Asst.C.I.T., Mangalore V. M/s The South Canara District Central Co-Operative Bank Ltd., Mangalore

ITA 1195/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8613 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-03-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 31-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEERA MALHOTRA CITII
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Depreciation; Business expenditure; Charitable institution; Question of law; Bad and doubtful debts
• Section: 43B; 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1195(B)/2015 (ASSESSMENT YEAR : 2012-13) THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), MANGALORE APPELLANT VS M/S SOUTH CANARA DISTRICT CENTRAL CO-OP.BANK LTD., SADASHIVA SAHAKARA SADANA, K.S.RAO ROAD, MANGALORE-575 002. PAN NO.AABAT6621N RESPONDENT REVENUE BY : MRS. NEERA MALHOTRA, CIT-II ASSESSEE BY : SHRI S. RAMASUBRAMANIAN, CA DATE OF HEARING : 03-03-2016 DATE OF PRONOUNCEMENT : 09-03-2016 O R D E R PER SHRI VIJAY PAL RAO, JM: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 03- 06-2015 OF THE CIT(A), MYSORE FOR THE ASSESSMENT YE AR: 2012-13. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS; 1. THE ORDER OF THE LD.CIT(A) IS OPPOSED TO LAW AN D FACTS OF THE CASE. ITA NO.1195(BANG)/2015 2 2. THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITIO N ON ACCOUNT OF INTEREST ON NON- PERFORMING ASSETS AS TH E ASSESSEE HAS ALREADY IDENTIFIED AND ACCOUNTED THE I NTEREST ON NPAS AND AS SUCH IT CAN BE CLEARLY HELD THAT THI S INTEREST ON NPAS HAS ALSO ACCRUED TO THE ASSESSEE AS ON 31-03-2012 AND IS TAXABLE. THE LD.CIT(A) HAS RELIE D UPON HE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS CANFIN HOMES LTD(2011) 5 TAX CORP(DT) 495 93, REPORTED IN 347 ITR 382 ON THIS ISSUE DESPITE THE F ACT THAT THE DEPARTMENT HAS CHALLENGED THIS DECISION BEFORE THE HON BLE SUPREME COURT AND THE SLP IS PENDING IN THIS C ASE. 3.1 THE LD.CIT(A) OUGHT TO HAVE UPHELD THE DECISIO N OF THE AO IN RESPECT OF THE ADDITION MADE IN THE CASE OF INTEREST INCOME ON ACCOUNT OF METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AS THE ASSESSEE HAS NEITHE R ALLOWED MERCANTILE NOR CASH SYSTEM BUT FOLLOWED HYB RID SYSTEM. BY VIRTUE OF THE PROVISIONS OF SEC.1445 OF THE IT ACT, THE ASSESSEE IS REQUIRE TO FOLLOW EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING TO COMPUTE THE REAL INCOME. NO ADJUSTMENT COULD BE MADE TO THE INCOME ASSESSED ON ACCRUAL BASIS. CIT(A) DELETED THE AMOUN T IGNORING HE FACT THAT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AS STATED IN THE FO RM 3CD. 3.2 RELIANCE ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CIT VS THE KARNATAKA BANK LTD IN ITA NO.433/2006 ON THIS ISSUE IS WRONG BECAUSE THE DEPARTMENT HAS NOT ACCEPTED THE DECISION AND SINCE THE SLP FILED HAS BEEN DISMISSED WITHOUT GOING INTO THE MERITS OF THE CASE, HE QUESTION OF LAW REMAIN UNSETTLED. ITA NO.1195(BANG)/2015 3 4.1 THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITI ON ON NON-DEDUCTION OF TDS ON INTEREST EXPENDED ON DEPOSI TS AND BORROWINGS. THE LEARNED CIT(A)FAILED TO APPRECIATE THE DECISION RENDERED BY THE HONBLE PANAJI ITAT IN THE CASE OF THE BELGAUM DISTRICT CENTRAL CO-OP.BANK LTD, WHEREI N IT IS CLEARLY HELD THAT SE.194A(3)(VIA)(B) MAKES NO DISTI NCTION BETWEEN MEMBERS AND NON-MEMBERS OF CO-OPERATIVE BAN K FOR PURPOSE OF DEDUCTION OF TAX. 4.2 THE LD,.CIT(A) HAS ERRED BY NOT CONSIDERING TH E DISTINCTION BETWEEN THE CO-OPERATIVE BANK AND CO- OPERATIVE SOCIETY IS INTERPRETED IN THE CASE OF BAG ANI NIVEDITA SAHAKARI BANK LTD VS ACIT (2003) ITD 567 WHEREIN IT IS HELD THAT CO-OPERATIVE SOCIETY MENTIO N IN SEC.194A(3)(3)(V) SHOULD BE INTERPRETED AS CO-OPERA TIVE SOCIETY OTHER THAN CO-OPERATIVE BANK. 5.1 THE LD.,CIT(A) OUGHT TO HAVE UPHELD THE DECISI ON OF THE AO TOWARDS ADDITIONS MADE ON ACCOUNT OF NON-BUS INESS EXPENDITURE AS THIS EXPENDITURE IS INCURRED AS PER THE DIRECTIONS OF THE CONTROLLING AUTHORITY AND NO-DOCU MENTARY EVIDENCE WAS FURNISHED BEFORE THE AO TO PROVE TO HI S SATISFACTION THAT ON ACCOUNT OF THIS EXPENDITURE, T HE ASSESSEE DERIVED CERTAIN INCOME OR BENEFITS. 