Tribunal adjusts tax assessments, limits disallowance, and defines royalty rates for domestic and export sales.

The tribunal partially allowed the appeal, directing the Assessing Officer to exclude the amount already taxed in the previous year for the capital gain on the sale of property. It also restricted the disallowance under section 14A to 2% of the dividend income earned during the year. Additionally, the tribunal allowed royalty on domestic sales but limited royalty on export sales to 1%, based on calculations provided by the assessee and emphasizing the applicability of Transfer Pricing Provisions.

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Issues Involved:
1. Inclusion of capital gain on sale of property.
2. Disallowance under section 14A for earning exempt income.
3. Disallowance of royalty amount paid to a foreign entity.

Issue 1: Inclusion of capital gain on sale of property:
The appellant contested the inclusion of capital gain on the sale of property at Bangalore, arguing that the same income cannot be taxed in two different assessment years. The Assessing Officer had held that the entire land was transferred in a previous assessment year, and the capital gains were taxed accordingly. The CIT(A) had accepted that a portion of the consideration did not accrue in the relevant year. The tribunal directed the Assessing Officer to consider excluding the amount already taxed in the previous year, allowing the ground for statistical purposes.

Issue 2: Disallowance under section 14A for earning exempt income:
The assessee challenged the disallowance under section 14A for earning exempt income, specifically related to dividend income. The tribunal considered previous years' orders and found that a major disallowance was related to expenditure on Floriculture business, which was exempt. The tribunal directed the Assessing Officer to restrict the disallowance to 2% of the dividend income earned during the year, based on various decisions and the facts of the case.

Issue 3: Disallowance of royalty amount paid to a foreign entity:
The appellant contested the disallowance of royalty paid to a foreign entity, citing agreements and changes in royalty rates approved by the government. The tribunal examined the royalty payments on domestic and export sales, considering previous years' orders. It allowed the royalty on domestic sales but restricted the royalty on export sales to 1%, directing the Assessing Officer to allow a specific amount based on calculations provided by the assessee. The tribunal differentiated the case from a precedent cited by the appellant, emphasizing the Transfer Pricing Provisions' applicability in determining the arms-length price.

The tribunal partially allowed the appeal, addressing each issue raised by the appellant in detail and providing reasoned judgments for each issue.

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