The Andhra Pradesh State Co-operative Bank Limited, Secunderabad V. Addl. Commissioner of Income Tax, Ranga-2, Hyderabad

ITA 1481/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82448 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 08-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Keywords: Depreciation; Bad and doubtful debts; Competent authority; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1481 /HYD/2013 & ITA NO. 88 /HYD/2014 (ASSESSMENT YEAR 200 9 - 1 0) M/S. A NDHRA PRADESH STATE CO - OPERATIVE BANK LTD., HYDERABAD ( PAN - AA AAT 2971 J ) V/S. ADDL. COMMISSIONER OF INCOME - TAX RANGE 2, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.V.SADASIVA& S HRI M.V.ANIL KUMAR RESPONDENT BY : SHRI P. SOMA SEKHAR REDDY DATE OF HEARING 1 9 .0 9 .2014 DATE OF PRONOUNCEMENT 09.10.2014 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER: OUT OF TH E SE TWO APPEALS FIL E D BY THE ASSESSEE, ITA N O.1481/HYD/2013 I S AN APPEAL FIL E D AGAINST THE ORDER OF T H E LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) III, HYDERABAD DATED 16 TH AUGUST, 2013 PASSED UNDER S.246A OF THE ACT, WHILE I TA NO.88/ H YD/14 IS AN APPEAL, WHICH IS DIRECTED A GAINST THE O RDER O F THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) III, HYDERABAD DATED 14 TH NOVEMBER,2013 PASSED UNDER S.154 OF THE AC T. SINCE ONE O F THE ISSUES INVOLVED THEREIN IS INTERLINKED, TH E SE APPEALS HAVE BEEN H EA RD TOGETH E R AND ARE BEIN G DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVE N IENCE. ITA NO.1481/HYD/2013 2. FIRST, WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE, BEIN G I TA N O.1481/HYD/2013. THE COMMON ISSUE INVOLVED IN G R OUNDS I TA NO. 1481/HYD/2013 & 88/HYD/20 14 M/S. ANDHRA PRADESH CO - OPERATIVE BANK LTD., HYDERABAD 2 NO.1 AND 2 OF THIS APPEAL REL A TES TO DISALLOWANCE OF R S .70,96,83,398 MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED CIT(A) ON ACCOUNT O F BAD DEBTS WRITTEN OFF, WHICH WERE COVERED BY THE ST ATE GOVERNMENT G UARANTEE. 3. ASSESSEE IN THE PR E SEN T CA S E IS A STATE LEVEL APEX COOPERATIVE CREDIT INSTITUTION FOR THE S TATE OF ANDHRA PRADESH, WHICH P R OVI D ES AGRICULTURAL LOANS TO THE FARMERS IN THE STATE, THROUGH ITS AFFILIATED DISTRICT COOPERATIVE CENTRAL BANKS AND THE PRIMARY AGRICULTURAL CO - OP E RATIVE CREDIT SOCIETIES. THE RETURN OF INCOM E FOR THE YEAR UNDER CON S IDE R ATION WAS ORIGINALLY FIL E D BY IT ON 30.9.2009, DECLARING TOTAL INCOME OF R S .62, 1 9,22,600. SUBSEQUENTLY, A REVISED RETURN WAS FIL E D BY TH E ASSESSEE ON 30 TH M ARCH, 2011, CLAIMING THEREIN, FURTHER DEDUCTION OF RS.99,18,76,416 ON ACCOUNT OF BAD DEBTS WRITTEN OFF AND RS.24,46,49,000 ON ACCOUNT OF GRATUITY PAYMENTS. DURIN G TH E COU R SE OF ASSESSMENT