TaxTMI 
TaxTMI 
2018 (8) TMI 1714
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....(the Act) concerning assessment year 2011-12. The assessee has also filed cross-objection in the Revenue's appeal supporting the action of the CIT(A). 2. The grounds of appeal raised by the Revenue as under: "1. The ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 4,59,71,927/- made by the Assessing Officer on account of provision made for unascertained Royalty liability. 2. The ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 4,24,692/- made by the AO in respect of interest paid to a NBFC without deduction of tax. The ld. CIT(A) ought to have held that the proviso inserted by Finance Act 2012 with effect from 1.7.2012 is not applicable for AY 2011-12 but for next asse....
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....oduced any bills in respect of the said expenditure which also proves that the provision of expenditure is liability. The appellant has reversed its provision in succeeding year which also proves that the provision created is in respect of unascertained liability, which is not an allowable expenditure. The Assessing Officer has rejected the alternate claim of appellant that payment of Rs. 3,77,74,260/- was paid before due date of filing return of income hence disallowance u/s 40(a)(i) cannot be made on the ground that provision of Royalty is made for payment to Non-resident persons and the same is not credited to Government Account within the time allowed u/s 200(1) of the Act. On the other hand, appellant has argued that provision of Royal....
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....ining to income booked in current year. It is settled legal accounting practice that assessee company makes lump sum provision of expenditure on the basis of their own estimate in financial year and such provision is immediately reversed on first day of subsequent financial year and actual amount paid is booked as expenditure in subsequent year which means that only excess/short expenditure is booked in subsequent year. This does not mean that expenditure provided in year is contingent or unascertained as same is based upon agreement executed with various parties and are against income booked in current financial year. Considering these facts, argument of Assessing Officer that expenditure is unascertained or contingent cannot be accepted. ....
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.... it is observed that appellant has duly deducted TDS on royalty payment at the time of payment to nonresident hence Assessing Officer is directed to verify the above contention of appellant and allow the expenditure as deduction in subsequent assessment year if same is not claimed by appellant as deduction or not already allowed in any proceedings in subsequent assessment years. This ground of appeal is partly allowed." 6. Aggrieved, the Revenue is in appeal before the Tribunal. 7. We have carefully considered the rival submissions on the issue of maintainability towards claim on account of royalty expenses. A perusal of the order of the CIT(A) provides an apparent justification for allowability of royalty expenses in the subsequent a....
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....ir tax return. 12. We find that similar issue was under consideration before the co-ordinate bench in the case of Dipak r. Gondaliya vs. ITO in ITA No.3313/Ahd/2015 & Another order dated 16.03.2016 cited on behalf of the assessee in the course of hearing. The relevant para dealing with the issue by the co-ordinate bench reads as under: "3. The common grievance in both these appeals relates to the holding that the amendment to Section 40(a)(ia) by the Finance Act, 2012 w.e.f. 01.04.2013 is prospective and by holding so the assessee is aggrieved by the disallowance of interest expenditure. 4. While scrutinizing the return of income, the A.O noticed that the assessee has taken loan for purchase of property from Reliance Ca....
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....t, we have to say that the reliance on the Circular by the D.R. is misplaced as that Circular refers to the decision of the Tribunal Special Bench, Vishakhapatnam in the case of Merilyn Shipping & Transports vs. Addl. CIT. The Circular also refers to the decision of the Hon'ble High Court of Gujarat, High Court of Allahabad which all relates to the issue relating to "paid or payable" whereas the issue before us relates to the amendment of second proviso to Section 40(a)(ia) which has been held to have a retrospective effect by the Hon'ble High Court of Delhi in the case of Ansal Landmark Township Pvt. Ltd. 279 CTR 384. 8. However, in the interest of justice and fair play, we restore this issue to the files of the A.O. The a....