5.2 THE LD.CIT(A) HAS RELIED ON THE DECISIONS OF T HE HONBLE SUPREME COURT IN THE CASE OF SRI VENKATA SATHYANARAYANA RICE MILLS VS CIT(223) ITR 101. H ONBLE MADRAS HIGH COURT IN CIT VS VELUMANICKAM LODGE (317 ) ITR 338 AND HONBLE RAJASTHAN HIGH COURT INADDL.CIT VS RAJASTHAN SPINNING AND WAVING MILL LTD 274 ITR 465. THE LD.CIT(A) HAS FAILED TO APPRECIATE THAT THE FAC TS AND ITA NO.1195(BANG)/2015 4 CIRCUMSTANCES OF THE QUOTED CASES ARE DIFFERENT FOR THE INSTANT CASE. IN ALL THE ABOVE THREE CASES THE D IRECT NEXUS BETWEEN THE EXPENDITURE AND TAXABLE INCOME ARE CLEA RLY PROVED. BUT HERE THERE IS NO DIRECT NEXUS EXIST OR PROVED TO THE SATISFACTION OF THE AO. 8. THE LD,.CIT(A) HAS ERRED IN DELETING THE ADDITI ON MADE IN RESPECT OF AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES. AMORTIZATION OF PREMIUM PAI D ON GOVERNMENT SECURITIES CLAIMED BY THE ASSESSEE AS DEDUCTION IS NOT AN ALLOWABLE DEDUCTION AS IN THE ASSESSEES CASE THE AS SECURITIES CLASSIFIED AS HE LD AS MATURITY ARE PERMANENT LONG TERM INVESTMENT MADE B Y THE ASSESSEE BANK, WHICH ARE PREDOMINANTLY CAPITAL IN N ATURE. RATIO OF THE DECISION OF HONBLE MADRAS HIGH COURT JUDGMENT IN TN POWER FINANCE & INFRASTRUCTURE DEVELOPMENT CORPN.LTD VS JCIT(2006) 280 ITR 491 (MA D.) WHEREIN, IT IS HELD THAT RBI GUIDELINES CANNOT OVER RIDE THE MANDATORY PROVISIONS OF INCOME TAX, IS APPLICABLE I N THIS CASE. 9.1 THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION MADE IN RESPECT OF DISALLOWANCE OF PROVISIONS FOR N ON- PERFORMING ASSETS AND STANDARD ASSETS. THE LD.CIT(A ) FAILED TO APPRECIATE THE FACT THAT AND THE PROVISIO N FOR NPA IS NEITHER EXPENDITURE NON AN ALLOWANCE WHICH IS PE RMITTED DEDUCTIONS U/S 28 TO 43B OF THE ACT. 9.2 THE LD,CIT(A) HAS ERRED IN HOLDING BOTH BAD DE BTS AS PER INCOME TAX ACT AND NPA UNDER RBI NORMS AS SA ME. AS PER SEC.36(1)(VII) BAD DEBT OR PART THEREOF WRIT TEN OFF AS IRRECOVERABLE SHALL NOT INCLUDE ANY PROVISION FOR B AD AND ITA NO.1195(BANG)/2015 5 DOUBTFUL DEBTS. THE PROVISIONS FOR NPA UNDER RBI DI RECTIONS IS NOT ONLY IN RESPECT OF LOSS ASSETS BUT ALSO DOUB TFUL ASSETS AND SUB-STANDARD ASSETS. 10. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED THAT THE ORDER OF THE LD.CIT(A), ON THE ABOVE POINTS MAY BE SET ASIDE AND THE ORDER OF THE AO BE RESTORE D. 3. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 4. GROUND NO.2 & 3 REGARDING ADDITION ON ACCOUNT O F INTEREST ON NPA. THE AO WHILE COMPLETING THE ASSESSMENT MADE AN ADDITION ON ACCOUNT OF INTEREST ON NPA OF RS.98,46,471/-. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A). THE CIT(A) DELETED THE ADDITION MADE BY THE AO, ON ACCOUNT OF INTEREST ON NPA BY FO LLOWING THE EARLIER ORDER FOR ASSESSMENT YEAR 2010-11. 5. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEA RNED AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT FOR THE ASSESSMENT YEAR 2010-11 THIS ISSUE HAS BEEN CON SIDERED AND DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATED 04-09-2015 IN ITA NO.34(B)/2014 ALONG WITH ITA NO.1266(B)/2014 IN PARA-8 AS UNDER; 8. AS CAN BE SEEN FROM THE GROUNDS RAISED, THE REVENUE DOES NOT DISPUTE THE PROPOSITION OF LAW LAI D DOWN BY THE HONBLE HIGH COURT OF KARNATAKA IN CANFIN ITA NO.1195(BANG)/2015 6 HOMES(SUPRA) AND THE FACT THAT THE SAID RATIO IS AP PLICABLE TO THE CASE OF THE ASSESSEE. THE ONLY GRIEVANCE OF THE REVENUE APPEARS TO BE THAT A SLP HA BEEN FILED AGAI NST THE DECISION OF THE HONBLE HIGH COURT AND THEREFORE, THE ISSUE IS BEING AGITATED BEFORE THE TRIBUNAL. WE ARE OF THE VIEW IN LIGHT OF THE PRONOUNCEMENT OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CANFIN HOMES(SUPRA), THERE CAN BE NO QUESTION OF ACCRUAL OF INCOME ON NPA AND THEREFO RE, EVEN UNDER