PROCEEDINGS, THE CLAIM O F THE ASSESSEE FOR DEDU CT ION ON ACCOUNT OF BAD DEBTS WRITTEN OFF WAS EXAMINED BY THE ASSESSING OFFICER. ON SUC H EXAMINATION, HE FOUND THAT THE DEBT BALANCES OUTSTANDING IN THE NAME OF SIX CREDITORS W E RE WRITTEN OFF BY THE ASSESSEE AS BAD DEBTS AND OUT OF TH E SE SIX DEBTS, AT LEAST FIVE DEBTS WERE COVERED BY STATE GOVERNEN T G UARANTEE. ENQUIRY MADE IN THIS REGARD BY THE ASSESSING OFFICER ALSO REVEALED THAT TH E RE WAS A C IRCULAR ISSUED BY NABARD STIPULATING THAT THE CREDIT FAC I L I TIES BACKED BY GUARANTEE OF THE STATE GOVERNM E NT, THOUGH OVERDUE, MAY BE TREATED AS NPAS ONLY WHEN THE ST A TE GOVERNMENT REPUDIATES ITS GUARAN TEE WHEN INVOKED. HE NOTED THAT NO EVIDENCE IN THI S REGARD WAS FURNISHED BY THE ASSESSEE REGARDING THE REPUDIATION OF THE GUARANTEE BY ST ATE GOVE R NMENT, AND THERE WAS ALSO NO EVIDENCE PRODUCED BY TH E ASSESSEE EXCEPT THE MINUTES OF INTERNAL BOARD MEETING AND AUDIT COMMITTEE MEETING TO SHOW ANY I TA NO. 1481/HYD/2013 & 88/HYD/20 14 M/S. ANDHRA PRADESH CO - OPERATIVE BANK LTD., HYDERABAD 3 STEPS TAKEN TO RECOVER DUES F R OM THE CONCERNED DEBTORS. HE THEREFORE, HELD THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO ESTABLISH THAT THE D EBTS WRITTEN OFF HAD ACTUALLY BECOME BAD AND SIN C E THE DEBT SO WRITTEN OFF TO THE EXTENT OF R S .97.90 CRORES W AS COVERED BY S TATE GOVERNMENT GUARANTEE , THE CLAIM OF T HE ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DE B TS WRITTEN OFF WAS DISALLOWED BY THE ASSESSING OFFICER TO THAT E X TENT. 4. THE DISALLOWANCE MA D E BY THE ASSESSING OFFICER ON ACCOUNT OF BAD DEBTS WRIT T EN OFF WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FIL E D BEFORE THE LEARNED CIT(A) AND IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(A) INTER ALIA RELYING ON THE DECISION S OF TH E HONBLE S UPREM E COU R T IN TH E CA S E OF VIJAYA BANK V/S. CIT(323 ITR 126 ) AND TR F LIMITED V/S. CIT ( 323 ITR 3 9 7 ) THAT IN ORDER TO CLAIM DEDUCTION ON ACCOUNT OF BAD DEBTS UNDER S.3 6 (1)(VII) AS AMENDED WITH EFFECT FROM 1.4.198 9, THERE WAS NO RE Q UIREMENT TO SHOW THAT TH E DEBTS WRITTEN OFF HAD ACTUALLY BECOME BAD, AND THE ONLY REQUIREMENT WAS THAT SUCH DEBTS SHOULD B E WRITTEN OFF BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THE LEARNED CIT(A) DID NOT FIND MERIT IN THIS STAND OF THE ASSESSEE. ACCOR D ING TO HIM, IT WAS NECESSAR Y TO ASCERTAIN W H E THER THE DECISION TO WRITE OFF THE RELEVANT DEBTS AS BAD WAS A BONA FIDE DECISION TAKEN BY THE ASSESSEE. IN THIS REGARD, HE FOUND THAT THE DECISION TO WRITE OFF DEBT S OU TSTANDING IN THE NAMES OF APSEB , THE AMADALAVALASA CSF/SRIKAKULAM DCCB AND THE SWAROOP AGRO OIL MILLS, WAS A BONA FI D E BUSINESS DECISION TAKEN BY THE ASSESSEE, AFTER FOLLO W IN G PROPER