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2013 (12) TMI 1007 - AT - Income TaxTransfer Pricing Adjustment Held that - Following assessee s own case for A.Y. 2006-07 - The food supplied is a basket containing individual items rather than supply of the items individually - The entire transaction has to be viewed as a single transaction - From the comparison of rate per passenger for individual airlines that the rate for the passenger rate for Singapore Airlines is the highest and the rate for Virgin Atlantic is the third highest - The transactions are at arm's length price Decided in favour of assessee. Disallowance u/s 14A Held that - The total investment of the assessee in the mutual fund has decreased - The assessee has earned tax free dividend income from Tata Mutual Fund which is claimed as exempt u/s 10(35) - The assessee has not allocated any expenditure for earning tax free dividend income and since the disallowance made by the A.O. on adhoc basis appears to be on higher side Following assessee s own case for the A.Y. 2006-07 - A reasonable disallowance of ₹ 1,50,000/- is justified Partly allowed in favour of assessee. Depreciation on goodwill Held that - Following assessee s own case for the A.Y. 2003-04 Depreciation is allowable on goodwill Following CIT vs. Smifs Securities Limited 2012 (8) TMI 713 - SUPREME COURT - Goodwill would fall under the expression any other business or commercial rights of similar nature in section 32(1) Explanation 3 (b) Decided in favour of assessee.
Issues Involved:
1. Transfer Pricing Adjustment 2. Disallowance under Section 14A 3. Depreciation on Intangible Assets 4. Credit for Taxes Deducted at Source 5. Levy of Interest under Section 234C 6. Levy of Interest under Section 234B Detailed Analysis: 1. Transfer Pricing Adjustment: The assessee contested the adjustment of Rs. 1,792,322 made by the Assessing Officer (AO) under section 92CA(3) of the Income Tax Act, 1961, concerning the arm's length price of international catering services transactions with its Associated Enterprise (AE). The appellant argued that the facts were similar to the previous assessment year (2006-07), where the Tribunal had ruled in favor of the assessee. The Tribunal noted that the per passenger rate charged by the assessee from its AE was higher than the rates charged by other airlines. Following the precedent set in the previous year, the Tribunal deleted the adjustment, allowing Ground No. 1. 2. Disallowance under Section 14A: The AO invoked section 14A, disallowing Rs. 247,521, attributing it to the remuneration paid to the Chief Financial Officer (CFO) and a trainee, arguing it was related to earning exempt income. The assessee contended that the total investment in mutual funds had decreased, and thus, the disallowance should be reduced. The Tribunal, following the previous year's decision, restricted the disallowance to Rs. 1,50,000, noting that the disallowance was based on a percentage of the CFO's remuneration rather than the investment. Ground No. 2 was partly allowed. 3. Depreciation on Intangible Assets: The AO disallowed the depreciation claimed on goodwill, following the previous year's assessment. However, the Tribunal noted that the Hon'ble High Court had ruled in favor of the assessee for the assessment year 2003-04, allowing depreciation on goodwill. The Tribunal directed the AO to follow the same course as for the assessment year 2003-04, where the High Court had allowed depreciation on goodwill. Ground No. 3 was allowed in the manner directed. 4. Credit for Taxes Deducted at Source: The assessee claimed that the AO erred in granting credit for taxes deducted at source. However, during the proceedings, it was stated that the credit had already been given by the AO. Consequently, Ground No. 4 was dismissed as not pressed. 5. Levy of Interest under Section 234C: The assessee requested that interest under section 234C be computed based on the returned income. The Tribunal directed the AO to compute the interest accordingly, allowing Ground No. 5. 6. Levy of Interest under Section 234B: The assessee argued that the levy of interest under section 234B should be consequential. The Tribunal directed the AO to recompute the interest based on the income computed after giving effect to the Tribunal's order. Ground No. 6 was allowed for statistical purposes. Conclusion: The appeal filed by the assessee was partly allowed. The Tribunal ruled in favor of the assessee on the issues of transfer pricing adjustment, disallowance under section 14A, and depreciation on intangible assets, while directing the AO to recompute interests under sections 234C and 234B based on the returned income and the Tribunal's order. The issue of credit for taxes deducted at source was dismissed as not pressed.
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