THE MERCANTILE SYSTEM OF ACCOUNTING IT CANNOT BE SAID THAT INCOME HAS ACCRUED OR ARISEN TO THE ASSESSEE. THE FACT THAT THE REVENUE HAS PREFERRED SLP AGAINST THE DECI SION OF THE HONBLE HIGH COURT CANNOT BE A GROUND TO TAKE A NY DIFFERENT VIEW ON THE ISSUE. WE THEREFORE, UPHOLD T HE ORDER OF THE CIT(A) AND DISMISS GROUND NO.2 & 3. AS IT IS CLEAR THAT THIS ISSUE IS COVERED BY THE J UDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS CANFIN HO MES LTD. (2011) 347 ITR 382 AND BY FOLLOWING THE SAID JUDGMENT OF THE H ONBLE JURISDICTIONAL HIGH COURT THIS TRIBUNAL HAS DECIDED THE ISSUE IN F AVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010-11. FOLLOWING THE EAR LIER ORDER OF THIS TRIBUNAL IN ASSESEES OWN CASE WE DO NOT FIND ANY E RROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CIT(A) QUA THIS ISSUE. ACCOR DINGLY, GROUND NO.2 & 3 OF THE REVENUES APPEAL ARE DISMISSED. 6. GROUND NO.3.2 REGARDING ADDITION ON ACCOUNT OF INTEREST ON INVESTMENTS IN GOVERNMENT SECURITIES. THE ASSESSEE DID NOT OFFER THE INTEREST ACCRUED, BUT NOT DUE ON GOVERNMENT SECURIT IES TO TAX. THE AO HAS MADE AN ADDITION OF RS.4,16,05,627/- BY HOLDING THAT THE INTEREST ITA NO.1195(BANG)/2015 7 ACCRUED BUT NOT DUE ON GOVERNMENT SECURITIES IS IN COME ACCRUED TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND AC CORDINGLY, BROUGHT THE SAME TO TAX. 7. ON APPEAL, THE CIT(A) HAS DELETED THE ADDITION MADE BY THE AO, BY FOLLOWING THE EARLIER ORDER FOR THE ASSESSMENT Y EAR 2010-11. 7.1 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PAR TIES AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT TH E OUTSET, WE NOTE THAT FOR THE ASSESSMENT YEARS : 2010-11 AND 2011-12 VIDE ORDER DATED 04-09- 2014, THIS TRIBUNAL HAS CONSIDERED AND DECIDED AN I DENTICAL ISSUE IN PARA-49 TO 51 AS UNDER; 49. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSI ONS. AT THE TIME OF HEARING BEFORE US, IT WAS AGREED Y THE PARTIES THAT THE ISSUE RAISED BY THE REVENUE IN THIS APPEAL HAS ALREADY BEEN DECIDED BY THE HONBLE MADRAS HIGH COU RT IN THE CASE OF CIT VS TAMIL NADU MERCANTILE BANK LTD . , 291 ITR 137 (MAD.) THE QUESTION OF LAW BEFORE THE HONB LE MADRAS HIGH COURT WAS AS FOLLOWS: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING TH AT INTEREST ON SECURITIES IS TAXABLE ONLY ON SPECIFIED DATES WHEN IT BECAME DUE FOR PAYMENT AND NOT ON ACCRUED BASIS ? THE HONBLE MADRAS HIGH COURT HELD AS FOLLOWS; ITA NO.1195(BANG)/2015 8 IN VIEW OF THE DELETION OF THE SECTION 18 OF THE ACT WITH EFFECT FROM APRIL 1, 1989, THE THIRD PROVISO T O SECTION 145(1) WAS INSERTED WITH EFFECT FROM APRIL 1, 1989, WHICH IS A SAVING CLAUSE. ALTHOUGH THE AMENDMENT WAS WITH EF FECT FROM APRIL 1, 1989, IT CLEARLY PROVIDES THAT ANY IN COME BY WAY OF INTEREST ON SECURITIES SHALL BE CHARGEABLE T O TAX AS THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH INTER EST IS DUE TO THE ASSESSEE ONLY WHERE NO METHOD OF ACCOUNTING IS REGULARLY EMPLOYED BY THE ASSESSEE. IN OTHER WORDS, IF THE ASSESSEE IS MAINTAINING CASH SYSTEM OF ACCOUNTING, THE AFORESAID PROVISO WOULD NOT APPLY. THE LEGISLATIVE INTENT IS THAT WHEN THE ASSESSEE IS MAINTAINING THE CASH SYST EM OF ACCOUNTING, INCOME BY WAY OF INTEREST ON SECURITI ES WILL HAVE TO BE CHARGED TO TAX ONLY WHEN THE ASSESSEE AC TUALLY RECEIVES THE INTEREST AND NOT ON THE DATE ON WHICH INTEREST ON SUCH SECURITIES MIGHT BECOME DUE. THE ASSESSEE, WHILE FILING THE RETURN OF INCOME FOR THE ASSESSMENT YEARS 1989-90 AND 1990-91, CLAIMED EXCLU SION OF THE SUMS REPRESENTING THE ACCRUED INTEREST FOR T HE PERIODS TILL MARCH 31, 1998 AND TILL MARCH, 31, 1990, FOR T HE RESPECTIVE ASSESSMENT YEARS, IN RESPECT OF THE SECU RITIES HELD BY IT ON THE GROUND THAT IT DID NOT BECOME DUE IN THE RESPECTIVE PREVIOUS YEARS AND THAT EVEN AFTER THE O MISSION OF SEC.18, THE INTEREST ON SECURITIES SHOULD BE CHARGE D ONLY WHEN IT BECOME DUE FOR PAYMENT AS IT DID NOT ACCRUE ON DAY- TODAY BASIS. THE