PROCEDURE AND OBTAINING THE CONCURRENCE OF THE AUDIT. HE ALSO FO U N D THAT THE GUARANTEE GIVEN BY THE STATE GOVERNMENT IN TH E SE CA S ES HAD EITHER BEEN RE VOKED OR DID NO T EXI S T . HE TH E R E FORE, ALLOWED THE CLAIM O F THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF THESE BAD DEBTS WRITTEN OFF. AS REGARDS THE OTHER DEBTS WRITTEN OFF BY THE I TA NO. 1481/HYD/2013 & 88/HYD/20 14 M/S. ANDHRA PRADESH CO - OPERATIVE BANK LTD., HYDERABAD 4 ASSESSEE , HE HELD THAT PROPER PROCEDURE HA D NO T BEEN FOLLOWED BY THE ASSESSEE AND TH E SE LOANS WERE VERY MUC H RECOVERABLE. HE ACCORDINGLY SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BAD DEBTS WRITTEN OFF IN RESPECT OF THESE DEBTORS, AMOUNTING TO RS.70,96,83,398. 5. T H E LEARNED COUNSE L FOR THE ASSESSEE SUBMI T TED THAT THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF BAD DEBTS WRITTEN OFF WAS DISALLOWED BY THE ASSESSING OFFICER MAINLY ON THE G R OUND THAT THE SAID DEBT S HAD ACTUALLY NO T BECOME BAD DURING THE YEAR UNDER CONSIDERATION BEC AUSE O F THE GU A RANTEE GIVEN BY THE S T ATE GOVERNMENT. HE SUBMITTED THAT THE LEARNED CIT(A) HAS ALSO SUSTAINED THE SAID DI S ALLO W ANCE MAINLY FOR THE SAME REASONS, AS GIV E N BY THE ASSESSING OFFICER, BY HOL D IN G THA T THE DECISION OF THE ASSESSEE TO WRITE OFF SOME O F THE DEBTS AS BAD WAS NO T A BONA FIDE DECISION AS THE SAID DEBTS WERE SECURED BY THE GUARANTEE GIVEN BY THE ST ATE GOVER N MENT AND THE SAME HA D NOT BECOME ACTUALLY IRRECOVERABLE. HE CON T ENDED THAT THE ASSE SSING OFFICER AS WELL AS THE LEARNED CIT(A) , HOWEVER , HAVE OVERLOOKED THAT AS PER THE PROVIS I ONS OF S.36(1) OF THE AC T AS AMENDED WITH EFFECT FROM 1.4.1989, IT IS NO T RELEVANT TO SEE WH E TH E R THE DEBTS WRITTEN OFF HAVE ACTUALLY BECOME BAD AND THE ONLY RE QUIREMENT IS THAT THE SAID DEBTS SHOULD B E WRITTEN OFF BY THE ASSESSEE FROM HI S BOOKS OF ACCOUNT AS IRRECOVERABLE. IN THIS REGARD, HE INVITED OU R ATTENTION TO PARAGRAPH 4.2 OF THE ASSESSMENT ORDER TO POINT OUT THAT A SPECIFIC FINDING IS GIVEN BY THE ASS ESSING OFFICER THA T THE CONCERNED DEBTS HAVE BEEN WRITTEN OFF BY TH E ASSESSEE AS BAD IN ITS BOOKS OF ACCOUNT. HE ALSO INVITED OU R ATTENTION TO THE PROVISIONS OF S.36(2), AND SUBMITTED THAT THE DEBTS WRITTEN OFF BY THE ASSESSEE ACTUALLY REPR E SENTED THE MO NIES LENT IN THE ORDINARY COURSE OF BUSINESS OF BANKING, WHICH I S CARRIED ON BY THE ASSESSEE, AND THUS, THE I TA NO. 1481/HYD/2013 & 88/HYD/20 14 M/S. ANDHRA PRADESH CO - OPERATIVE BANK LTD., HYDERABAD 5 CONDIT I ON STIPUL A TED IN CLAUSE (I) OF S.36(2) WAS DULY SATISFIED. HE CON T ENDED THAT THE ASSESSEE T HU S IS ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF AS PER THE P R OVIS I ONS OF S.36(1)(VIII) READ WITH S.36(2) A S APPLICABLE TO THE YEAR UNDER CON S I D ERATION AND THE AUTHO R I T I E S BELOW A RE NO T JU S TIFIED IN DISALLO W IN G THE CLAI M OF THE ASSESSEE FOR THE SAID DEDUCTION ON THE G R OUN D S WHI C H ARE NO MORE REL E VANT. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND STRONGLY RELIED ON THE IMPUGN E D ORDER OF THE LEARNED CIT(A) IN SUPPORT OF THE R E V EN UES CASE ON THIS ISSUE. HE CONTENDED THA T THE CLAIM O F THE ASSESSEE FOR BAD DEBTS WR ITTEN OFF WAS A PREMATURE CLAIM AND AS RIGHTLY HELD BY THE LEARNED CIT(A), THE DECISION OF THE ASSESSEE TO WRITE OFF THE RELEVANT DEBTS AS BAD WAS NOT A BONA FIDE BUSINESS DECISION, KEEPING IN VIEW THAT THE SAID DEBTS WERE SECURED BY THE STATE GOVERNMENT GUARANTEE AND THERE WAS NOTHING BROUGHT ON RECORD TO ESTABLISH THAT THE SAID DEBT S HAD BEC O ME ACTUALLY BAD DURING THE YEAR UNDER CONSIDERATION. 7. W E HAVE CONSIDERED THE RIVAL SUBMI S SI O N S AND ALSO PERUSED THE RELEVANT MATE R IAL ON RECORD. IT IS O BSERVED THAT THE CLAIM O F THE ASSESSEE FO R DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF WAS DISALLOWED BY THE ASSESSING OFFICER AND THE SAID DISALLO W ANCES HAS BEEN PARTLY SUSTAINED BY THE LEARNED CIT(A) MAINLY ON THE GROUND THAT THE RELEVANT DEBTS WRITTEN OFF BY THE ASSESSEE HA D NO T ACTUALLY BECOME BAD DURING THE YEAR UNDER CON S I D E R ATION . A S HELD BY THE HONBLE SUPREME COU R T IN THE CASE OF TR F LTD. (SUPRA), EVERY ASSESSEE, PRIOR TO 1.4.1989 H A D TO ES T A BLISH, AS A MATTER OF FACT, THAT THE DEBT A D VANCED BY HIM, HAD IN FACT BECOME IRR E COVERABLE IN ORD E R TO CLAIM DEDUCTION UNDER S.36(1)(VII). AS HELD BY THE HONBLE SUPREME COU R T, THIS POS I TION , I TA NO. 1481/HYD/2013 & 88/HYD/20 14 M/S. ANDHRA PRADESH CO - OPERATIVE BANK LTD., HYDERABAD 6 HOW E VER , HAS GOT ALTERED BY THE AMENDMENT MADE IN S.36 (1)(VII) OF THE ACT WITH EFFECT FROM 1.4.1989 AND IT IS NOT NECESSARY FOR THE ASSESSEE AFTER 1.4.1989 TO ESTABLISH THAT THE DEBT IN FACT HAS BECOME IRRECOVERABLE. EXPLAININ G FURTHER, H ONBLE SUPREME COURT HAS HELD THAT IF THE BAD DEBT IS WRITTEN O F F AS IR RECO V ERABLE IN THE ACCOUNTS OF THE ASSESSEE, IT I S ENOUGH FOR THE ASSESSEE TO CLAIM DEDUCTION ON ACCOUNT OF BAD DEBTS UNDER S.36(1(VII). IN THE PRESENT CA S E, THE RELE V ANT D EBTS WERE ADMITTEDLY WRITTEN OFF BY THE ASSESSEE IN THE BOOKS O F ACCOUNT AND SIN C E THE SAME REPRESENT ED THE MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF BANKIN G CARRIED ON BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF UNDER S.36(1)(VII) READ WITH S.36(2) OF TH E AC T. W E, THEREFORE, DELETE THE ADDITION MADE BY THE ASSESSING OFFICER AND S USTAIN E D BY TH E CIT(A) ON THIS ISSUE AND ALLOW G R OUN D S NO.1 AND 2 OF APPEAL. 