Assessee paid aforesaid sum of Rs.18 Lacs to Reserve Bank of India [RBI] as compounding fees under the provisions of Foreign Exchange Management Act, 1999. Assessee was categorized as operating company for the purposes of FIPB and FEMA. Subsequently, the assessee made investment in shares of its wholly owned subsidiary companies and accordingly its category changed from operating company to operating- cum-holding company, which required prior approval of FIPB. However, the said approval was not obtained and the assessee applied for post-facto approval of the same from FIPB which was granted subject to compounding of the same by RBI. Held, such compounding fees was compensatory in nature and therefore, allowable.(AY .2002-03, 2003-04, 2009-10)