AO, HOWEVER, DISALLOWED THE CLAIM OF THE ASSESSEE, HOLDING THAT AFTER THE OMISSION OF SEC.18 , OF THE ACT, I.E AFTER JULY 8, 1988, INTEREST IS TO BE ASSE SSED UNDER THE HEAD BUSINESS OR OTHER SOURCES AS THE CASE MAY BE, ITA NO.1195(BANG)/2015 9 AND THEREFORE, THE INTEREST WHICH ACCRUED UPTO THE END OF THE ACCOUNTING YEAR BECAME TAXABLE AS THE INCOME OF THE PREVIOUS YEAR. THE CIT(A) HELD THAT THE AO WAS NO T JUSTIFIED IN HOLDING THAT THE INTEREST ACCRUED UP TO LAST DAY OF THE ACCOUNTING YEAR SHOULD BE SUBJECTED TO TAX. THIS WA S UPHELD BY THE TRIBUNAL. ON APPEAL TO THE HIGH COURT: HELD , DISMISSING THE APPEAL THAT EVEN THOUGH SECTION 18 OF THE ACT WAS DELETED, THE ASSESSEE WAS TAXABLE FOR INTEREST ON SECURITIES ONLY ON SPECIFIED DATES WHEN IT BECAME DUE FOR PAYMENT, IN VIEW OF THE THIRD PROVISO TO SE C.145(1) OF THE ACT, WHICH WAS IN FORCE DURING THE RELEVANT ASS ESSMENT YEARS. 50. IT IS NOT IN DISPUTE BEFORE US THAT IDENTICAL D ECISION HAS ALSO BEEN RENDERED BY THE HONBLE HIGH COURT OF KERALA IN THE CASE OF CIT VS FEDERAL BANK, 301 ITR 188(KER .) AND THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF KAR NATAKA BANK LTD IN ITA NO.433/BANG/2005 DATED 12.9.2013. 51. IN THE PRESENT CASE, THE ASSESSEE HAS BEEN FOLLOWING THE METHOD OF OFFERING INTEREST ON SECURI TIES TO TAX ON RECEIPT BASIS ON MATURITY AND THE SAME HAS BEEN ACCEPTED BY THE REVENUE IN THE PAST. IN VIEW OF TH E AFORESAID DECISION, WE ARE OF THE VIEW HAT THE ORDER OF THE C IT(A) DOES NOT CALL FOR ANY INTERFERENCE. CONSEQUENTLY, THE RELEVANT GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISS ED. THUS, IT IS CLEAR THAT THIS ISSUE IS DECIDED IN FAV OUR OF THE ASSESSEE BY THIS TRIBUNAL BY FOLLOWING THE DECISION OF THE H ONBLE KERALA HIGH COURT IN CASE OF CIT VS FEDERAL BANK 301 ITR 188(KER.) AS WELL AS ITA NO.1195(BANG)/2015 10 THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CA SED OF KARNATAKA BANK LTD. IN ITA NO.433/2005 DATED 12.9.2013. FOLLO WING THE EARLIER ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CIT(A) ON THIS ISSUE. HENCE, GROUND NO.3.2 OF THE REVENUE IS DISMISSED. 8. GROUND NO.4.1 AND 4.2 REGARDING THE DISALLOWANCE U/S 40(A)(IA) OF THE IT ACT, 1961 FOR WANT OF DEDUCTION OF TAX AT SO URCE U/S 194A(1) OF THE IT ACT, 1961. DURING THE COURSE OF ASSESSMENT, TH E AO NOTED THAT THE ASSESEE HAS PAID INTEREST OF RS.62,51,01,510/- ON D EPOSITS FROM MEMBERS AND PAYMENT TO EACH OF THE DEPOSITORS EXCEEDED A SU M OF RS.10,000/-. THE AO HELD THAT AS PER THE PROVISIONS OF SEC.194A( 1) OF THE ACT, THE ASSESSEE IS REQUIRED TO DEDUCT TAX IN RESPECT OF TH E PAYMENT OF INTEREST ON DEPOSITS. ACCORDINGLY, THE AO INVOKED THE PROVISION S OF SEC.40(A)IA) OF THE ACT AND DISALLOWED THE SAID AMOUNT OF INTEREST. 9. ON APPEAL, THE CIT(A) HAS DELETED THE DISALLOWAN CE MADE BY THE AO BY FOLLOWING THE DECISION OF THIS TRIBUNAL IN CA SE OF BAGALKOT DISTRICT CENTRAL CO-OP. BANK LTD IN ITA NO.1572/BANG/2013 W HEREIN IT WAS HELD THAT THE CO-OPERATIVE BANK IS COVERED BY THE EXEMPT ION SPECIFIED U/S 194A(3)(V) OF THE IT ACT. THEREFORE, THE CO-OPERA TIVE BANK IS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 194A OF THE IT ACT, 196 1. ITA NO.1195(BANG)/2015 11 10. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEA RNED AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE L EARNED AR HAS INVITED OUR ATTENTION TO THE DECISION OF THE HONBLE JURISD ICTIONAL HIGH COURT DATED 16-12-2015 IN CASE OF BAILHONGAL URBAN CO-OP. BANK LTD. IN ITA NO.100001 OF 2014 WHEREIN THE HONBLE HIGH COURT BY CONSIDERING THE CIRCULAR NO.19/2015 IN F.NO.142/14/2015-TPL ISSUED BY MINISTRY OF FINANCE HELD INPARA-2 & 3 AS UNDER; 2.THE MINISTRY OF FINANCE, GOVERNMENT OF INDIA VID E CIRCULAR NO.19/2015 IN F.NO.142/14/2015-TPL, HAS CLARIFIED THAT THE CO-OPERATIVE BANKS NEED NOT DED UCT TAX AT SOURCE UNDER SECTION 194A OF THE ACT. THE RELEVA NT PORTION AT 42.5 READS AS FOLLOWS; 42.5 IN VIEW F THIS, THE