8. GROUNDS NOS.3 AND 4 OF THE ASSESSEE S APPEAL INVOLVE A COMMON ISSUE REL A TIN G TO DISALLOWANCE OF R S .21,55,72,052 MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) ON ACCOUNT OF AMOUNT PAID TO LIC TOWARDS EMPLOYEES GRATUITY FUND. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE REL E VANT MATER IAL ON RECORD. IT IS OBSERVED THAT THE AMOUNT P A I D BY TH E ASSESSEE TO LIC TO WA RDS EMP L OYEES GRATUITY FUN D WAS DISALLOWED BY THE ASSESSING OFFICER A ND THE SAID DISALLOWANCE WAS CONFIRMED BY THE LEARNED CIT(A) ON THE GROUND THAT THE SAID FUN D WAS NO T APPR OVED BY THE PRESCRIBED AUTHO R ITY U N DER THE INCOME TAX ACT, ALTHOUGH APPLICATION SEEKING SUCH APPROVAL WAS FIL E D BY THE ASSESSEE. AS SUBMITTED BY THE LEARNED CO UN SEL FOR THE ASSESSEE AT THE TIM E OF HE A RING BEFORE US , THE EMPLOYEES GROUP GRATUITY FUND HAS SI N C E BE E N APPROVED BY THE I TA NO. 1481/HYD/2013 & 88/HYD/20 14 M/S. ANDHRA PRADESH CO - OPERATIVE BANK LTD., HYDERABAD 7 COMMISSIONER OF INCOME - TAX II, HYDERABAD WITH EFFECT FROM 1.3.2009 VIDE LETTER DATED 1.3.2013, A COPY O F WHICH IS FIL E D A T PAGE NO.109 OF THE PAPER - BOOK. KEEPING IN VIEW THE SAID APPROVAL, THE LEARNED REPR E SENTATIVES OF BOTH SIDES HAVE AGREED THAT THE MATTER SHOULD B E SENT BACK TO THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH IN THE LIGHT O F THE SAID APPROVAL. ACCORDINGLY, THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE IS SET ASIDE AND THE MATTER IS RESTORED TO THE FI LE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH IN THE LIGHT OF THE APPROVAL GRANTED BY THE COMPETENT AUTHORITY TO THE LIC GROUP GRATUITY FUND. GROUND NOS.3 AND 4 OF THE ASSESSEE S APPEAL ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. GR O UND NOS, 5, 6 AND 7 OF THE ASSESSEES APPEAL INVOLVE A COMMON ISSUE R E L A TING TO DISALLOWANCE OF R S .173,15, 46, 253 MADE BY THE ASSESSING OFFICER AND CON F I R M E D BY THE LEARNED CIT(A) ON AC C OUN T OF BAD DEBTS WRITTEN OFF UNDER THE AGR ICUL T URAL DEBT WAIVER AND DEBT RELIEF SCHEME, 2008 (ADWDRS). 11. IN ITS PROFIT & LOSS ACCOUNT FILED ALONGWITH THE RETURN OF INCOME, ASSESSEE HA D DEB I TED AN AMOUNT OF RS .173,15,46,253 ON ACCOUNT OF I T S SHARE IN THE WAIVER OF IN T ER E ST AND OTHER CHARGES. WHILE SUB S TANTIATING I T S CLAIM ON THIS ISSUE, IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER BY THE ASSESSEE T HAT IT HAD PROVIDED CREDIT LOANS TO FARM E RS THROUGH PACS AT CONCESSIONAL RATES OF IN TE R E ST WITH GOVERNMENT OF INDIA A ND STATE GOVERNM E N T SUPPORT. IT WAS SUBMITTED THAT AS PER THE SCHEME FORMULATED, THE FARMERS WERE EXTENDED CERTAIN RELIEF ON ACCOUNT OF WAIVER OF EXCESS OF IN T ER E ST OVER THE PRINCIPAL AMOUNT , UNAPPLIED INTEREST, PENAL INTER E ST, LEGAL CHARGES, INSPECTION CHAR G ES AND MISCELLANEOUS