ACIT, Chandigarh V. M/s Punjab State Coop. Agrl. Dev. Bank, Chandigarh

ITA 1102/CHANDI/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2443 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-08-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 12-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3); 80HHC; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 1102/CHD/2014 ASSESSMENT YEAR: 2011-12 THE ACIT VS. THE PUNJAB STATE COOP. AGRL. CIRCLE 2(1), DEV. BANK, SCO 53-54 CHANDIGARH SECTOR 17E CHANDIGARH PAN NO. AABAP8596L (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUSHIL KUMAR RESPONDENT BY : SH. M.R. SHARMA DATE OF HEARING : 18/11/2015 DATE OF PRONOUNCEMENT : 07/01/2016 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DT. 16/09/2014 OF CIT(A), CHANDIGARH. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS : 1. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE INTERE ST OF RS. 8,61,15,004/- ARISING OUT OF SURPLUS FUNDS IN RESERVE ACCOUNTS IS ELIGIBLE FOR D EDUCTION U/S 80P(2)(A)(I). 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS. 36,30,999/- MADE BY THE A.O. BY HOLDING THAT THE PROVISION OF NPA IS ELIGIBLE FO R DEDUCTION U/S 80P(2)(A)(I). 3. THE LD. CIT HAS ERRED IN DELETING THE ADDITION OF R S. 2,21,57,661/- MADE BY THE A.O. ON ACCOUNT OF GROSS INTEREST RECEIVED ON THE LOANS AD VANCED TO THE EMPLOYEES TREATING THE SAME AS INCOME FROM OTHER SOURCES INST EAD OF BUSINESS INCOME. 3. BRIEF FACTS RELATING TO THE CASE ARE THAT THE RE TURN OF INCOME FOR THE IMPUGNED AY WAS FILED BY THE ASSESSEE ON 30/09/2011 DECLARING TOTAL INCOME OF RS. 5,85,560/-. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80P(2)(A)(I) OF RS. 19,33,42,382/- FROM ITS GROSS TOTAL INCOME OF R S. 19,39,27,939/-. ASSESSMENT UNDER SECTION 143(3) WAS FRAMED ON THE ASSESSEE AT AN INCOME OF RS. 2 11,25,25,220/- AFTER DISALLOWING DEDUCTION UNDER SE CTION 80P(2)(A)(I) ON THE FOLLOWING: INTEREST RECEIVED ON RESERVE FUND RS. 8,61,15,004 /- INTEREST ON LOANS RS. 2,21,57,661/- INTEREST RECEIVED ON COMPUTER LOANS RS. 33,000/- TOTAL RS. 108305665/- AND FURTHER DISALLOWING THE PROVISIONS ON ACCOUNT O F NON PERFORMING ASSETS [NPA] AMOUNTING TO RS. 36,30,999/-. 4. AGGRIEVED BY THE SAME THE ASSESSEE FILED AN APPE AL BEFORE LD. CIT(A) WHO VIDE HIS ORDER DT. 16/09/2014 DELETED ALL THE D ISALLOWANCES MADE BY FOLLOWING HIS OWN ORDER FOR AY 2010-11. 5. AGGRIEVED BY THE SAME THE REVENUE FILED THE PRES ENT APPEAL BEFORE US. 6. AT THE OUTSET IT WAS STATED BY THE LD. AR THAT A LL THE ISSUES RAISED IN THE PRESENT APPEAL ARE COVERED BY THE DECISION OF THE H ONBLE ITAT CHANDIGARH IN THE ASSESSEES OWN CASE FOR AY 2010-11 IN ITA NO. 82 9/CHD/2013 DT. 03/08/2015. IN VIEW OF THE SAME WE PROCEED TO DECIDE THE APPEAL AS FOLLOWS: 7. GROUND NO. 1 RAISED BY THE REVENUE IS AGAINST TH E CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) ON INTEREST OF RS. 8,61, 15,004/- ARISING OUT OF SURPLUS FUNDS IN RESERVE ACCOUNTS. 8. BRIEF FACTS RELATING TO THE ISSUES ARE THAT DURI NG THE IMPUGNED AY THE ASSESSEE HAD RESERVE FUND AND OTHER FUNDS TOTALING RS. 3,75,16,51,776/- AS FOLLOWS: SR. NO. AMOUNT I) RESERVE FUND RS. 1,18,16,60,877/- II) BAD AND DOUBTFUL DEBT RESERVES RS. 1,11,06,93,7 67/- III) BUILDING FUND RS. 10,96,74,323/- IV) EDUCATION FUND RS. 1,71,80,950/- V) COMMON GOODS FUND RS. 11,97,00,727/- VI) AGRICULTURAL CREDIT STABILIZATION FUND RS. 70,0 6,25,246/- VII) EMPLOYEES BENEFIT FUND RS. 5,65,76,429/- VIII) INVESTMENT FLUCTUATION FUND RS. 1,50,08,100/- IX) NPA PROVISIONS RS. 5,97,26,066/- X) BUILDING & INFRASTRUCTURE DEVELOPMENT FUND RS. 6 ,25,32,000/- XI) GOODS PAY MASTER REBATE FUND RS. 3,78,39,852/- TOTAL RS. 3,75,16,51,776/- 3 BESIDE THE ABOVE A BALANCE OF 19,32,08,336/- WAS LY ING IN THE SURPLUS UNDER PROFIT AND LOSS ACCOUNT. THESE FUNDS HAD BEEN PARK ED IN INVESTMENT WITH DIFFERENT BANKS AND OTHER AGENCIES AND INTEREST HAD BEEN EARNED THEREON AMOUNTING TO RS. 8,61,15,004/-. THE ASSESSEE HAD CL AIMED DEDUCTION UNDER SECTION 80P(2)(A)(I) ON THE SAME. IN THE ASSESSMENT ORDER FRAMED U/S 143(3) OF THE ACT, THE LD. AO HELD THAT THE INTEREST EARNED O N SURPLUS FUNDS WAS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES AND COULD NOT BE SAID TO BE ATTRIBUTABLE TO PROVIDING CREDIT FACILIT IES TO THE MEMBERS. HE THEREFORE HELD THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80P(2)(A)(I)OF THE SAME AND ADDED THE AMOUNT OF RS. 8,61,15,004/- TO INCOME OF THE ASSESSEE. 9. ON APPEAL THE DEDUCTION WAS ALLOWED BY THE LD. C IT(A) FOR THE REASON THAT SIMILAR ADDITION MADE IN AY 2010-11 HAD BEEN D ELETED IN APPEAL BY THE LD. CIT(A). 10. AGGRIEVED BY THE SAME, THE REVENUE FILED THE PR ESENT APPEAL BEFORE US. 11. BEFORE US THE LD. DR RELIED UPON THE ORDER OF T HE HONBLE ITAT CHANDIGARH IN ITA NO. 829/CHD/2013, IN THE ASSESSES OWN CASE I N AY 2010-11WHEREIN IT WAS HELD THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTIO N UNDER SECTION 80P(2)(A)(I) ON INTEREST EARNED ON SURPLUS FUND. 12. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY T HE DECISION OF HONBLE ITAT CHANDIGARH IN ITA NO. 829/CHD/2013 WHEREIN ON IDENT ICAL SET OF FACTS THE HONBLE ITAT HAD HELD AT PARA 9 AND 10 OF ITS ORDER AS FOLLOWS: 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. NO DOUBT THAT IN THE EARLIER YEAR THIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. ORIGINALLY THIS ISSUE WAS DECIDED FOR AS SESSMENT YEARS 1998-99, 1999-2000, 2000-01, 2001-02, 2002-03, 2003 -04 & 2005-06 IN ITA NOS. 120, 563 TO 565/CHANDI/2007 & 392 TO 395/C HANDI/2008 BY CONSOLIDATED ORDER DATED 25.3.2009. IT HAS TO BE NO TED THAT DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TO TGARS CO- OPERATIVE SALE SOCIETY LTD (SUPRA) WAS RENDERED ON FEBRUARY 8, 2010. THEREFORE, CLEARLY WHEN THE MATTER WAS DECIDE D THE BENEFIT OF DECISION OF HON'BLE SUPREME COURT WAS NOT AVAILA BLE. IN THE LATER YEARS ALSO IT SEEMS THAT REVENUE HAS NOT CITED THE DECISION OF HON'BLE SUPREME COURT. IN FACT, SIMILAR VIEW WAS T AKEN IN THE CASE OF CIT V PUNJAB STATE COOPERATIVE FEDERATION OF HOU SING BUILDING SOCIETIES LTD (SUPRA) BUT THAT DECISION WAS REVERSE D BY THE HON'BLE 4 HIGH COURT IN ITA NO. 643 OF 2010 VIDE ORDER DATED 10.5.2011. IT WAS OBSERVED AT PARAS 3 & 4 AS UNDER:- 3. WE HAVE HEARD LD. COUNSEL FOR THE REVENUE. NONE APPEARS FOR THE ASSESSEE DESPITE SERVICE. 4. PLEA ON BEHALF OF THE REVENUE IS THAT INTEREST RECEIVED BY THE ASSESSEE FROM COMMERCIAL BANKS WAS NOT COVERED BY S ECTION 80P(2)(A)(I) IT HAS NOTHING TO DO WITH THE INTERES T INCOME ON THE LOAN ADVANCED TO THE MEMBERS. RELIANCE HAS BEEN PLA CED ON THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE TOTGARS C OOPERATIVE SALE SOCIETY LTD VS ITO 2010 (35) DTR 25 HOLDING TH AT INTEREST ON BANK DEPOSITS OF GOVERNMENT SECURITIES DERIVED BY A COOPERATIVE SOCIETY COULD NOT BE ATTRIBUTED TO THE ACTIVITIES O F THE SOCIETY OF PROVIDING VARIOUS FACILITIES TO ITS MEMBERS AND WAS TAXABLE UNDER SECTION 56 BEING INCOME FROM OTHER SOURCES. IT APP EARS THAT SINCE THE JUDGMENT OF THE TRIBUNAL IS PRIOR TO THE JUDGEM ENT OF THE HON'BLE SUPREME COURT RELIED UPON ON BEHALF OF THE REVENUE. THE TRIBUNAL DID NOT HAVE ADVANTAGE OF THE LAW LAID DOW N THEREIN. THE MATTER IS THUS, COVERED IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF HON'BLE SUPREME COURT. CONTRARY VIEW OF THE TRIBUN AL CANNOT BE SUSTAINED. 10. WE DO NOT FIND ANY FORCE IN THE SUBMISSIONS THA TTHE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TOTGARS CO -OPERATIVE SALE SOCIETY LTD (SUPRA) IS NOT APPLICABLE TO THE PRESEN T FACTS OF THE CASE. IN FACT, THE HON'BLE SUPREME COURT HAS OBSER VED AS UNDER:- THE INTEREST INCOME ARISING TO A CO-OPERATIVE SOCI ETY CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS, O N THE SURPLUS, WHICH IS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURP OSES, FROM INVESTMENT IN SHORT-TERM DEPOSITS AND SECURITIES, H AS TO BE TAXED AS INCOME FROM OTHER SOURCES UNDER SECTION 56 OF THE I NCOME-TAX ACT, 1961. SUCH INTEREST CANNOT BE SAID TO BE ATTRIBUTAB LE TO THE ACTIVITIES OF THE SOCIETY, VIZ., CARRYING ON THE BU SINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR MARKETING OF AG RICULTURAL PRODUCE OF ITS MEMBERS. INTEREST INCOME OF SUCH SOCIETY FRO M AMOUNTS RETAINED BY IT CANNOT BE SAID TO BE ATTRI-BUTABLE E ITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A)(I) OR SECTI ON 80P(2)(A)(III) OF THE ACT. SECTION 80P(2)(A)(I) CANNOT BE PLACED ON A PAR WITH EXPLANATION (BAA) TO SECTION 80HHC , SECTION 80HHD(3) AND SECTI ON 80HHE(5). THE READING OF THE ABOVE HEAD NOTE WOULD SHOW CLEAR LY THAT DEDUCTION U/S 80P(2) IS AVAILABLE ONLY FROM THE COR E ACTIVITIES I.E. ACTIVITY OF PROVIDING CREDIT TO ITS MEMBERS AND THE SAME IS NOT AVAILABLE ON THE DEPLOYMENT OF SURPLUS FUNDS WITH O THER BANKS. THEREFORE, FOLLOWING THE DECISION OF HON'BLE SUPREM E COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD (SUP RA) AS WELL AS HON'BLE HIGH COURT IN THE CASE OF CIT V PUNJAB STAT E COOPERATIVE FEDERATION OF HOUSING BUILDING SOCIETIES LTD (SUPRA ) WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. IN VIEW OF THE ABOVE, FOLLOWING THE DECISION OF THE HONBLE ITAT IN THE ASSESSES OWN CASE IN THE PRECEDING YEAR WE HOLD THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80P(2)(A)(I) ON THE INCOME EARNED ON DEPLOYMENT OF SURPLUS FUNDS WITH O THER BANKS. THE DEDUCTION 5 UNDER SECTION 80P(2)(A)(I) ON AN AMOUNT OF RS. 8,61 ,15,004/- BEING INTEREST ON RESERVE FUND EARNED DURING THE YEAR IS THEREFORE DI SALLOWED. 13. APPEAL OF THE REVENUE ON THIS GROUND IS THEREFO RE ALLOWED. 14. IN GROUND NO. 2 REVENUE HAS AGITATED THE DELETI ON OF ADDITION OF RS. 36,30,999/- MADE BY THE AO BY HOLDING THAT THE PROV ISION OF NPA IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I). 15. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSE HAD DEBITED AN AMOUNT OF RS. 36,30,999/- TO ITS PROFIT & LOSS ACCO UNT AS PROVISION FOR NPA AS PER THE NORMS OF THE NABARD AND RBI. THE AO HELD THAT G UIDELINE ISSUED BY THE RBI OR NABARD CANNOT OVER-RIDE THE PROVISION OF THE INC OME TAX ACT WHICH IS INDEPENDENT CODE ITSELF AND TOTAL INCOME IS TO BE C OMPUTED IN ACCORDANCE WITH THE PROVISIONS OF INCOME TAX ACT, 1961. HE FUR THER OBSERVED THAT PROVISIONS OF ANY NATURE IS NOT ALLOWABLE UNDER THE INCOME TAX ACT AS DEDUCTION. HE ALSO OBSERVED THAT PROVISION FOR BAD DEBT IS ALLOWABLE U NDER SECTION 36(I)(VIIA) OF THE INCOME TAX ACT ONLY IF THE ASSESSEE IS ENGAGED IN T HE BANKING BUSINESS. SINCE THE ASSESSEE IN THE IMPUGNED CASE WAS NOT ENGAGED I N THE BUSINESS OF BANKING THE CLAIM OF THE PROVISION WAS DISALLOWED. 16. ON APPEAL THE LD. CIT(A) ALLOWED THE CLAIM OF T HE ASSESSEE SINCE SIMILAR ADDITION MADE IN ASSESSMENT YEAR 2010-11 HAD BEEN DELETED IN APPEAL BY THE LD. CIT(A). 17. AGGRIEVED BY THE SAME, THE REVENUE FILED THE PR ESENT APPEAL BEFORE US. 18. BEFORE US THE LD. DR SUBMITTED THAT THOUGH THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE ITAT IN ASSES SMENT YEAR 2010-11 BUT THE SAME IS NOT TO BE ALLOWED SINCE THE DEPARTMENT HAD FILED AN APPEAL BEFORE THE HONBLE HIGH COURT ON THIS ISSUE. 19. LD. AR ON THE OTHER HAND RELIED UPON THE ORDER OF THE HONBLE ITAT CHANDIGARH IN ITA NO. 829/CHD/2013 PASSED IN THE AS SESSES CASE FOR AY 2010-11. 6 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE DOCUMENTS PLACED BEFO RE US. 21. WE FIND THAT THIS ISSUE HAS BEEN DECIDED IN FAV OUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR AY 2010-11 BY THE HONBLE IT AT CHANDIGARH BENCH IN ITAT NO. 829/CHD/2013 WHEREIN AT PARA 15 OF THE ORDER IT WAS HELD AS UNDER : 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND FIND THAT THIS ISSUE WAS DECIDED FOR ASSESSMENT YEAR 200 9-10 VIDE PARAS 7 & 8 WHICH ARE AS UNDER:- 7. GROUND NO.2, RAISED BY THE REVENUE IS ALSO COVE RED BY THE DECISION OF THE TRIBUNAL, AS INDICATED BY THE CIT(A PPEALS) IN HIS IMPUGNED ORDER AND BY THE DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2008-09 DATED 19.09.2012 IN ASSESSE E'S OWN CASE. THE RELEVANT FINDINGS OF THE CIT(APPEALS), AS CONTA INED IN PARA 4 TO 4.2 IS REPRODUCED HEREUNDER : 4. GROUND OF APPEAL NO. 3 IS AGAINST DISALL OWANCE OF RS. 7S6966/- ON ACCOUNT OF PROVISION FOR NPA MADE BY TH E APPELLANT. 4.1 SIMILAR ADDITION WAS MADE IN THE CASE OF THE AP PELLANT IN A.Y. 2007-08, WHICH HAS BEEN DELETED BY MY PREDECESSOR B Y FOLLOWING THE DECISION OF HON'BLE ITAT, CHANDIGARH IN THE APP ELLANT'S OWN CASE FOR A.Y. 2006-07 (SUPRA). THE HON'BLE ITAT HAD ADJUDICATED IN PARA 5 OF ITS ORDER, CITED SUPRA, AS UNDER: - 'THE FACTS ARE THAT THE ASSESSEE CLAIMED DEDUCTION OF A SUM OF RS. 16,75,070/- REPRESENTING THE PROVISION ON ACCOUNT O F NPAS. THE PROVISION OF NPAS WAS MADE IN THOSE CASES IN WHICH THE LOANEES STARTED MAKING DEFAULTS IN RE-PAYMENT OF LOANS. IN TERMS OF THE GUIDELINES ISSUED BY NABARD FOR CREATING PROVISIONS DEPENDING UPON THE LENGTH OF DEFAULT, THE DEDUCTION OF RS. 16 ,75,070/- WAS SOUGHT TO BE JUSTIFIED. THE ASSESSING OFFICER OBSER VED THAT SUCH A CLAIM COULD ONLY BE ALLOWED IF THE ASSESSEE WAS ENG AGED IN A BUSINESS OF BANKING. SINCE, IT WAS HELD THAT ASSESS EE WAS NOT ENGAGED IN THE BANKING BUSINESS, THE CLAIM WAS DENI ED. IN APPEAL, THE CIT(APPEALS) HELD THAT THOUGH THE ASSESSING OFF ICER WAS JUSTIFIED IN DISALLOWING THE SAID CLAIM BUT THE CON SEQUENTIAL INCREASE IN INCOME WOULD RESULT IN A HIGHER CLAIM O F DEDUCTION U/S 80P(2)(A) (I) OF THE ACT . AGAINST SUCH DECISION, T HE REVENUE IS IN APPEAL. IN OUR CONSIDERED OPINION, THE DISALLOWANCE OF THE PROVISION FOR NPA HAS BEEN SUSTAINED BY THE CTT (APPEALS), BUT EVIDEN TLY, THE INCOME RESULTING THEREOF HAS BEEN HELD TO BE ELIGIBLE FOR 80P (2) (A)(I) OF THE ACT. ON THIS ASPECT, WE FIND NO JUSTIFICATION F OR THE GROUND RAISED BY THE REVENUE. THERE IS NOTHING BROUGHT ON RECORD TO DISREGARD THAT THE INTEREST IRRECOVERABLE, WHICH IS EMBEDDED IN THE NPAS IS NOTHING BUT INTEREST RECEIVABLE FROM MEMBER S, THOUGH NOT REGULARLY RECEIVED. IT IS ONLY THE DEFAULTED INTERE ST INCOME, WHICH IS SOUGHT TO BE CLAIMED AS A DEDUCTION. IF THE SAID DE DUCTION IS NOT ALLOWED, THE NATURAL COROLLARY IS THAT THE ENHANCED INCOME WOULD BECOME ELIGIBLE FOR80P(2(A) (I), TO WHICH THE ASSES SEE IS OTHERWISE ENTITLED. IN FACT, SIMILAR ISSUE CAME UP BEFORE TH E TRIBUNAL IN THE CASE OF H.P.STATE CO-OPERATIVE BANK LTD. (SUPRA) WH EREIN THE SAME CLAIM WAS HELD AS ELIGIBLE FOR BENEFIT U/S 80P(2)(A )(I) OF THE ACT FOR THE REASON THAT EVEN THE INTEREST WAS ALSO EARNED F ROM THE BUSINESS 7 OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THER EFORE, ON THIS ASPECT, WE FIND NO JUSTIFIABLE GRIEVANCE FOR THE RE VENUE AND THE REVENUE FAIL ON THIS ASPECT. 4.1.1. HON'BLE ITAT HAS ALSO UPHELD THE ORDER OF MY PREDECESSOR IN A.Y. 2007-08 VIDE PARA 6 & 7 OF ORDER DATED 09.12. 2010 IN ITA NO. 1113/CHANDI/2010. 4.2 I HAVE GONE THROUGH THE DECISION OF MY PREDECES SOR AND HON'BLE ITAT, CHANDIGARH ON THIS ISSUE AND I AM ENT IRELY IN AGREEMENT WITH THE FINDINGS GIVEN BY MY PREDECESSOR WHICH HAVE BEEN AFFIRMED BY HON'BLE ITAT. IN FACT, THE ADDITIO N MADE ON THIS ACCOUNT WAS DELETED BY ME IN A.Y. 2008-09. HENCE, T HE ADDITION MADE ON THIS ACCOUNT IS DELETED IN THIS YEAR ALSO. GROUND OF APPEAL NO. 3 IS ALLOWED. 8. SIMILARLY, FINDINGS OF THE ORDER DATED 19.09.201 1 OF THE TRIBUNAL IN ITA NO.742/CHD/2011 ARE ALSO REPRODUCED HEREUNDER : 7. THE ISSUE RAISED BY THE REVENUE IN GROUND NO . 2 IS AGAINST THE ORDER OF THE CIT(A) IN HOLDING DISALLOWANCE OF PROVISIONS OF NPA IS ELIGIBLE FOR DEDUCTION U/S 80(P)(2)(A)(I) OF THE ACT. WE FIND THAT THIS ISSUE HAS ALSO BEEN DELIBERATED UPON BY THE TR IBUNAL VIDE ITS ORDER DATED 9.12.2010 IN TURN RELYING UPON THE ORDE R OF THE TRIBUNAL DATED 24.9.2009 (VIDE PARAS 5 & 6) WHICH IN TURN, F OLLOWED ITS OWN PRECEDENT OF ORDER DATED 25.3 2009 IN ITA NOS. 120 /CHANDI/2007 AND OTHERS FOR ASSESSMENT YEAR 1998-99 TO 2005-06, AFFIRMING THE STAND OF THE CIT(A) DISMISSED THE GROUND OF APPEAL RAISED BY THE REVENUE BY HOLDING AS UNDER:- '5. THE SECOND GROUND RAISED BY THE REVENUE IS WITH REGARD TO THE ACTION OF THE CIT(APPEALS) IN DELETING THE DISALLOW ANCE OF RS. 41, 20,183/- REPRESENTING PROVISION OF NON PERFORMING A SSETS (NPAS). ON THIS ASPECT ALSO, THE TRIBUNAL IN ITS ORDER DATED 2 5.3.2009 (SUPRA) HAS ADJUDICATED THE ISSUE IN FOLLOWING WORDS: 12. THE SECOND ASPECT IS IN RELATION TO INCOME RESULTIN GON ACCOUNT OF DISALLOWANCE OF RS. 16,75,070/- REPRES ENTING PROVISION OF NON-PERFORMING ASSETS(NPAS). THE FACTS AR E THAT THE ASSESSEE CLAIMED DEDUCTION OF A SUM OF RS. 16, 75, 070/- REPRESENTINGTHE PROVISION ON ACCOUNT OF NPAS. THE P ROVISION OF NPAS WAS MADE IN THOSE CASES IN WHICH THE LOANE ES STARTED MAKING DEFAULTS IN RE-PAYMENT OF LOANS. IN TERMS OF THE GUIDELINES ISSUED BY NABARD FOR CREATING PROVISIONS, DEPENDING UPON THE LENGTH OF DEFAULT, THE DEDUCTION OF RS. 16,75,070/- WAS SOUGHT TO BE JUSTIFIED.THE ASSESSI NG OFFICER OBSERVED THAT SUCH A CLAIM COULD ONLY BE ALLOW ED IF THE ASSESSEE WAS ENGAGED IN A BUSINESS OF BANKING.SINCE , IT WAS HELD THAT ASSESSEE WAS NOT ENGAGED IN THE BANKIN G BUSINESS,THE CLAIM WAS DENIED. IN APPEAL, THE CLT(APPEALS) HELD THAT THOUGH THE ASSESSING OFFICER- WAS JUSTIFIED IN DIS ALLOWING THE SAID CLAIM, BUT THECONSEQUENTIAL INCREASE IN INCO ME WOULD RESULT IN AHIGHER CLAIM OF DEDUCTION U/S 80P(2)(A )(I) OF THE ACT. AGAINST SUCH DECISION, THE REVENUE I S IN APPEAL. 13. IN OUR CONSIDERED OPINION, THE DISALLOWANCE OF THE PROVISION FOR NPA HAS BEEN SUSTAINED BY THE CIT ( APPEALS), BUT EVIDENTLY, THE INCOME RESULTING THEREOF HAS BEE N HELD TO BE ELIGIBLE FOR 80P(2)(A)(I) OF THE ACT. ON THIS ASPECT, WE FIND NO JUSTIFICATION FOR THE GROUND RAISED BY TH E REVENUE. THERE IS NOTHING BROUGHT ON RECORD TO DISREGAR D THAT THE INTEREST IRRECOVERABLE, WHICH IS EMBEDDE D IN THE NPAS IS NOTHING BUT INTEREST RECEIVABLE FROM MEMBERS, THOUGH NOT REGULARLY RECEIVED. IT IS ONLY THE DEFAULTED INTEREST INCOME, WHICH IS SOUGHT TO BE CLAIMED AS A DEDUCTI ON. IF THE SAID DEDUCTION IS NOT ALLOWED, THE NATURAL COROLLARY IS THAT THE ENHANCED INCOME WOULD BECOME ELIGIBLE FOR S OP(2) (A) (I), 8 TO WHICH THE ASSESSEE IS OTHERWISE ENTITL ED. IN FACT, SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL IN THE CASE OF H.P.STATE CO-OPERATIVE BANK LTD. (SUPRA) WHEREIN THE SAME CLAIM WAS HELD AS ELIGIBLE FOR BENEFIT U/S 80P(2)(A)(I ) OF THE ACT FOR THE REASON THAT EVEN THE DEFAULTED INTEREST, WAS ALSO EARNED FROM THE BUSINESS OF PROVIDING CREDIT FACILI TIES TO ITS MEMBERS. THEREFORE, ON THIS ASPECT, WE FI ND NO JUSTIFIABLE GRIEVANCE FOR THE REVENUE AND THE REV ENUE FAIL ON THIS ASPECT. ' 6. IN VIEW OF THE AFORESAID DISCUSSION, AS THE FACT S AND CIRCUMSTANCES ARE IDENTICAL IN THE YEAR UNDER CONSI DERATION, FOLLOWING THE PRECEDENT, THE ORDER OF THE CIT(APPEA LS) ON THIS ASPECT IS ALSO HEREBY AFFIRMED. AS A RESULT, ON THI S GROUND ALSO, THE REVENUE FAILS. 8. THE ISSUE IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE RAISED IN THE EARLIER YEARS AND FO11OWING THE AFORESAID PRECE DENT, WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A). THE GROUND OF APPEAL NO, 2 RAISED BY THE REVENUE IS DISMISSED. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBU NAL, REFERRED TO ABOVE, THIS GROUND OF APPEAL OF THE REVENUE IS DISM ISSED. 16. FOLLOWING THE ABOVE, WE DECIDE THIS ISSUE IN FA VOUR OF THE ASSESSEE. IN VIEW OF THE SAME WE DELETE THE ADDITION MADE ON ACCOUNT OF PROVISIONS OF NPA AMOUNTING TO RS. 36,30,999/-. 