PROVISIONS OF THE SECTION 194A(3)(V) OF THE INCOME TAX ACT HAVE BEEN AMENDED SO AS TO EXPRESSLY PROVIDE THAT THE EXEMPTION PROVIDED FROM DEDUCTION OF TAX FROM PAYMENT OF INTEREST TO MEMBER S BY A CO-OPERATIVE SOCIETY UNDER SECTION 194A(3)(V) OF TH E INCOME- TAX ACT SHALL NOT APPLY TO THE PAYMENT OF INTEREST ON TIME DEPOSITS BY THE CO-OPERATIVE BANKS TO ITS MEMBERS. AS THIS AMENDMENT IS EFFECTIVE FROM THE PROSPECTIVE DATE OF 1 ST JUNE, 2015, THE CO-OPERATIVE BANK SHALL BE REQUIRED TO DE DUCT TAX FROM THE PAYMENT OF INTEREST ON TIME DEPOSITS OF IT S MEMBERS, ON OR AFTER THE 1 ST JUNE, 2015. HENCE, A CO- OPERATIVE BANK WAS NOT REQUIRED TO DEDUCT TAX FROM THE PAYMENT OF INTEREST ON TIME DEPOSITS OF ITS MEMBERS PAID OF CREDITED BEFORE 1 ST JUNE, 2015. 3. IN THE LIGHT OF THE AFORESAID CIRCULAR, THE VIEW OF THE TRIBUNAL HOLDING THAT CO-OPERATIVE BANK WAS REQUIRE D TO ITA NO.1195(BANG)/2015 12 DEDUCT TAX IS NOT SUSTAINABLE. HENCE, THIS APPEAL MERITS CONSIDERATION. BY FOLLOWING THE DECISION OF THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF BAILHONGAL URBAN CO-OP. BANK LTD. W DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CIT(A) ON T HIS ISSUE. ACCORDINGLY, GROUND NO.4.1 & 4.2 OF REVENUE ARE DISMISSED. 11. GROUND NO.5.1 & 5.2 ARE REGARDING THE DISALLOW ANCE OF EXPENDITURE ON THE GROUND OF NON-BUSINESS EXPENDITU RE. THE AO NOTED THAT THE ASSESSEE HAD PAID A SUM OF RS.1,18,60,800/ - TO M/S NAVODAYA GRAMA VIKASA CHARITABLE TRUST WITH A DESCRIPTION HG VCT ANIMATOR SALARY. WHEN THE AO QUESTIONED THE ALLOWABILITY OF THE SAID EXPENDITURE THE ASSESSEE SUBMITTED THAT THE SAID TRUST IS A REG ISTERED TRUST FORMED AS PER THE DIRECTIONS OF THEIR CONTROLLING AUTHORITY I .E NABARD. THE ASSESSEE IS PROMOTING THE FORMATION OF SELF HELP GR OUPS THROUGH THE SAID TRUST AND IN TURN THE ASSESSEE IS GENERATING INCOME BY ADVANCING LOANS TO THESE SELF HELP GROUPS. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE SAID AMOUNT PAID TO TRU ST ON THE GROUND HAT IT IS NON-BUSINESS EXPENDITURE. 12. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE DISALLOWANCE MADE BY THE AO BY FOLLOWI NG THE EARLIER ORDER FOR THE ASSESSMENT YEAR 2010-11. ITA NO.1195(BANG)/2015 13 13. WE HAVE HEARD THE LEARNED DR AS WELL AS THE L EARNED AR AND HAVE CONSIDERED THE RELEVANT MATERIAL ON RECORD. A T THE OUTSET, WE NOTE THAT FOR THE ASSESSMENT YEAR 2010-11, THE TRIBUNAL HAS CONSIDERED AND DECIDED AN IDENTICAL ISSUE IN PARA-29 & 30 AS UNDE R; 29. WE HAVE HEARD THE SUBMISSIONS OF THE LD.DR, WHO RELIED ON THE ORDER OF THE AO AND THE GROUNDS OF AP PEAL. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). 30. WE HAVE GIVEN CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS. NAVODAYA GRAMA VIKAS CHARITABLE TRUS T IS A REGISTERED TRUST FORMED AS PER THE DIRECTIONS OF TH E ASSESSEES CONTROLLING AUTHORITY, NABARD. THROUGH THE SAID TRUST THE ASSESSEE IS PROMOTING THE FORMATION OF SE LF HELP GROUPS IN THE DISTRICTS OF DAKSHINA KANNADA AND UDU PI. THE ASSESSEE HAS BEEN ADVANCING LOANS TO THOSE SELF HEL P GROUPS FOR GENERATING INCOME. THE LOANS ARE GIVEN TO SHGS FOR HOME INDUSTRIES LIKE CANDLE MAKING, SOAP MAKING AND SUCH OTHER ACTIVITIES. THE INCOME GENERATED BY SUCH SELF HELP GROUPS COME BACK TO THE ASSESSEE AS DEPOSITS. UNDER THIS MICRO FINANCING SCHEME RURAL POOR AND UNEDUCATED PEOPLE GET TO KNOW BANKING, LEARN TO HANDLE FINANCE AND INCREASE THEIR INCOME LEVEL. THE SCHEME HAS A GREAT VISION OF UPLI FTMENT OF THE RURAL POOR THROUGH THESE ACTIVITIES. WITH THIS OBJECT IN VIEW, NABARD, AS THRUST THE RESPONSIBILITY OF MAKIN G PAYMENTS TO NAVODAYA TRUST. THE EXPENSES IN QUESTIO N ARE IN RESPECT OF THE REMUNERATION PAID EACH MONTH TO 2 60 ANIMATORS AND 8 CO-ORDINATORS. SUCH ANIMATORS AND CO- ORDINATORS DO THE WORK OF LIAISONING, TRAINING, MON ITORING AND GUIDING SUCH SHGS. THEY ARE ALSO PROMOTING VARIOUS LOAN PRODUCTS OF THE ASSESSEES BANK AND ARE ALSO WORK A S THE PERSONS CANVASSING