CHARGES. IT WAS FURTHER SUBMITTED THAT AS PER THE W A IVER SCHEME, THE RELI E F ALLOWED I TA NO. 1481/HYD/2013 & 88/HYD/20 14 M/S. ANDHRA PRADESH CO - OPERATIVE BANK LTD., HYDERABAD 8 WAS SHARED AMONGST THE THREE TIERS OF COOPERATI V ES IN AN EQUITABLE MANNER TO SUSTAIN/BALANCE THE SYSTEM AND ACCORDINGLY THE AMOUNT SHARED BY THE ASSESSEE WAS CLAIMED AS EXPENDITURE BY DEBITING THE SAME TO THE PROFIT & LOSS ACCOUNT . THIS EXPLANATION OF THE ASSESSEE WAS NO T FOUND ACCEPTABLE TO THE ASSESSING OFFICER. ACCO RD ING TO HIM, THE R E LI EF ALLOWED UN DE R THE RELIEF SCHEME WAS TO B E FINALLY REIMBURSED BY THE CE NTRAL GOVERNMEN T AND THE SAME THEREFO RE, DID NOT AMOUNT TO ANY EXPENDITURE INCURRED BY THE ASSESSEE. HE ALSO HELD THAT THE ASSESSEE WAS ONLY ACTING AS A MEDIATOR IN THE PROCESS AND I T WAS NOT GOING TO SUFFER ANY LOSS ON ACCOUNT OF WAIVER GIVEN BY THE GOVERNMENT OF I NDIA , A S AMOUNT OF RELIEF WAS FIN AL LY TO BE R E I M BURSED TO IT BY THE GOVE R NMEN T O F IN DIA. HE TH E R E FORE, DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUC T ION ON ACCOUNT OF ITS SHARE IN WAIVER OF INTER E ST AND OTHER CHARGES. 12. ON APPEAL, THE LEARNED CIT(A) AGREED IN P R IN C IPL E WITH THE STAND OF THE ASSESSEE ON THIS ISSUE THAT THE AMOUNT IN QUESTION REPRESENTED DEBT OF THE ASSESSEE BEIN G MONEY LENT IN THE ORDINARY COURSE OF BU S IN E SS OF BAN K ING CARRIED ON BY IT AND THE SAME HAVING BEEN WRITTEN OFF IN THE BOOKS O F ACCOUNT, THE ASSESSEE WAS ENTITLED TO CLAIM DE D UC T ION. HE HOWE V ER, HELD THAT THE P R OVI SI ON S OF S.36(1)(VIIA) ARE APPLI C ABL E IN TH E CA S E OF THE ASSESSEE, AND, THER EF ORE, THE DEDUCTION ON ACCOUNT OF BAD DEBTS WAS ALLOWABLE SUBJECT TO THE SATISFACTION OF TH E CON DI TION STIPULATED IN S.36(2)(V) OF THE ACT. ACCOR D INGLY, H E DIRECTED THE ASSESSING OFFICER TO DETERMINE THE AMOUNT OF PROVISION CR E ATED AND ALLOW THE DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF AS PER THE CONDITION STIPULATED IN S.36(2)(V) OF THE A CT. 13. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS PER CLAUSE (V) OF I TA NO. 1481/HYD/2013 & 88/HYD/20 14 M/S. ANDHRA PRADESH CO - OPERATIVE BANK LTD., HYDERABAD 9 SUB - SECTION ( 2 ) OF S.36, NO DEDUCTION FOR A BAD DEBT OR PART THEREOF CAN BE ALLOWED, WHERE SUCH DEBT OR PART THEREOF RELATES TO ADVANCES MADE BY AN ASSESSEE TO WHICH CLAUSE (VIIA) OF SUB - SECTION (1) APPLIES, UNLESS THE ASSESSEE HAS DEBITED SUCH DEBT OR PART OF THE DEBT IN THAT PREVIOUS YEAR TO THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE. AT THE TIME O F HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT DISPUTED THE FACT THAT S.36(1)(VIIA) IS APPLICABLE IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND THE DEDUCTION ON ACCOUNT OF BAD