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2014 (1) TMI 1899 - AT - Income TaxCapital gain on sale of property at Bangalore - Correct assessment year - contention that same item of income cannot be taxed in two different assessment years - HELD THAT:- On perusal of the order of the CIT(A), the CIT(A) seems to have accepted that out of ₹ 24.53 crores received by the assessee as a total consideration of Block-B1, ₹ 6.03 crores did not accrue during that year. Therefore, to that extent, the ground does not survive. However, whether the Order of the CIT(A) was accepted by the Revenue or not is not known to us. Therefore, A.O. is directed to consider exclusion of the amount brought to tax, to the extent included in this year in assessee computation, in case the same was assessed in A.Y. 2005-2006. With this direction, the ground is considered as allowed for statistical purposes. Disallowance u/s 14A - Major disallowance is on the issue of expenditure relatable to Floriculture business which was claimed as exempt - HELD THAT:- We are of the opinion that the entire disallowance made by the A.O. cannot be sustained. However, keeping in view that assessee has earned substantial amount of dividend on investments and also keeping various Coordinate Bench decisions on similar issue in the relevant A.Y., we are of the opinion that 2% of the amount earned as dividends can be considered as expenditure related to exempt income. Accordingly, A.O. is directed to restrict the disallowance to 2% of the dividend income earned during the year. With this direction, grounds No.4 and 5 are partly allowed. Disallowance of royalty amount paid by the assessee to Gulf Oil International (Maritius) Inc. - HELD THAT:- For royalty on domestic sales is concerned, as rightly pointed out by the learned Counsel, the DRP in later two years has examined the internal CUP and allowed the royalty on the domestic sales. Keeping in view the factual position as examined by the DRP and also the Order of the TPO for A.Y. 2009-2010, we are of the opinion that there is no need to disallow the royalty payment on domestic sales. Therefore, the claim is allowable based on the above facts. Coming to the export sales assessee relied on the various factors for allowing the entire claim. However, considering the fact that same issue was also examined by the DRP in A.Ys. 2007-2008 and 2008-2009 which the assessee/appellant seems to have accepted, we are of the opinion that the royalty on export sales can be restricted to 1% as was done in later years and accordingly, the royalty is restricted to an amount of ₹ 18,05,788/- as per the working furnisheded by assessee . Therefore, out of the amount of ₹ 62,29,972/- Assessing Officer is directed to allow royalty at ₹ 18,05,788/- and balance amount of ₹ 44,24,184/- stands disallowed. This is not a disallowance under section 37(1) but an adjustment made under Transfer Pricing Provisions where arms length price is to be determined, whether the agreement is approved or not. Keeping that in mind, we are of the opinion that the decision relied on by the learned Counsel, does not apply to the facts of the case. As decided earlier, the restriction on the royalty amount is limited to ₹ 44,24,184/-.
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