FOR THE DEPOSITS OF THE BANK. FURTHER, IT ITA NO.1195(BANG)/2015 14 IS CLEAR FROM THE FACTUAL FINDING RENDERED BY THE C IT(A) THAT THE ASSESSEE COULD GENERATE DISBURSEMENT TO THE TUN E OF RS.500 CRORES AND DEPOSIT MOBILIZATION TO THE EXTEN T OF RS.85 CRORES FROM THE SHGS. IT IS ALSO CLEAR THAT T HE EXPENDITURE IN QUESTION WAS INCURRED BY THE ASSESSE E KEEPING IN MIND THE COMMERCIAL EXIGENCY. THE DECI SION OF THE HONBLE RAJASTHAN HIGH COURT IN RAJASTHAN SPINN ING AND WEAVING MILLS LTD CITED SUPRA, CLEARLY SUPPORT THE CONCLUSIONS ARRIVED AT BY THE CIT(A). IN THE AFO RESAID DECISION, THE HONBLE RAJASTHAN HIGH COURT HELD THA T IT IS NOT NECESSARY TO SHOW THAT THE EXPENSES WERE NOT PROFIT ABLE OR NO BENEFIT WAS ACTUALLY DERIVED. THE RECEIPT OF ACT UAL BENEFIT IS ALSO NOT NECESSARY. THE KEY ASPECT TO BE SEEN I S RELATIONSHIP BETWEEN THE EXPENSES INCURRED AND CARR YING ON OF THE BUSINESS OF THE ASSESSEE. IF THERE IS A BE NEFIT TO THE ASSESSEE, THEN THE EXPENDITURE HAS TO BE REGARDED A S INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSE E AND ALLOWED AS A DEDUCTION. THE HONBLE RAJASTHAN HIGH COURT FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SASOON J. DAVID & CO. PVT. LTD VS CIT, 118 ITR 261(SC) WHEREIN REFERENCE WAS MADE TO THE EXPRESSIO N WHOLLY OR EXCLUSIVELY USED IN SEC.37(1) OF THE AC T AND WAS OF THE VIEW THAT THE EXPRESSION USED IS NOT NECESSA RY. IN THE LIGHT OF THE LEGAL POSITION AS EXPLAINED IN THE JUDICIAL PRONOUNCEMENT AND KEEPING IN VIEW THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE ORDER OF CIT(A) D OES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS NO.5 TO 8 RAISED BY THE REVENUE ARE DISMISSED. ITA NO.1195(BANG)/2015 15 FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL, WE D O NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CIT(A) Q UA THIS ISSUE. 14. GROUND NO.8 REGARDING ADDITION MADE IN RESPECT OF AMORTIZATION OF PREMIUM ON GOVERNMENT SECURITIES. 15. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LE ARNED AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO NOTED THAT THE ASSESSEE HAS REDUCED A SUM OF RS.45,25,556/- FROM T HE GROSS INTEREST FROM STATUTORY LIQUIDITY RATIO (SLR) RECEIVED DURIN G THE YEAR BEING THE PREMIUM PAID ON GOVERNMENT SECURITIES AMORTIZATION. THE AO HAS DISALLOWED THIS AMOUNT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 16. ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE ORDER FOR THE ASSESSMENT YEAR 2010-11 AND 2011-12. WE FIND THAT FOR THE ASSESSMENT YEAR 2010-11 AND 2011-12 TH E TRIBUNAL HAS DECIDED AN IDENTICAL ISSUE IN PARAS-39 & 40 AS UNDE R; 39. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE IS SUE RAISED BY THE ASSESEE IN GROUND NO.8 & 9 IS NO LONG ER RES INTEGRA AND HAS BEEN DECIDED BY THIS TRIBUNAL IN TH E CASE OF M/S SIR M. VISWESWARAYA CO-OPERATIVE BANK LTD VS J CIT , ITA NO.1122/BANG/2010 FOR AY: 2007-08 ORDER DATED 11.5.2012. THE FOLLOWING WERE THE RELEVANT OBSERV ATIONS OF THE TRIBUNAL. ITA NO.1195(BANG)/2015 16 0.3 LET US FIRST TAKE UP THE ISSUE RELATING TO AMORTIZATION OF PREMIUM ON INVESTMENT IN GOVERNMENT SECURITIES. RELEVANT GROUNDS READ AS UNDER; I). THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAS TO INVEST SURPLUS FUND IN GOVERNMENT SECURITIES AS PER RBI GUIDELINES AND THE PREMIUM PA ID WILE INVESTING IN GOVERNMENT SECURITIES THAT ARE BOUGHT IN ON MARKET WOULD HAVE TO BE AMORTIZED TILL THE MATURITY DATE OF THE SECURITY AND THUS THE PREMIUM WAS WRITTEN OFF W AS LIABLE TO BE ALLOWED AS DEPRECIATION OF VALUE OF SE CURITIES; II) THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE CLASSIFICATION OF SECURITIES FOR RBI PURPOSES WOULD NOT TAKE AWAY THE BENEFIT WHICH THE APPELLANT WAS ENTITLED T O AND HE OUGHT TO HAVE APPRECIATED THAT THE CASE LAW REFE RRED WERE DISTINGUISHABLE AND ACCORDINGLY HE OUGHT TO HA VE ALLOWED THE DEDUCTION AS CLAIMED IN FULL:. 