DEBT , THEREFORE, IS ALLOWABLE SUBJECT TO SATISFACTION OF THE CONDITION STIPULATED IN S.36(2)(V) OF THE ACT. HE , HOWEVER, HAS CONTENDED THAT THE PROVISIONS OF S.36(1)(VIIA) INTRODUCED IN THE STAT UTE BOOK WITH EFFECT FROM 1.4.1979 ARE MADE APPLICABLE TO COOPERATIVE BANKS ONLY FROM 1.4.2007, AND TH ER E FORE, THE LEARNED CIT(A) OUGHT TO H A VE DIRECTED THE ASSESSING OFFICER TO SATISFY HIM S ELF ABOUT THE FULFI L MENT OF THE CONDITIONS STIPUL A TED IN S.36(2)(V) BY THE ASSESSEE KEEPING IN VIEW THAT S.36(1)(VIIA) W A S APPLICABLE IN TH E CA S E OF THE ASSESSEE ONLY WITH E FFECT FROM 1.4.2007. SINCE THIS CONTENTION RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS DULY SUPPORTED BY THE BOARD CIRCULAR NO.258/1979 DATED 14.6.1979 AND NO.3 OF 2008 DATED 12.3.2008, CLARIFYING THAT THE PROVISIONS OF S.36(1)(VIIA) INT R O D UCED FROM 1979 WOUL D NOT BE APPLICABLE TO COOP E RATIVE BANKS FROM 1.4.1979, BUT ONLY FROM 1.4.2007 AND THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS ALSO NOT DISPUTED THIS POSITION, WE ACCEPT THIS CON TE NTION RAISED BY THE LEARNED C OUN S EL FO R THE ASSESSEE . ACCOR D INGLY, THE DIRECTION G IVEN BY THE LEARNED CIT(A) IS MODIFIED TO THE E X TE N T THAT THE ASSESSING OFFICER SHALL SATISFY HIM S EL F ABOUT THE FULFILLMENT OF TH E CON DI TION STIPUL A TED IN S.36(2)(V) BY TH E ASSESSEE , KEEPING IN V IEW THAT S.36(1)(VIIA) IS APPLI CABLE IN THE CASE OF THE ASSESSEE ONLY WITH I TA NO. 1481/HYD/2013 & 88/HYD/20 14 M/S. ANDHRA PRADESH CO - OPERATIVE BANK LTD., HYDERABAD 10 E FFECT FROM 1.4.2007 W HILE CON S IDERIN G TH E CLAIM OF TH E ASSESSEE FOR DEDUCTION ON ACCOU N T OF BAD DEBTS UNDER THE AGRICULTURAL DEBT WAIVER AND DEBT RELIEF SCHEME, 2008. SUBJECT TO THIS MODIFICATION, THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE IS UPHELD AND GROUND NOS.5 TO 7 OF THE ASSESSEES APPEAL ARE TREATED AS PARTLY ALLOWED. 14. GROUND NO.8 RAISED BY THE ASSESSEE IN ITS APPEAL READS AS FOLLOWS THE COMMISSIONER OF INCOME - TAX(APPEALS) OUGHT TO HA VE APPRECIATED THE FACT THAT THE ASSESSING OFFICER WHILE COMPUTING THE INCOME FROM BUSINESS SHOULD NOT HAVE INCLUDED INVESTMENT DEPRECIATION OF RS.7,05,18,382/ - AND PROFIT ON SALE OF INVESTMENTS OF RS.5,11,09,716/ - AND THE SAME SHOULD BE EXCLUDED FROM THE TAXABLE INCOME AS THESE DO NOT FORM PART OF THE TAXABLE INCOME. 15. AFTER CON S ID E RIN G THE RIVAL SUBMI S SION S AND PERUSING THE RELEVANT MATERIAL ON RECORD, I T IS OBSERVED THAT TH E LD CIT(A) BY HIS IMPUGNED ORDER HAS DIRECTED THE ASSESSING OFFICER TO CONSIDER THE CLAIM O F THE ASSESSEE FOR RELIEF ON THE ISSUES INVOLVED IN G R OUN D NO.8, AFTER VERIFYING THE SAME FROM THE RELEVANT RECORDS. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSES SEE AT THE TIME OF HEARING BEFORE US, A SIMILAR ISSUE WAS RESTORED BY THE T RIBUNAL ALSO TO THE FILE O F THE ASSESSING OFFICER IN ASSESSEES OWN CA S E FOR ASSESSMENT YEAR 2008 - 09 , VIDE ITS ORDER DATED 1.1.2014 P A SSED IN ITA NO.851/HYD/2013, FOR DECIDING THE S AME AFRESH, AF T ER GI V ING THE ASSESSEE PROPER AND SUFFICIENT OPPOR T UNITY OF BEING H E ARD. ACCORD I NGLY, THE I S SUE INVOL V ED IN GROUND NO.8 OF THE ASSESSEES APPEAL I S RE STORED TO THE FILE O F THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH, AS PER THE SAME D IRECTION S AS GIVEN BY TH E T RIBUNAL IN ASSESSEES OWN CA S E FOR ASSESSMENT YEAR 2008 - 09. I TA NO. 1481/HYD/2013 & 88/HYD/20 14 M/S. ANDHRA PRADESH CO - OPERATIVE BANK LTD., HYDERABAD 11 GROUN D NO.8 IS ACCORDINGLY TREA T ED AS ALLOWED FOR STATISTICA L PURPOSES. ITA NO.88/HYD/2014 16. AS REGARDS TH E ASSESSEES APPEAL BEING ITA NO.88/HYD/2014, WHICH I S DIRECTED AGAINST THE O R DER OF THE LEARNED CIT(A) PASSED UNDER S.154 R E JECTING THE APPLI C ATION FILED BY THE ASSESSEE FOR RECTIFICATION, IT IS OBSERVED THAT RECTIFICATION OF THE LEARNED CIT(A)S ORD E R , BY WAY OF APPLICATION UNDER S .154 WAS SOUGHT BY THE ASSESSEE , ON THE SAME ISSUES AS RAI S ED IN GROUND NOS.5 TO 7 OF ITS APPEAL, B E IN G I TA NO.1481/HYD/2013, WHICH HA S A L R E ADY BEEN DECIDED BY US IN TH E FOREGOIN G PORTION OF THIS O R DER. SINCE THE GRIE V ANCE OF TH E ASSESSEE , AS RAISED BY WAY OF RECTI F ICATION APPLICATION UNDER S .154 BEFORE THE LEARNED CIT(A) , HAS ALREADY BEEN ADDRESSED BY US, WHILE DECIDING GROUND NOS. 5 TO 7 BY DIRECTING THE ASSESSING OFFICER TO SATISFY HIM S EL F REGARDING FULF I LMENT OF CON DI TIONS S T IPULATED IN S36(2)(V) BY THE ASSESSEE , KEEPING IN VIEW THAT S.36(1)(VIIA) IS APPLICABLE IN I T S CA S E ONLY WITH E FFECT FROM 1.4.2007, THIS APPEAL FIL E D BY THE ASSESSEE A G AIN S T THE O R DER OF THE LEARNED CIT(A) PASSED UNDER S.154 HAS BECOME IN F RUCTUOUS. THE SAME IS ACCORDINGLY DISMISSED. 17. IN THE RESULT, APPEAL OF THE ASSESSEE BEING ITA NO.1481/HYD/2013 IS PARTLY ALLOWED AND THE APPEAL OF THE ASSESSEE BEING ITA NO.88/HYD/2014 IS DISMISSED. O RDER PRONOUNCED IN THE COURT ON 9 TH OCTOBER, 2014 SD/ - SD/ - ( ASHA VIJAYARAGHAVAN ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/ - 9 TH OCTOBER, 2014 I TA NO. 1481/HYD/2013 & 88/HYD/20 14 M/S. ANDHRA PRADESH CO - OPERATIVE BANK LTD., HYDERABAD 12 COPY FORWARDED TO: 1. M/S. ANDHRA PRADESH STATE CO - OPERATIVE BANK LTD., C/O. M.ANANDAM & CO., CHARTERED ACCOUNTANTS, 7A,SURYA TOWERS, S.P. ROAD, SECUNDERABAD 500 003. 2 . ADDL COMMISSIONER OF INCOME - TAX RANGE 2, HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) I II HYDERABAD 4. COMMISSIONER OF INCOME - TAX II HYDERABAD 5. DEPARTMENTAL RE PRESENTATIVE, ITAT, HYDERABAD. B.V.S