could not be termed as something not allowable under section 37 of the Act since incurred wholly and exclusively for the purposes of the business, going by CIT Vs. Euro India Ltd. 223 Taxman 97 (Del.). We are, therefore, of the considered view that even if there is some failure on the assessee’s part in filing all the relevant details, it would not result in its entire expenditure claim getting disallowed. It is thus deemed it appropriate in the larger interest of justice that a lumpsum ad- hoc/estimated disallowance of Rs. 20,92,318/- only in the given facts and circumstances would be just and proper with a rider that 19 | P a g e the same shall not be considered as a precedent. The impugned legal and professional expenses claim stands accepted to the tune of Rs. 4 crores therefore.

11. Suffice to say, it has come on record that the learned departmental authorities are of the view that the assessee’s impugned salary and bonus claim are of enduring nature which 21 | P a g e are required to be capitalized only. It is thus made clear that there is no dispute about the assessee having actually incurred the impugned expenditure representing salary and bonus regarding its employees. That being the case, we hereby quote Taparia Tools Ltd. v. JCIT (2015) 372 ITR 605 (SC), that merely because some alleged enduring benefit flow from a particular item of expenditure would not ipso facto render it as capital in nature. We draw strong support therefrom to delete the impugned expenditure disallowance in very terms.

22 | P a g e 6.4 That on facts and circumstances of the case and in law, the AO while invoking the provisions of section 40A(2)(b) of the Act has ignored that group company to which support services charges has been paid by the assessee are not covered within the purview of the said section. 6.5 That on facts and circumstances of the case and in law and without prejudice to the above ground of appeal no. 6.3 and 6.4, the AO while invoking the provisions of section 40A(2)(b) of the Act has erroneously cast a responsibility on the Appellant to prove the reasonableness of support service charges paid by it to group companies. ORP's Findings: The ground 6 basically relates to disallowance of "Intragroup Services", though incorrectly dealt with by the A' u/s 40A(2)(b) of the Act. The page no. 17 of the AO's order was minutely read along with the computation of income on page 24, para

6. There was no mention of Section 40A(2)(b) of the Act by the AO. In fact the disallowance was made by the AD mainly u/s 37 of the Act as evident from para 6.2 of AO's order. Under para 6.7 section 40A(2)(b) was of course mentioned in passing by the AQ obviously to buttress his allegation of failure of the A on the front of reasonableness of expenditure received by the A The submissions and the documentary evidence filed by the A' were considered along with its submissions. Upon an analysis of the facts & evidence, we are of the considered view that the A' was required to furnish the basis of determination of expenditure on account of each type of service rendered by it to the A' and the prevailing market rate for each such service rendered by the AEs of the A'. The production of agreements/internal policy memo and the debit notes were not of much significance unless and until it was established at the threshold itself by the A' that there was a logical, scientific and rational methodology behind evaluating each such service and that the methodology was universally applied in the market for benchmarking/pricing such services. In the absence of the same, i.e. absence of a generally accepted methodology and the ALP of such services, the disallowance is sustained."

13. The Revenue vehemently argues in support of the impugned disallowance that the same has rightly been made @ 25% of the total expenses on ad-hoc/estimation basis. That being the case and once the impugned expenditure is accepted in principle, we are of 23 | P a g e the considered view that the same deserves to be disallowed only to the extent of 5% only on ad-hoc basis subject to a rider that the same shall not be treated as a precedent. Necessary computation shall follow as per law.