04. THE BRIEF FACTS PERTAINING TO THIS ISSUE AR E THAT WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE IT A CT, FOR THE ASSESSMENT YEAR 2007-08, THE AO NOTICED THAT TH E ASSESSEE HAS CLAIMED A SUM OF RS.26,.40,237/- UNDER AMORTIZATION OF PREMIUM ON INVESTMENTS AND THE ASSE SSEE HAD NO EXPLANATION FOR THE CLAIM. HENCE, HE DISALL OWED THE SAME. WHILE DISALLOWING THE SAME, THE AO FOLLOWED T HE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF T N POWER FINANCE AND INFRASTRUCTURE DEVELOPMENT CORPN. LTD. VS JCIT (2006) 280 ITR 491. AGGRIEVED, THE ASSESSEE MOVED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUT HORITY. 05. THE LD.CIT(A) AFTER CONSIDERING THE SUBMI SSIONS MADE BEFORE HIM AND FOLLOWING THE DECISION OF THE M ADRAS ITA NO.1195(BANG)/2015 17 HIGH COURT HAS THAT MERELY BECAUSE THE RBI HAD DIRE CTED THE ASSESSEE TO PROVIDE FOR NON-PERFORMING ASSETS, THAT DIRECTION CANNOT OVERRIDE THE MANDATORY PROVISIONS OF THE INCOME-TAX ACT, CONTAINED IN SEC.36(1)(VIIA)A WHICH STIPULATE FOR DEDUCTION NOT EXCEEDING 5 PERCENT OF THE TOTAL INCOME ONLY IN RESPECT OF THE PROVISION FOR BAD AND DOUBTF UL DEBTS WHICH ARE PREDOMINANTLY REVENUE IN NATURE OR TRADE RELATED AND NOT FOR PROVISION FOR NON-PERFORMING ASSETS WHI CH ARE OF PREDOMINANTLY CAPITAL IN NATURE. THUS, WE ARE OF TH E VIEW THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION OF AMORTIZATION OF PREMIUM ON INVESTMENTS U/S 36(1)(VI I). AGGRIEVED, THE ASSESSEE IS N SECOND APPEAL BEFORE U S WITH THIS ISSUE. 06. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE CIT(A) HAD FAILED TO SEE THE REASON THAT A ISSUE SI MILAR TO THAT OF THE PRESENT ONE HAD BEEN ALLOWED BY VARIOUS BENCHES OF THE HONBLE TRIBUNAL, NAMELY; A. CATHOLIC SYRIAN BANK LTD VS ACIT COCHIN (2010) 38 SOT 553. B. KHANAPUR CO-OP.BANK LTD VS ITO IN ITA NO.141/PNJ/2011(PANAJI.) C. CORPORATION BANK VS ACIT,MLORE IN ITA NO.112/BANG/2008 THE LD. COUNSEL ALSO LACED RELIANCE ON BOAR DS INSTRUCTIONS NO.17 OF 2008(VII) AND PLEADED THAT TH E CLAIM OF THE ASSESSEE BE ALLOWED AS THE ASSESSEE HAD THE POW ERS TO DEBIT IN ITS P&L ACCOUNT A SUM OF RS.29,02 LAKHS FO R AMORTIZATION OF PREMIUM. ITA NO.1195(BANG)/2015 18 07. PER CONTRA, THE LEARNED DR AW UNABLE TO CONTROVERT TO THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. 08. WE HAVE CAREFULLY CONSIDERED THE RIVAL S UBMISSIONS AND PERUSED THE RELEVANT FACTS AND MATERIALS ON REC ORD. WE HAVE ALSO CONSIDERED THE FINDINGS OF THE VARIOUS BENCHES OF THE TRIBUNAL, AS UNDER; I) CATHOLIC SYRIAN BANK LTD VS ACIT (2010) 38 SOT 553(COCHIN) AN IDENTICAL ISSUE TO THAT OF THE SUBJECT MATTER UN DER CONSIDERATION HAS ARISEN BEFORE THE COCHIN BENCH. AFTER ANALYZING THE ISSUE IN DEPTH, THE BENCH HAS OBSERVE D THAT WITH REGARD TO AMORTIZATION OF PREMIUM ON PURCHASE OF GOVERNMENT SECURITIES, IT WAS CLARIFIED THAT THIS W AS MAD AS PER THE PRUDENTIAL NORMS OF THE RBI. FOLLOWING THE TRIBUNAL DECISION IN THE ASSESSEES CASE AND CONSIDERING THA T THE ASSESSEE BANK IS FOLLOWING CONSISTENT AND REGULAR M ETHOD OF ACCOUNTING SYSTEM, THERE IS NO JUSTIFICATION IN INTERFERING WITH THE ORDER OF THE CIT(A) ON THIS ISSUE OF AMORT IZATION OF PREMIUM ON GOVERNMENT SECURITIES. UNITED COMMERCI AL BANK VS CIT(1999) 156 CTR (SC) 380: (1999) 240 ITR 355 (SC) AND SOUTH INDIAN BANK LTD. (ITA NO.126/COCH/2 004, DATED SEPT.2005 FOLLOWED. II) THE KHANAPUR CO-OP. BANK LTD VS ITO ITA NO.141/PNJ/2011 DATED 8.9.2011: THE HONBLE BENCH OF PANAJI TRIBUNAL HAD RECORDED ITS FINDINGS THAT 6. LIKEWISE, THE PREMIUM AMORTIZED A T RS.1,78,098/- IS CLAIMED TO BE IN RESPECT OF SECURI TIES HELD ITA NO.1195(BANG)/2015 19 UNDER THE CATEGORY HELD TO MATURITY. THE AO HAS T AKEN THEM AS LONG TERM INVESTMENTS. IN OTHER WORDS, HE H AS ACCEPTED THE ASSESSEES CLAIM THAT THE SECURITIES A RE HELD TO MATURITY. THAT BEING SO AND HAVING REGARD TO T HE CBDT INSTRUCTION NO.17 OF 2008 DATED 26.11.2008 AS REPRO DUCED HEREIN ABOVE, THE PREMIUM PAID ON SUCH GOVERNMENT SECURITIES IS REQUIRED TO BE AMORTIZED OVER THE PER IOD REMAINING TO MATURITY. III) IN THE CASE OF CORPORATION BANK VS ACIT, MAN GALORE IN ITA 112/BANG/2008(BANG)/ FOR THE ASSESSMENT YEAR 2004-05, THE EARLIER BENCH HAD ALSO HELD A SIMILAR VIEW. IN THE LIGHT OF THE ABOVE DISCUSSION AND THE CASE LAWS DISCUSSED SUPRA, TAKING INTO ACCOUNT THE TOTALITY O F THE FACTS AND MATERIALS, WE ARE OF THE CONSIDERED VIEW THAT T HE ASSESSEE IS ENTITLED TO CLAIM THIS DEDUCTION AND HE NCE, WE ALLOW THE GROUNDS OF THE ASSESSEE RELATING TO THIS ISSUE. 40. WE ARE OF THE VIEW THAT IN THE LIGHT OF THE DE CISION ON THE ISSUE CONSIDERED BY THE TRIBUNAL, THE CLAIM MAD E BY THE ASSESSEE WAS RIGHTLY ALLOWED BY THE CITA). ACCORDIN GLY, THE RELEVANT GROUND OF APPEAL IS DISMISSED. 17. FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL W E DO NOT FIND ANY MERIT OR SUBSTANCE IN THE GROUNDS RAISED BY THE REV ENUE. ACCORDINGLY, GROUND NO.8 OF THE REVENUES APPEAL IS DISMISSED. 18. GROUND NO.9.1 & 9.2 REGARDING DISALLOWANCE OF THE CLAIM OF PROVISION OF RS.2.5 CRORES TOWARDS NPA. THE AO WAS OF THE VIEW THAT EXPLANATION TO SEC.36(1)(VII) OF THE IT ACT, PROVID ES THAT ANY BAD DEBT OR PART THEREOF WRITTEN OFF CANNOT INCLUDE ANY PROVISI ON FOR BAD AND DOUBTFUL ITA NO.1195(BANG)/2015 20 DEBTS. THE PROVISION FOR NPA UNDER THE RBI DIRECT ION IS DOUBTFUL ASSETS AND ACCORDINGLY, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE. 19. ON APPEAL, THE CIT(A) HAS DIRECTED THE AO TO A LLOW DEDUCTION U/S 36(1)(VIIA) AFTER CONSIDERING THE PROVISIONS MA DE BY THE ASSESSEE. 20. BEFORE US, LEARNED DR HAS SUBMITTED THAT PRO VISION FOR DOUBTFUL DEBTS IS NOT AN ALLOWABLE CLAIM AS HELD BY THE HON BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. VS JCIT (320 ITR 577) . 21. ON THE OTHER HAND, LEARNED AR HAS SUBMITTED TH AT THE AO HAS NOT CONSIDERED THE CLAIM OF ASSESSEE U/S 36(1)(VIIA ) AND THEREFORE, THIS GROUND OF THE REVENUES APPEAL IS NOT ARISING FROM THE ORDER OF THE CIT(A). 22. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE AO DISALLOWED THIS CLAIM OF ASSESSEE AS PER EXPLANATION TO SEC.36(1)(VII) WHEREAS THE CI T(A) DIRECTED THE AO TO ALLOW THE CLAIM U/S 36(1)(VIIA) AFTER VERIFICATION IN PARA-3.7(B) OF THE CIT(A)S ORDER. 3.7(B) THE CAREFUL READING OF THE PROVISIONS OF SEC.36(1)(VIIA) THE CO-OP. BANKS ARE ENTITLED FOR D EDUCTION OF 7.5% OF THE TOTAL INCOME PROVIDED ASSESSEE CREAT ED A PROVISION IN THE BOOKS OF ACCOUNT. IN THE INSTANT CASE, THE ASSESSEE BANK HAS CREATED A PROVISION OF RS.2,05,00,000/- TOWARDS PROVISION FOR NPA AND STANDARD ASSETS VIDE SCHEDULE 22 OF THE FINANCIAL STATEMENTS. THE ASSESSEE BANK IS ALSO ENTITLED FOR DEDUCTION OF 10% OF THE AGGREGATE ADVANCES GIVEN BY THE RURAL BRANCHES. SINCE THE ASSESSEE BANK HAS CREAT ED A PROVISION IN THE BOOKS OF ACCOUNT AND IS ENTITLED F OR ITA NO.1195(BANG)/2015 21 DEDUCTION U/S 36(1)(VIIA) I.E 7.5% OF THE TOTAL INC OME AND 10% OF THE AGGREGATE ADVANCES GIVEN BY THE RURAL BRANCHES, I DIRECT THE AO TO ALLOW THE DEDUCTION U/ S 36(1)(VIIA) AFTER CONSIDERING THE PROVISION MADE BY THE ASSESSEE BANK AND AS PER THE PROVISIONS OF 36(1)(V IIA). AS IT IS MANIFEST FROM THE FINDING OF THE CIT(A) T HAT THE CLAIM OF THE ASSESSEE WAS EXAMINED BY THE CIT(A) AS PER THE PROV ISION OF SEC.36(1)(VIIA) AND ACCORDINGLY, THE AO WAS DIRECTED TO ALLOW THE C LAIM UNDER THE SAID PROVISION AFTER VERIFICATION OF THE PROVISIONS MADE BY THE ASSESSEE AND COMPLIANCE OF CONDITIONS PROVIDED U/S 36(1)(VIIA) O F THE IT ACT, 1961. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE CIT(A) ON THIS ISSUE AND THE AO IS DIRECTED TO CONSIDER AND EXAMINE THIS CLAIM U/S 36(1)(VIIA) OF THE ACT, 1961. 23. IN THE RESULT, THE APPEAL FILED BY THE REVENU E IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9 TH MARCH, 016. SD/- SD/- (INTURI RAMA RAO) (VIJAY PAL R AO) ACCOUNTANT MEMBER JUDICIAL MEMBER D A T E D : 09-03-2016 PLACE: BANGALORE AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE