Tribunal upholds CIT(A)'s decisions on royalty provision & interest disallowance. Delhi HC precedent cited.

The Tribunal dismissed the Revenue's appeal on both issues, upholding the CIT(A)'s decisions regarding the disallowance of provision made towards royalty liability and the disallowance of interest paid to NBFC without tax deduction. The Tribunal aligned with the CIT(A) and a Delhi High Court decision, affirming the allowability of royalty expenses in the subsequent year and the retrospective application of the 2nd proviso to Section 40(a)(ia). The Revenue's appeal was ultimately dismissed, and the assessee's Cross Objection was withdrawn with no objections from the Revenue.

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Issues:
1. Disallowance of provision made towards royalty liability.
2. Disallowance of interest paid to NBFC without tax deduction.

Analysis:

Issue 1: Disallowance of provision made towards royalty liability
The Revenue appealed against the CIT(A)'s order concerning the disallowance of a provision made for royalty liability. The AO disallowed the claim as unascertained liability. The CIT(A) remitted the issue back to the AO for allowing the royalty expenses when paid in the subsequent assessment year. The Tribunal found the CIT(A)'s justification for allowability of royalty expenses in the subsequent year to be in line with the law, dismissing the Revenue's appeal on this ground.

Issue 2: Disallowance of interest paid to NBFC without tax deduction
The AO disallowed interest paid to a NBFC due to failure in tax deduction under Section 194A. The CIT(A) relied on a Delhi High Court decision, holding the 2nd proviso to Section 40(a)(ia) as retrospective, remitting the matter back to the AO for verification. The Tribunal referenced a similar case where the issue was restored to the AO for verification of tax returns filed by the payee. The Tribunal upheld the CIT(A)'s decision, aligning with the Delhi High Court's ruling, dismissing the Revenue's appeal on this issue.

In conclusion, the Tribunal dismissed the Revenue's appeal on both issues, affirming the CIT(A)'s decisions. Additionally, the Cross Objection filed by the assessee was withdrawn with no objections from the Revenue. The appeal of the Revenue was ultimately dismissed, and the cross objection of the assessee was dismissed as withdrawn.

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