22. THIS GROUND OF APPEAL RAISED BY THE REVENUE IS THEREBY DISMISSED 23. GROUND NO. 3 RELATES TO THE DELETION OF ADDITIO N OF RS. 2,21,57,661/- MADE BY THE AO ON ACCOUNT OF GROSS INTEREST RECEIVED ON LOANS ADVANCED TO THE EMPLOYEE TREATING THE SAME AS INCOME FROM OTHER SOU RCES INSTEAD OF BUSINESS INCOME. THIS ISSUE IS IDENTICAL TO THE ISSUE RAISED IN GROUND NO. 1. DURING THE IMPUGNED AY THE ASSESSEE HAD RECEIVED IN TEREST ON VARIOUS KINDS OF LOANS ADVANCED TO ITS EMPLOYEES AS PER DETAILS HERE UNDER : 1. INTEREST RECEIVED ON HOUSE BUILDING LOAN RS. 1,53,09,359 2. INTEREST RECEIVED ON VEHICLE LOAN-CAR RS. 20, 68,475/- 3. INTEREST RECEIVED ON CONSUMER LOANS RS. 90,80 3/- 4. INTEREST RECEIVED ON PERSONAL LOANS RS. 44,2 9,701/- 5. INTEREST RECEIVED ON VEHICLES / SCOOTERS LOAN RS. 2,59,323/- 6. INTEREST RECEIVED ON COMPUTER LOAN ADVANCED TO E MPLOYEE RS. 33,000/- THE LD. AO HELD THE ABOVE INTEREST INCOME TO BE INC OME FROM OTHER SOURCES AND NON BUSINESS INCOME OF THE ASSESSEE AND ACCORDI NGLY DISALLOWED DEDUCTION UNDER SECTION 80P(2)(A)(I) ON THE SAME. 9 LD. CIT(A) FOLLOWING HIS ORDER FOR AY 2010-11 DELET ED THE ADDITION MADE. 24. BEFORE US LD. DR ARGUED THAT THIS ISSUE HAS BEE N DECIDED AGAINST THE ASSESSEE BY HONBLE ITAT CHANDIGARH IN ITS DECISION RENDERED IN THE CASE OF THE ASSESSEE FOR AY 2010-11 VIDE ORDER DT. 03/08/2015 I N ITA NO. 829/CHD/2013. 25. WE FIND THAT THIS ISSUE HAS ALREADY BEEN DECIDE D IN AY 2010-11 AT PARA 17- 20 OF THE ORDER AS FOLLOWS : 17. GROUND NO.4 : THIS ISSUE IS ALMOST IDENTICAL T O THE ISSUE ADJUDICATED BY US THROUGH GROUND NO.2. 18. BOTH THE PARTIES MADE SAME CONTENTIONS IN RESPE CT OF THESE ISSUES ALSO. IN FACT LD. COUNSEL ONLY STRESSED THAT GIVING LOANS TO EMPLOYEES WAS ONE OF THE CONDITION OF EMPLOYMENT, A ND THEREFORE, THIS WAS BUSINESS INCOME OF THE ASSESSEE. 19. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND NO FORCE IN THESE CONTENTIONS BECAUSE OF OUR FINDINGS IN RESPEC T OF GROUND NO.2 CONTAINED IN ABOVE PARA NOS. 4 TO 10. WE MAY EMPHA SIZE THAT HON'BLE SUPREME COURT HAS CLEARLY LAID DOWN THAT DE DUCTION IS AVAILABLE ONLY AGAINST THE CORE ACTIVITY OF THE ASS ESSEE I.E. EXTENDING OF LOANS TO THE MEMBERS OF THE SOCIETY AN D GIVING LOANS TO THE STAFF CANNOT BE SAID TO BE THE CORE ACTIVITY OF THE SOCIETY. THEREFORE, WE DECIDE THIS ISSUE AGAINST THE ASSESSE E. 20. IN THE RESULT, APPEAL IS PARTLY ALLOWED. FOLLOWING THE SAME WE DECIDE THIS ISSUE IN FAVOUR O F THE REVENUE. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. 26. IN THE RESULT APPEAL OF THE REVENUE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/01/2016. SD/- SD/- (H.L. KARWA) (ANNAPURNA MEHROTRA) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 07/01/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR