The ACIT, Circle-1, Bharuch V. Bharuch District Central Co. Op. Bank Ltd., Bharuch

ITA 1531/AHD/2016

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1984 (ITAT-SURAT)
• Duration Of Justice: 6 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-05-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 08-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Depreciation; Rule of consistency; Bad and doubtful debts
• Section: 143(3); 80P; 264

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No.1529 & 1542/AHD/2016 (AY 2009-10) (Hearing in virtual Court) Assistant Commissioner of Income-tax, Circle-1, Bharuch, Above Bank of Baroda, Station Road, Baruch-392001 Bharuch Dist. Central Co-Op. Bank Ltd., JavaharBhavan, Opp. Shalimar Station Road, Bharuch-392001 Vs Bharuch District Central Co-Op. Bank Ltd. JavaharBhavan, Opp.Shalimar Cinema, Station Road, Bharuch- 392001 PAN No: AAABT 0073 E Addl. Commissioner of Income-tax, Bharuch Range, Bharuch Appellant Respondent ITA No.1530 & 1543/AHD/2016 (AY 2010-11) Assistant Commissioner of Income-tax, Circle-1, Bharuch, Above Bank of Baroda, Station Road, Baruch-392001 Bharuch District Central Co- Op. Bank Ltd. JavaharBhavan, Opp.Shalimar Cinema, Station Road, Bharuch- 392001 Vs Bharuch District Central Co-Op. Bank Ltd. JavaharBhavan, Opp.Shalimar Cinema, Station Road, Bharuch- 392001 Addl. Commissioner of Income-tax, Bharuch Range, Bharuch Appellant Respondent ITA No.1531 & 1544/AHD/2016 (AY 2011-12) Assistant Commissioner of Income-tax, Circle-1, Bharuch District Central Co-Op. Bank Ltd. Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 2 Bharuch, Above Bank of Baroda, Station Road, Baruch-392001 Bharuch Dist. Central Co-Op. Bank Ltd., JavaharBhavan, Opp. Shalimar Station Road, Bharuch-392001 Vs JavaharBhavan, Opp.ShalimarCinema, Station Road, Bharuch- 392001 Dy. Commissioner of Income-tax, Bharuch Range, Bharuch Appellant / Revenue Respondent / Assessee ITA No.362 & 641/SRT/2018 (AYs 2012-13 & 2014-15) Bharuch District Central Co- Op. Bank Ltd. JavaharBhavan, Opp.Shalimar Cinema, Station Road, Bharuch- 392001 PAN No: AAABT 0073 E Vs Assistant Commissioner of Income-tax, Circle-1, Bharuch, Above Bank of Baroda, Station Road, Baruch-392001 Appellant / Assessee Respondent / Revenue Assessee by ShriManish J Shah, Advocate Revenue by Shri H.P.Meena, CIT-DR& Shri J.K. Candani, Sr.DR Date of hearing 04.05.2022 Date of pronouncement 23.06.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This set of eight appeals/ cross appeals by assessee as well as Revenue are directed against the separate orders of ld. Commissioner of Income tax (Appeals)-3, Vadodara [for short to as “Ld.CIT(A)”] for assessment year-wise (AY) 2009-10 to Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 3 2012-13 & 2014-15. In all the appeals, the parties have has raised certain common grounds of appeal, certain facts in all years appeals are common except variation of additions on account of disallowance under section 36(1)(viia) and disallowance of diminution of Government securities, therefore, with the consent of parties all the appeals were clubbed, heard together and are decided by consolidated order to avoid the conflicting decisions. For appreciation of facts, the facts in assessment year 2009-10 are treated as lead case and the decision on the facts of this year would apply for all other years under appeal before us. The assessee in its appeal in ITA No.1542/AHD/2021 (AY2009-10) has raised the following grounds of appeal:- “1. The CIT(Appeals) erred in not allowing deduction of Rs.1,06,73,0092/- u/s 36(1)(viia) of the Income Tax Act, 1961 in respect of the provision made for bad and doubtful debts in accordance with the provision of the Gujarat Cooperative Societies Act,1961 read with the consequential provision in the bye-laws of the assessee.” 2. The revenue in its cross appeal for AY 2009-10 in ITA No. 1542/Ahd/2016 has raised following grounds of appeal; Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 4 “1. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting the disallowance of Rs.5,86,30,000/- made on account of diminution of value of securities, without appreciating the fact that this change in categorisation from HTM category to current category, is not reflected separately by the assessee in its Balance Sheet as on 31.03.2009. 1.1 The Ld. CIT(A) erred in allowing the claim of deduction on account of diminution of value of securities on the basis of Hon'ble Supreme Court's judgment in the case of United Commercial Bank vs CIT (SC) 240 ITR 355 without appreciating that the assessee's case is on distinct fact inasmuch as the assessee was not consistently following such method of claiming deduction on account of diminution of value of securities which renders the case of the assessee obiter dictum. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in directing the AO to allow deduction claimed by the assessee of Rs.7,50,00,000/- @ 10% of average advances made by rural branches of the assessee bank u/s 36(1)(viia) of the Act, holding that the assessee co-operative bank falls under the category of non-scheduled bank and eligible for above deduction without appreciating the Explanation (ia) below section 36(1)(viia) of the Act. 2.1 The Ld. CIT(A) failed in interpreting the statute in the entirety, section 36(1)(viia) enshrines the three categories of banks namely Schedule Bank, Non-Schedule Bank and Co-operative Bank for deduction of bad and doubtful debts @ 7.5% of the total income computing before making any deduction under this clause and chapter VIA, whereas for the provisions for deduction @10% of average advances made by the rural branches, the Explanation (ia) clearly defines rural branches of Schedule and Non-Schedule Banks. The assessee being a Co-operative Bank did not find its place in the Explanation (ia) below section 36(1)(viia) of the Act, rendering the findings of Ld. CIT(A) erroneous and misleading. 3. The appellant craves to add to, amend or alter the above grounds as may be deemed necessary.” Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 5 3. Brief facts of the case are that assessee is a District Co-Op Bank and as such engaged in the business of banking activities, having various branch including rural branch. The assessee while filing return of income offered taxable income of Rs. 1.639 Crore. In the computation of income the assessee claimed deduction of Rs. 5.863 Crore on account of diminution of value of Government securities and deduction of Rs. 8.567 Crore under section 36(1)(viia). During the scrutiny the assessee was asked to furnish justification on deduction under section 36(1)(viia). The assessing officer recorded that the assessee furnished following details:- “6.1 In the computation of income the assessee has claimed deduction of Rs.8,56,73,002/- U/s 36(1)(viia). The ae was asked to furnish the justification and working for the above claim. In response the assessee has submitted the calculation as under Gross Total income before claiming deduction U/s36(1)(viia) 10,20,63,748 7.5% 76,54,781 Avg. Aggregate Rural Advances 20,05,106,000 10% of above 20,05,10,600 Total deduction allowable 20,81,65,381 1) NPA provision debited to P&L a/c 75,000,000 2) Statutory bad debts provision made @15% of net profit 10,673,003 TOTAL 85,673,003 Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 6 Deduction u/s 36(1)(viia) claimed was restricted to 85,673,003 4. The Assessing Officer after referring the provision of section 36(1)(viia) noted that as per this provision, the deduction is allowable @ 7.5% of gross total income before claiming deduction under section 36(1)(viia) and 10% of aggregate average advance made by the rural branches of such bank computed in the prescribed manner. The deduction as computed would be subject to any provision for bad and doubtful debts made by the assessee during the year. The assessee is a co-operative bank and would not qualify as rural branch for the purpose of claiming deduction under section 36(1)(viia). Therefore, he issued show cause notice to explain as to why the claim should not be restricted only 7.5% of gross total income before claiming deduction under section 36(1)(viia) subject to any provision for bad and doubtful debts made by the assessee. The assessee filed its reply and contended that assessee is a non-scheduled bank and therefore 10% of advances of rural branches would be eligible for deduction under section 36(1)(viia). The contention of Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 7 assessee was not accepted by Assessing Officer by taking view that co-operative bank are not scheduled bank. The legislature has placed co-operative banks in a different category than Non-Scheduled Bank. The assessing officer held that the assessee has made provision of Rs.7.50 crores on account of bad and doubtful debts in the profit and loss account for the year. And in the computation of income it has claimed further amount of Rs.1.067 Crore on account of statutory bed debts provision made @ 15% of net profit. In the profit and loss account of the year, no such provision has been made. Therefore, the allowable deduction under such being calculated on the provision of bad and doubtful debts made by assessee in the profit and loss account at Rs.7.50 crores. The Assessing Officer further held that allowable deduction under section 36(1)(viia) would be Rs.76.54 lakhs being 7.5% of gross total income under section 36(1)(viia) subject to the provision of bad and doubtful debts made by assessee of Rs.7.50 crores. Thus, the allowable deduction of the assessee under section 36(1)(viia) is Rs.76.54 lakhs only. The assessee claimed deduction under section 36(1)(viia) of Rs.8.567 crores. Thus, Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 8 excess claimed of Rs.7.80 crores was disallowed and added back to the income of assessee. 5. The Assessing Officer further noted that in the computation of income, the assessee claimed deduction of Rs.5.863 crores on account of diminution of Government Securities. The assessee in the note attached with the computation of income, claimed such deduction on the basis of decision of Hon'ble Apex Court in the case of United Commercial Bank (UCO Bank) vs. CIT 240 ITR 355 (SC). The assessee was issued show cause notice to justify such deduction. The assessee filed its reply to the said show cause notice. In the reply, it was submitted that such deduction is claimed for the first time on the basis of judgment of Hon'ble Apex Court in UCO Bank (supra). It was further claimed that assessee-co-operative bank has shifted its investment in Government Securities held in “Held to Maturity” (for short to as “HTM”) category into current category for the first time vide Resolution dated 18.10.2008. The assessee also stated that as per Master Circular on Investment by Primary (Urban) Co-operative Banks, the banks may shift investment to / from “Held to Maturity” category Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 9 with the approval of Board of Directors once a year. Such shifting will normally be allowed at the beginning of the accounting year. The contention of assessee was not accepted by Assessing Officer by taking view that as per assessee’s submission shifting was made on 18.10.2008 which is not the beginning of accounting year. The bona fide of the entry has not been proved as much as the entry has been made in the middle of the year. The Assessing Officer further recorded that in the statement CCB-7 furnished during the course of assessment, it has been mentioned that the provision required to be made for diminution of value of investment on these securities was at Rs.586.28 lacs whereas provision made was Rs.590.96 lacs. In Annexure-2 to the balance-sheet at Sr. No.(A)(8), it is seen that investment depreciation reserve has increased to Rs.590.96 lacs as on 31.03.2009 from Rs.539.932 lacs as on 31.03.2008. Thus, depreciation (diminution of value) on investment during the year was Rs.51,17,500/- only. Therefore the maximum of claim for assessee during the year could have been Rs.51.17 lacs only, which is subject to allowability as per provision of the Act. Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 10 However, assessee has claimed Rs.586.3 lacs in the computation of income. The assessee-bank claimed the shifting of its investment in Govt. Securities held in HTM category into current category for the first time as per Resolution dated 18.10.2008 but as per the Annexure-10 Investment schedule to the audited accounts, no such categorization of investments have been made. The entire book value in Govt. Securities into Govt. of India (GOI), 2023 6.17%, Rs.25 crores in GOI 2019 6.05%, 6.05% and Rs.9.8 crores in GOI 2028 6.01% which is shown at Sr. No.(A) of the Annexure and part of such investment, on which the assessee claimed depreciation (diminution of value) in the computation. The assessee has not separately shown under HTM category as has been claimed during the assessment proceedings. If the assessee really transferred such securities to current category, the same should have been separately reflected in the balance- sheet as on 31.03.2009. The assessee has purchased securities after the decision of Hon'ble Apex Court in the case of United Commercial Bank (supra). Thus, the assessee should have claimed such deduction from the year of purchased and Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 11 the decision of Hon'ble Apex Court was delivered in favour of United Commercial Bank (supra) on 29 September 1999, the assessee purchased the securities in 2003 and 2004, which is after the date of judgment. The reasoning in the decision of Apex Court was that the assessee was consistently following system of accounting from last past 30 years, which has been accepted by department. The assessing officer held that the assessee has claimed such deduction for the first time though such decision of Hon'ble Apex Court in UCO Bank (supra) was delivered much before purchased of securities, thus, case law relied by assessee is not applicable in the facts of the present case. On the aforesaid reasoning, the Assessing Officer disallowed the diminution of value of Govt. securities of Rs.5.865 crores. 6. Aggrieved by the disallowance of diminution as well as on deduction under section 36(1)(viia), the assessee filed appeal before the Ld. CIT(A). On the disallowance of diminution of valueon investment of Rs.5.863 crores, the assessee made similar submission as submitted before the Assessing Officer. In addition to assessee furnished the details of securities; Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 12 consisting date of purchase, fixed value, book value, market value and difference in the following manner:- Particulars Date of purchase Face value Book value Market value Difference SLR-Current Category 6.17% GOI 2023 21.10.2003 2000.00 2025.60 1737.00 288.60 6.05% GOI 2019 16.10.2023 2500.00 2533.95 2319.75 214.20 601% GOI 2028 10.06.2004 500.00 490.03 406.55 83.48 Total 5000.00 5049.58 4463.30 586.28 7. The assessee further explained that as per Reserve Bank of India (for short as “RBI”) Master Circular dated 01.07.2008, the bank is clarified the entire portfolio (SLR as well as non- SLR investments) into 3 categories (i) Held to Maturity (HTM) (ii) Available for Sale (AFS) and (iii) Held for Trading (HFT). As per the guidelines investment made under the available for sale (AFS) category should be marked to market periodically. It was further submitted that assessee-bank is allowed to shift securities investment held to maturity category to AFS category with approval of Board of Directors, once a year as per RBI’s guidelines. The assessee during the year mentioned in the aforesaid table under the shifted HTM category to AFS category after proper approval of Board of Directors. The same Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 13 was furnished to the Assessing Officer as security held under HTM category was shifted to AFS category during the year, difference between the market value and book value as on 31.03.2009 was claimed as deduction in the computation of total income. The Assessing Officer rejected the claim on the ground that assessee made the claim for the first time the shifting of security from HTM to AFS category during the year. The assessee submitted that in earlier year, there was no such shifting; therefore there was no consequential effect. Even if shifting was grant in earlier year, the same cannot be viewed against the assessee as the assessee has carried the investment under HTM category. Similar claim was made in subsequent year on account of valuation of inventory held under AFS category. A claim cannot be disallowed just it was made for the first time only things is to be verified is whether the claim is genuine and within the four corners of law. The Assessing Officer held that if the assessee has regularly followed the method of value of investment under the available for sale category in that case, loss if allowable, would be only Rs.11.58 lacs. The Assessing Officer has not appreciated the Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 14 fact in a proper perspective. The entire GOI securities were held HTM category which was only in the current year the assessee transferred some of the securities to AFS category in fact assessee was followed method classification as per RBI’s Master Circular dated 01.07.2008. The securities was held under the available for sale category has been consistently valued at market value/rate and only the incremental profit/loss has been offered/claimed in the return of income. 8. On the submission of assessee, Ld. CIT(A) required remand report from the Assessing Officer. The Assessing Officer furnished remand report with letter dated 21.05.2015, wherein he has written that before deciding the matter, the decision of Ahmedabad Tribunal in the case of DCIT, Mehsana Circle Vs Co-operative Bank of Mehsana Ltd. (22 taxmann.com 71) (Ahmedabad-Trib) may be considered. 9. The remand report of Assessing Officer was forwarded to assessee for its comment. The assessee filed its comment / rejoinder vide submission dated 23.10.2016. In rejoinder / reply, the assessee reiterated that as per RBI’s Master Circular dated 01.07.2008 a bank is required to classify its entire Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 15 investment portfolio into 3 categories i.e. HTM, AFS and HFT. A bank is allowed to shift investment to / from HTM category with the approval of Board of Directors once in a year. Accordingly, the assessee shifted certain securities from HTM category to AFS category. The deduction was claimed on the basis of once the investment was categorized as AFS and there was to be marked to the market at the year-end, they became akin to current investment and therefore any diminution in the value as at the end of the year over the carrying cost as at the beginning of the year is available as deduction irrespective of its investments in books of account. The assessee also relied upon the decision of Hon'ble Apex Court in the case of United Commercial Bank (supra). The assessee also submitted that assessee consistently followed the method of valuing the security of AFS category as market value in all subsequent years and claiming loss or offering consequential gain. The assessee submitted that in assessment year 2010-11, there was further diminution and assessee claimed loss of Rs. 1.94 crores in assessment year 2010-11 there was depreciation and gain of Rs. 26.90 lakhs and was offered to tax, in assessment Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 16 year 2012-13 there was diminution and loss of Rs. 1.189 crores was claimed, in assessment year 2013-14 there was appreciation and gain of Rs.2.38 crores was offered to tax. In all aforesaid subsequent years, such loss was allowed and such gains were tax under section 143(3) of the Act. The return of income, computation of income for all the above referred years were furnished. The assessee also relied on the certain case law. On the objection of Assessing Officer that the assessee has changed the classification in the middle year and not in the beginning of the year. Therefore there is no bar to change the classification in the middle of year, which was changed only after Board of Directors’ approval in the middle of year. In the case of State Bank of Mysore vs. DCIT (2009) 33 SOT 7 (Bang- Trib.) re-classification or loss was calculated in the middle of the year and was allowed. It was submitted that in the remand report, Assessing Officer failed to comment any of the point raised in the written statement. Thus, the Assessing Officer has no defence under the disallowance. 10. The Ld. CIT(A) after considering the contents of assessment order, submission of assessee, remand report of Assessing Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 17 Officer and further rejoinder and explanation furnished by the assessee held that assessee is eligible for claim of deduction of Rs.5.863 crores on account of diminution of value on Government securities on the basis of judgment of Hon'ble Apex Court in the case of United Commercial Bank (supra). On the observation of assessing officer that such deduction is claimed for the first time on the basis of judgment, the ld CIT(A) noted that the assessee’s claim that shifting of securities was done for the first time during the year and there was no such shifting in earlier years and thus there was no consequential effect and that similar method was followed in subsequent assessment years and loss of Rs.1.18 crores was claimed in assessment year 2011-12 and was allowed. The Ld. CIT(A) held that there is no bar to change the classification in the middle of the year, the classification can be changed only on approval of Board of Directors’ approved such classification, as has been done in the middle of the year, then claim of loss on account of diminution of value in Govt. securities has no connection availability of deduction. Even if change would have been done in the beginning of the year it Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 18 could change on 31.03.2009 and the amount of claim would still remain same. On the objection of Assessing Officer that for allowance of claim of deduction is that has assessee regularly followed the method of diminution of value investment under AFS category. In that case, loss as available to assessee would be only Rs.51.17 lakhs for the year under fluctuation and not Rs.5.86 crores. The Ld. CIT(A) held that if the such theory of Assessing Officer is accepted then assessee would lose all the loss relating to earlier depreciation and which cannot be said to be just or fair if the assessee has claimed the loss on account of diminution of securities for the first time and genuineness and correctness of such losses are not doubtful then such case is the claim of loss is allowable. It was held that in subsequent year, the securities held under the AFS category have been consistently valued at market rate and only the incremental profit/loss has been offered/claimed in the return of income and which has been accepted by Assessing Officer. The loss as has been allowed in subsequent year. On the objection of Assessing Officer that in the balance- sheet there is no separate classification for HTM and ASF. The Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 19 Ld. CIT(A) held that there is no requirement of separate disclosure of HTM category and ASF category and as per the RBI’s Master Circular, the investment should continue to be classified in Govt. Securities, shares & Bond of PSU and others. The categorization in the case of assessee has been done separately as per RBI’s requirement on the basis of his aforesaid observation, Ld. CIT(A) held that assessee is eligible for claim of deduction under diminution in the value investment shifted from HTM category to ASF category. The Ld. CIT(A) also relied upon the decision of ITAT Mumbai Benches in the case of Yes Bank Ltd. Mumbai vs. DCIT in ITA No.5910/Mum/2012 for assessment year 2006-07. The Ld. CIT(A) called the certified working showing the premium amount and book value separately which was furnished by assessee in the following manner:- Provision for Bad & Doubtful Debts: Allowable Deduction u/s 36(1)(viia) AY 2009-10 Claim for change in category of investments i.e. from HTM to AFS Sr.No. Govt. Security Type Purchase price Market value as on 31.03.2009 Diminution in value of investments 58,630,000 1 6.17% Bond maturing in 2023 202,560,000 173,700,000 28,860,000 2 605% Bond maturing in 2019 253,400,000 231,975,000 21,425,000 Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 20 3 6.01 Bond maturing in 2028 49,000,000 40,655,000 8,345,000 Total (Rs) 504,960,000 446,330,000 58,630,000 Allowable claim for change in category of investments i.e. from HTM to AFS Sr.No. Govt. Security Type Purchase price Premium (discount) on acquisition Net value (excluding premium) Market value as on 31.03.2009 Diminution in value of investment 1 6.17% Bond maturing in 2023 202,560,000 2,560,000 2000,000,000 173,700,000 26,300,000 2 6.05% Bond maturing in 2019 253,400,000 3,400,000 250,000,000 231,975,000 18,025,000 3 6.01% Bond maturing in 2028 49,00,000 -1,,000,000 50,000,000 40,655,000 9,345,000 Total(Rs) 504,960,000 4,960,000 500,000,000 446,330,000 53,670,000 11. On perusal of the aforesaid details, the Ld. CIT(A) was of the view that premium amount of Rs.49.65 lacs as shown in the column No.4 is not eligible for deduction as the assessee is not claiming premium amount separately by amortizing the same over the period of respective investment. Accordingly, the Assessing Officer was directed to allow the deduction of diminution to the extent of Rs.5.36 crores. (i.e. Rs.5,86,30,000 – Rs.49,65,000) and accordingly granted substantial relief to the assessee. 12. On the disallowance of deduction under section 36(1)(viia), the assessee also reiterated similar submission as made before the Assessing Officer. The assessee also furnished working of Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 21 disallowance under section 36(1)(viia). The Assessing Officer restricted the allowance @ 7.5% of total income being Rs.76.54 lacs and not allowed Rs.8.56 crores by taking view that additional limit of 10% of aggregate average rural advance is not applicable as the assessee-bank is a co-operative bank and not or non-schedule bank. The assessee submitted that once the Assessing Officer allowed deduction of 7.5% of total income of deduction under section 36(1)(viia), then it is not a dispute that this provision is applicable to the assessee. The Assessing Officer admitted one limb of this section, so far as it relates to deduction to 7.5% of total income. The Assessing Officer admitted that ceiling of 7.5% is applicable to it in that case, other limb of section being 10% aggregate average rural advances is also applicable to the assessee, because the ‘word’ used in the section “and” “such” the definition of schedule bank in clause (ii) of explanation to said clause (viia) includes schedule co-operative bank within the definition. The intention of legislature is very clear to provide deduction on account of provision of bad and doubtful debt to the co-operative bank and for giving effect to the said object, the amendment was Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 22 made in section 36(1)(viia) so as to include co-operative bank. If the interpretation adopted by Assessing Officer is taken, it would be clearly against the legislative intent. Any interpretation which defeats the object with which the provision is to be avoided. The interpretation adopted by Assessing Officer limits the scope of deduction available to the co-operative bank which was never the intention of law maker. Thus, the assessee is eligible for deduction under section 36(1)(viia). The assessee also relied on certain case laws. 13. The ld CIT(A) after considering the submissions of the assessee noted that Cochin Tribunal in Kannur district Cooperative Bank Vs ACIT (2012) (136 ITD 102) held that under Banking Regulation Act, 1949, “The banking company” also includes “Cooperative Bank” and further held that as per definition of “Non-schedule Bank” given in the explanation under Section 37(1)(viia) a “banking company” as defined in Section (c) of Banking Regulation Act, which is not a scheduled bank is classified as Non-scheduled bank and it was held by Tribunal that consequently a cooperative bank would be classified as non-scheduled bank for the purpose of Section 36(1)(viia), Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 23 thus, cooperative bank will get deduction of 10% only of rural branch advance which are defined under that Act. The decision of Tribunal was confirmed by the Hon’bleKerala High Court in its decision dated 3 rd April, 2014 reported viz (365 ITR 343 Ker). The Hon’ble High Court held that there is no necessity to find out generic meaning of either urban or rural for the simple reason that explanation under Section 36(1)(viia) is self-defines what could be considered as a rural branch for the purpose of this Section. As per the High Court decision, the cooperative banks also falls under the category of non-scheduled bank for the purpose of this Section and held that authorities below were justified in opining that the benefit of 10% of aggregate of average advances is applicable to cooperative bank also, provided rural branches have advanced such amounts and such rural branches means a branch as explained under explanation (ia) as held by the High Court in Lord Krishna Bank 339 ITR 606 (Ker). 14. The ld. CIT(A) by following the decision of Tribunal held that assessee is eligible for deduction of 10% of aggregate average advances also as advanced by its rural branch. The assessee Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 24 has claimed total deduction of Rs. 8.567crores which also includes deduction of Rs. 1.067 crore being 15% statutory transferred to bad debts reserve. The ld. CIT(A) was of the view that amount of Rs. 1.067 crore would not qualify for deduction in view of decision of Ahmedabad Tribunal in assessee’s own case for A.Y. 2008-09. Thus, granted partial relief to the assessee to the extent of Rs.7.500 crores and upheld the disallowance to the extent of Rs. 1.067 crore. 15. Aggrieved by the order of ld CIT(A), both the parties have filed appeal raising the grievances as per their respective grounds of appeal. The assessee in its appeal has challenged the disallowance of deduction under Section 36(1)(viia) to the extent of Rs. 1.067 crore only being, 15% statutory transferred to bed debts reserve. On the other hand, the Revenue has challenged the order of ld. CIT(A) in granting relief on the deduction of diminution of Rs. 5.365 crore and allowing deduction under Section 36(1)(viia) to the extent of 7.500 crores. 16. We have heard the submissions of the learned Commissioner of Income- tax/ departmental representative (CIT-DR) for the Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 25 revenue and the learned authorised representative (ld AR) for the assessee and have gone through the orders of the lower authorities carefully. Ground No. 1 of the revenue’s appeal relates to disallowance of diminution of value of Govt. Securities. The ld. AR of the assessee submits that during the financial year, the assessee for the first time shifted its investment in certain government securities from HTM to AFS category. The action of shifting of such securities form one category to other was approved by the Board vide resolution dated 18/10/2008. Consequently, these securities are valued at market price at the year-end for the A.Y. 2009-10 as per RBI Circular and accepted method of accounting. Accordingly, the assessee claimed deduction of diminution in the value of these securities from its book value to its market price as on 31/03/2009. There is no dispute with regard to valuation and the amount of diminution. The only issue is (i) whether change in valuation as a result of reclassification/shifting is allowable and/or (ii) whether only change in market price during the current year is allowable or entire difference between book value and market price as on 31/03/2009 is allowable. The ld. Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 26 AR of the assessee submits that as per RBI master circular, banks are required to classify their investments into three categories and can reclassify or shift classifications with the approval of the board of directors. The provisions of circular, although, recommended such reclassification or shifting at the beginning of year, however, it does not prohibit in the middle of the year. The ld AR for the assessee submits that on careful reading of entire provision makes the intention clear that such recommendation is given to avoid further reclassification/ shifting i.e. more than once in a year to maintain stability but does not prohibit it to be done in the middle of the year. Such intention is clear from the use of words “normally be allowed at the beginning of the year”. Reclassification/shifting if done even at the beginning of the year would not change the amount of diminution in the values of securities as on 31/03/2009. The deduction was claimed on the basis of once the investment was categorized as AFS and there was to be marked to the market at the year-end, they became akin to current investment and therefore any diminution in the value as at the end of the year over the carrying cost as at the Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 27 beginning of the year is available as deduction irrespective of its investments in books of account. The assessee also relied upon the decision of Hon'ble Apex Court in the case of United Commercial Bank (supra). 17. The ld AR for the assessee submits that assessee consistently followed the method of valuing the security of AFS category as market value in all subsequent years and claiming loss or offering consequential gain. The assessee submitted that in assessment year 2010-11, there was further diminution and assessee claimed loss of Rs. 1.94 crores in assessment year 2010-11 there was depreciation and gain of Rs. 26.90 lakhs and was offered to tax, in assessment year 2012-13 there was diminution and loss of Rs. 1.189 crores was claimed, in assessment year 2013-14 there was appreciation and gain of Rs.2.38 crores was offered to tax. In all aforesaid subsequent years, such loss was allowed and such gains were tax under section 143(3) of the Act. The ld AR for the assessee submits that the return of income computation under treatment was furnished before the lower authorities. To support his submission, the ld. AR for the assessee relied upon the Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 28 decision of Bangalore Tribunal in the case of State Bank of Mysore vs. DCIT (2009) 33 SOT 7 (Bang- Trib), DCIT Vs Karur Vysya Bank (2005) 273 ITR 510 ( Madras), CIT Vs Nedungadi Bank Ltd (2004) 264 ITR 454 (Kerala), Karnataka bank Vs ACIT (2013) 356 ITR 549 (Karnataka) and United Commercial Bank Vs CIT ( 1999)(240 ITR 355-SC). 18. On the other hand, the ld. CIT-DR for the revenue has vehemently supported the order of the Assessing Officer. 19. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities. The Assessing Officer disallowed the deduction of diminution of value from government securities by taking a view that as per RBI master circular dated 01/07/2008 shifting of investment from HTM category to AFS category normally be allowed at the beginning of the year while the assessee has shifted in the middle of year. The assessee has not given an extraordinary circumstances for such shifting. Further the categorisation of investment is not separately shown in the balance sheet. The ld. CIT(A) allowed the relied to the assessee by taking a view that the assessee claimed deduction of Rs. 5.863 crore on Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 29 account of diminution of valuation on government securities on the basis of judgment of Hon'ble Apex Court in the case of United Commercial Bank (supra). It was explained before Assessing Officer that such deduction is claimed for the first time on the basis of judgment. As per Assessing Officer, the depreciation on investment during the year was only Rs.51.17 lakhs on the basis of his observation that depreciation reserved has increased to Rs.5.90 crores as on 31.03.2009 from Rs.5.39 crores as on 31.03.2008. Thus, as per Assessing Officer, the maximum claim during the year could have been Rs.51.17 lacs only. The Assessing Officer held that if the assessee really got such approval of board of director from to HTM category to current category, the same should have been shown in separate reflection in the balance-sheet as on31.03.2009. However, no such categorization has been made and that the judgment of Hon'ble Apex Court in the case of United Commercial Bank (supra) was delivered on 29 th September 1999, the assessee purchased these Govt. securities in the year 2003 after the pronouncement of the aforesaid judgment (supra) and that assessee should have Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 30 claimed such deduction from the year of purchase. However, assessee claimed that they have shifted its investment from HTM category to AFS category during the year and amount of Rs.5.86 crores represented diminution of value of Govt. securities as on 31.03.2009. The assessee’s claim that shifting of securities was done for the first time during the year and there was no such shifting in earlier years and thus there was no consequential effect and that similar method was followed in subsequent assessment years and loss of Rs.1.18 crores was claimed in assessment year 2011-12 and was allowed. As recorded above, before ld CIT(A) the assessee retreated the similar submissions and also relied on certain case laws. The Ld. CIT(A) held that there is no bar to change the classification in the middle of the year, the classification can be changed only on approval of ‘Board of Directors’ approved such classification, as has been done in the middle of the year, then claim of loss on account of diminution of value in Govt. securities has no connection availability of deduction. Even if change would have been done in the beginning of the year it could change on 31.03.2009 and the amount of claim would Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 31 still remain same. On the objection of Assessing Officer that for allowance of claim of deduction is that has assessee regularly followed the method of diminution of value investment under AFS category. The ld CIT(A) held that in case loss as available to assessee would be only Rs.51.17 lakhs for the year under fluctuation and not Rs.5.86 crores and if such theory of Assessing Officer is accepted then assessee would lose all the loss relating to earlier depreciation and which cannot be said to be just or fair, if the assessee has claimed the loss on account of diminution of securities for the first time and genuineness and correctness of such losses are not doubtful then such case is the claim of loss is allowable. 20. The ld CIT(A) on appreciation of facts find that in subsequent year, the securities held under the AFS category have been consistently valued at market rate and only the incremental profit/loss has been offered/claimed in the return of income and which has been accepted by Assessing Officer. The loss as has been allowed in subsequent year on the objection of Assessing Officer that in the balance-sheet there is no separate classification for HTM and ASF. The Ld. CIT(A) held Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 32 that there is no requirement of separate disclosure of HTM category and ASF category and as per the RBI’s Master Circular, the investment should continue to be classified in Govt. Securities, shares & Bond of PSU and others. The categorization in the case of assessee has been done separately as per RBI’s requirement and held that assessee is eligible for claim of deduction under diminution in the value investment shifted from HTM category to ASF category. The Ld. CIT(A) also relied upon the decision of ITAT Mumbai Benches in the case of Yes Bank Ltd. Mumbai vs. DCIT in ITA No.5910/Mum/2012 for assessment year 2006-07. 21. We find that in State Bank of Mysore Vs DCIT (supra), the coordinate bench of tribunal on similar ground of appeal, by following the Apex Court order in United Commercial Bank Vs CIT(supra) passed the following order; “7.2 We have considered the rival submissions. We have also perused the RBI Master Circular and other case laws on which the Sr. Counsel has placed strong reliance. The Hon'ble ITAT, Bangalore Bench 'B' in ITA No. 253/Bang./2007 dated 24-1-2008 in the case ofAsstt. CIT (LTU) v. Vijaya Bank had an occasion to deal with a similar issue. After considering the rival submissions, analyzing the RBI Guidelines Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 33 and also extensively quoting various judicial pronouncements on which both the parties have placed their reliance, the Hon'ble Tribunal has observed thus— "15. From the above, it is clear that the assessee is treating the securities held under the category 'held for maturity' as stock-in-trade. If there is appreciation in the market value as compared to the market value at the opening of the year and such appreciation is also accounted for. It is not claiming depreciation only for the years, when the value has gone down. If that had been the case, the assessee would not have accounted for any appreciation in 3rd, 4th and 5th year. The method by which the assessee bank is valuing securities is in accordance with the accounting principles by treating such securities as stock-in-trade. Moreover, the revenue itself is treating the profit on maturity of such security as business income and, therefore, such securities cannot be treated as capital assets. 16. Special Bench, Delhi in the case of New India Insurance v. ACIT [2007] 18 SOT 51 = (2007-TIOL-389-ITAT-DEL-SB) had an occasion to consider the binding nature of RBI Guidelines. The Special Bench held that RBI Guidelines in respect of provision for NPA are not binding in the computation of income under the Income-tax Act. Income is to be assessed as per the provision of the Income-tax Act. The Madras High Court in the case of Tamilnadu Power & Infrastructure Development Corporation Ltd. v. CIT 286 ITR 491 - (2006-TIOL- 112-HC-MAD-IT) held that provision for non-performing the assets debited to P & L account is not allowable, as directive of Reserve Bank of India may not override statutory provision. Once the Revenue is accepting that profit arising on the maturity of investment is business income, then it cannot take the stand that it is not stock-in-trade. During the course of proceedings before us, the learned AR has filed the assessment order in the case of the assessee for the asst. years 2000-01 to 2002-03. The depreciation claimed in all these asst. years has not been disallowed .Thus, the revenue is consistently accepting that depreciation is allowable. This Bench in the following cases has allowed such depreciation on the valuation of the securities held by the Bank: (1) Karnataka Bank Ltd. v. Jt. CIT ITA No. 50/BANG/97 dated 27th July, 2003. (2) INGVysya Bank Ltd. v. Dy. CIT [2006] 6 SOT 606 (Bang.). Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 34 17. Considering the above discussion, it is held that the assessee is entitled to value all the investment at cost prices or market value whichever is lower by treating such investment as stock-in-trade. . . ." 7.3 The Hon'ble Tribunal in IT Appeal No. 112/Bang./2008, dated 3-12-2008 in the case of Corporation Bank v. Asstt. CIT (2009-TIOL-75-ITAT-BANG), by following the decision of the Hon'ble Tribunal in the case of Asstt. CIT v.Vijaya Bank (supra), has held that— "16. Considering the facts and circumstances of the case before us and respectfully following the decision of the Hon'ble Supreme Court in the case of United Commercial Bank v. CIT referred supra, it is held that the assessee bank is entitled to value all the investment at cost prices or market value whichever is lower by treating such stock-in-trade........." 7.4 In RBI's Master Circular, under the caption 2 Classification, it has been mentioned thus— "(i) The entire investment portfolio of the banks (including SLR securities and non-SLR securities) should be classified under three categories viz., 'Held to maturity', 'Available for Sale' and 'Held for Trading'. However, in the balance sheet, the investments will continue to be disclosed as per the existing six classifications viz., (a) Government securities, (b) other approved securities, (c) shares, (d) debentures and bonds, (e) subsidiaries/joint ventures, and (f) other (CP Mutual Fund Units, etc.). (ii) Banks should decide the category of the investment at the time of acquisition and the decision should be recorded on the investment proposals. 2.3 Shifting among categories : (i) Banks may shift investments to/from Held to maturity category with the approval of the Board of Directors once a year. Such shifting will normally be allowed at the beginning of the accounting year. No further shifting to/from this category will be allowed during the remaining part of that accounting year." 7.5 In view of the clear cut guidelines of the RBI and respectfully following the findings of the Hon'ble Tribunal referred supra, the claim of the assessee towards provision of depreciation of Rs. 127,21,17,913 on account of transfer of securities from AFS Category to HTM Category is allowed. It is ordered accordingly.” Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 35 22. Considering the aforesaid factual and legal discussions, we do not find any infirmity or illegality in the order passed by ld CIT(A), which we affirm. In the result, ground No. 1 of appeal raised by the revenue is dismissed. 23. Ground No. 2 of the appeal relates to deleting the disallowance of deduction of Rs. 7.500 crores provision for bad and doubtful debts under Section 36(1)(viia) against the advances of rural branches. The ld. AR of the assessee submits that the assessing officer not allowed deduction section 36(1)(viia) to the assessee by taking view that the definition of rural branch in explanation (ia) does not cover cooperative banks. The legislature has placed cooperative bank as a different category than non-scheduled bank. Accordingly, deduction of provision for bad and doubtful debts with respect to advance of rural branch is not allowable to the assessee-bank. The ld CIT(A) allowed relief to the assessee to the extent of Rs. 7.500 Crore by following the order of Tribunal in Kannur District Co-operative bank (supra) and held assessee is eligible for deduction of 10% of aggregate average advances also as advanced by its rural branch. The ld AR Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 36 submits that assessee has claimed total deduction of Rs. 8.567crores which also includes deduction of Rs. 1.067 crore being 15% statutory transferred to bad debts reserve. The ld. CIT(A) was of the view that amount of Rs. 1.067 crore would not qualify for deduction in view of decision of Ahmedabad Tribunal in assessee’s own case for A.Y. 2008-09. Thus, granted partial relief to the assessee to the extent of Rs.7.500 crores and upheld the disallowance to the extent of Rs. 1.067 crore. The disallowance of Rs. 1.067 Crore is the subject matter of assessee’s appeal. The ld AR for the assessee further submits that it is settled law now that as per Explanation to section 36(1)(viia) also include ‘rural branch’ of co-operative bank, therefore, the benefits of 10% of aggregate of rural branches advance to be allowed to the assessee. 24. To support his submission, the ld. AR of the assessee relied on the decision of Kannur District Cooperative Bank Vs CIT 365 ITR 343 (Ker), Ernakulum District Co-operative Bank Vs CIT (2020) 423 ITR 308 (Ker). 25. On the other hand the ld CIT-DR for the revenue supported the order of the assessing officer. The ld CIT-DR for the Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 37 revenue further submits that this issue is against the assessee by the decision of Indore Bench in Jhabua Dhar Kshatriya Gramin Bank in ITA No. 106 to 114/Ind/2017 dated 06/09/2018 which in turn relied on order in Narmada Malwa Gramin Bank Vs ACIT in MA No. 104/Ind/2012 arising out of ITA No. 162/Ind/2011 dated 16/04/2013. 26. We have considered the rival submissions of the parties and have gone through the orders of the authorities below carefully. The Assessing Officer disallowed the claim of deduction under Section 36(1)(viia) by taking a view that the definition of ‘rural branch’ in explanation (ia) does not cover co-operative banks. The legislature has placed cooperative bank as a different category than non-scheduled bank. Accordingly, deduction of provision for bad and doubtful debts with respect to advance of rural branch is not allowable to the assessee-bank. As recorded above, before the ld. CIT(A), the assessee filed detailed written submission. We find that the ld. CIT(A) on appreciation of submission of assessee and considering the decision of Kannur District Co-operative Bank (supra) held that under Banking Regulation Act, 1949, “The Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 38 banking company” also includes “Cooperative Bank” and further held that as per definition of “Non-scheduled Bank” given in the explanation under Section 37(1)(viia) a “banking company” as defined in Section (c) of Banking Regulation Act, which is not a scheduled bank is classified as Non-scheduled bank and it was held by Tribunal that consequently a cooperative bank would be classified as non-scheduled bank for the purpose of Section 36(1)(viia), thus, cooperative bank will get deduction of 10% only of rural branch advance which are defined under that Act. The decision of Tribunal was confirmed by the Hon’ble Kerala High Court in its decision dated 3 rd April, 2014 reported viz (365 ITR 343 Ker). The Hon’ble High Court held that there is no necessity to find out generic meaning of either urban or rural for the simple reason that explanation under Section 36(1)(viia) is self-defines what could be considered as a rural branch for the purpose of this Section. As per the High Court decision, the cooperative banks also falls under the category of non-scheduled bank for the purpose of this Section and held that authorities below were justified in opining that the benefit of 10% of aggregate of Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 39 average advances is applicable to cooperative bank also, provided rural branches have advanced such amounts and such rural branches means a branch as explained under explanation (ia) as held by the High Court in Lord Krishna Bank 339 ITR 606. The ld. CIT(A) by following the decision of Tribunal held that assessee is eligible for deduction of 10% of aggregate average advances also as advanced by its rural branch. 27. Before us, the ld. AR of the assessee also vehemently submitted that it is a settled position in the law that explanation to Section 36(1)(viia) includes ‘rural branch’ of ‘co- operative banks’ as per the decision of Hon’ble Kerala High Court High. We find merit in the submission of ld. AR of the assessee. We find that Section 36(1)(viia) was amended vide Finance Act, 2007 and after amendment the benefit of deduction under Section 36(1)(viia) which was available to a scheduled and non-scheduled bank is sought to be extended to a co-operative banks other than primary agricultural credit society or a primary cooperative agriculture and rural development bank w.e.f. 01/04/2007. Further rest while Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 40 deduction available to such eligible cooperative banks under Section 80P stood withdrawn by Finance Act, 2006 w.e.f. 01/04/2007. Thus, there was an amendment by way of Finance Act, 2007 to Section 36(1)(viia) w.e.f 01/04/2007 wherein cooperative bank other than primary agricultural credit society or a primary cooperative agriculture and rural development bank, were brought under the provision of Section 36(1)(viia) for claiming deduction in respect of provisions made for bad and doubtful debts. Thus, in view of aforesaid factual discussion and the legal view taken by the Kerela High Court in Kannur District Cooperative Bank (supra), we find that the order of ld. CIT(A) is based on proper appreciation of amended provision of Section 36(1)(viia) which we affirm. 28. So far as objection of ld. CIT-DR and his reliance on the decision of Indore Bench in Jhabua Dhar Khatriya Gramin bank (supra) is concerned, we find that the ratio of finding of Tribunal is not applicable on the facts of the present case. In the said case the Tribunal relied on the earlier case law in Narmada Malwa Gramin Bank Vs ACIT (ITA No. Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 41 162/Ind/2011 dated 16.04.2013), wherein the issue was restored to the file of assessing officer to re-computing the claim of deduction to the extent of amount written off in the books of accounts. Thus, the finding in the said decision is not at all applicable on the facts of his case. In the result, the ground No. 2 of appeal raised by the Revenue is dismissed. 29. In the result, the appeal of the revenue is dismissed. 30. Now adverting to the sole ground of appeal raised by assessee against sustaining the disallowance to the extent of Rs. 1.067 crore under Section 36(1)(viia). The ld. AR of the assessee submits that assessee claimed deduction of statutory bad debts reserve created during the year at the rate of 15% of the net profit as per Gujarat State Cooperative Societies Act as provision for bad and doubtful debts. This creation of the reserve is by way of appropriation of net profit. The Assessing Officer disallowed and ld. CIT(A) confirmed. The ld. CIT(A) also held that the issues decided against the assessee by Ahmedabad Tribunal in A.Y. 2008-09, reported viz [36 taxmann.com 517 (Ahd.-Trib)]. The ld. AR of the assessee submits that transfer to statutory bad debts reserve appears Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 42 in the annual report as a proposed appropriation subject to approval in general body meeting of the members and as such disclosure and treatment is as per norms and practice followed by all cooperative banks as governed by the State Cooperative Act. Thus, such provision being an actual appropriation of profit shall be allowed as deduction. The ld. AR for the assessee submits that nomenclature or treatment in the books of account is not decisive or conclusive for a particular deduction otherwise allowable under the law, especially when the amount is in fact reduced from profits, even though as appropriation in the books of account as held by the Hon’ble Supreme Court in Kedarnath Jute Manufacturing Company (1971) 82 ITR 363 (SC). The ld. AR for the assessee further submits that similar deduction was allowed by the Assessing Officer in assessment year 2008-09 after considering the merits and noting in the assessment order. The order was challenged before CIT(A) and further to Tribunal, no enhancement was made by ld CIT(A). The ld. AR submits perusal of grounds of appeal in para 2 of the facts in the order of Tribunal for AY 2008-09, it can be clearly seen that the Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 43 issue of appropriation of 15% to statutory debts reserve amounting to Rs. 34,77,495/- was not the issue in the appeal before the Tribunal, rather the issue was relating to other provisions amounting to Rs. 6.00 crores out of provision for bad and doubtful debts of Rs. 7.34 crores. Therefore, the deduction is disallowed/sustained by the ld. CIT(A) on factually wrong basis that the issue is covered against the assessee in A.Y. 2008-09. The ld. AR submits that the issue was not even enhanced by the ld. CIT(A) in his order. Thus, on the principle of consistency, this claim is to be allowed. Since the parties have allowed the position to be sustained by not challenging the order on that issue. To support his submission, the ld. AR relied on the decision of Hon’ble Supreme Court in Radhasoami Satsang Vs CIT (1992) 193 ITR 321 (SC). 31. On the other hand, the ld. CIT-DR for the Revenue supported the order of ld. CIT(A). The ld CIT-DR for the revenue further submits that the assessing officer clearly held that no provision in the profit and loss account has been made by the assessee. Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 44 32. We have considered the rival submissions of both the parties and have gone through the orders of the authorities below. The Assessing Officer disallowed the claim of deduction under Section 36(1)(viia) by taking a view that the definition of rural branch in explanation (ia) does not cover cooperative banks. It was recorded by assessing officer while disallowing such claim that the legislature has placed cooperative bank as a different category than non-scheduled bank. Accordingly, deduction of provision for bad and doubtful debts with respect to advance of rural branch is not allowable to the assessee-bank. As recorded in the facts of revenue’s appeal the assessing officer disallowed the whole of claim of deduction of section 36(1)(viia). However, on appeal the ld CIT(A) allowed part relief to the assessee to the extent of Rs. 7.500 Crore, and remaining of Rs. 1.067 Crore was upheld by ld CIT(A) by taking view that no such deduction is claimed in the Profit and loss account but it is claimed in the computation of income and further similar issue was decided against the assessee in earlier assessment year i.e. 2008-09. Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 45 33. Before us, the ld AR for the assessee made two fold submissions, firstly, the assessee claimed deduction of statutory bad debts reserve created during the year at the rate of 15% of the net profit as per Gujarat State Co-operative Act as provision for bad and doubtful debts and this creation of the reserve is by way of appropriation of net profit. Secondly, the ld. CIT(A) also held that the issues decided against the assessee by Ahmedabad Tribunal in A.Y. 2008-09, which is factually wrong as per the contention of ld AR for the assessee. We shall take second contention first. For appreciation second contention of ld AR of the assessee, we perused the copy of assessment order dated 31.12.2010 passed under section 143(3), order of ld CIT(A) and order or Tribunal for AY 2008- 09, and find that issue of appropriation of 15% of statutory debts was not the subject matter in appeal before Tribunal, rather it was allowed by the assessing officer while passing the assessment order itself, though, the assessment order was subject to appeal before ld CIT(A), and no enhancement was made on this issue. Further the assessment order is neither Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 46 re-opened nor revised. Hence, we find merit in the submissions of the ld AR for the assessee. 34. Now adverting to the first contention of the ld AR for the assessee that the assessee claimed deduction of statutory bad debts reserve created during the year at the rate of 15% of the net profit as per Section 67A of Gujarat State Co-operative Act as provision for bad and doubtful debts and this creation of the reserve is by way of appropriation of net profit. And it is the contention of ld. AR of the assessee that transfer to statutory bad debts reserve were subject to approval in general body meeting of the members and as such disclosure and treatment is as per norms and practice followed by all cooperative banks as governed by the State Cooperative Act. We find that merit in the submissions of the ld AR for the assessee and find that as per section 67A of Gujarat Co- operative Society Act, every society, working in the State of Gujarat, which earned profit from its transactions, shall maintain a bad debts reserve funds. As per sub-section (2) of section 67A, every year, the society shall carry at least 15% of the net profit to the debts reserve funds. All such funds shall Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 47 be certified by the certified auditors and the expenses incurred in recovering the same shall first be written off as per section 67A(3). It is settled position under law that co-operative banks are primarily a co-operative society. We also noted that the financial statement of the assessee is not only subject to the statutory audit but also subject to the approval of the Registrar of Co-operative society. Thus, considering the aforesaid factual and in view of the statutory provision in the State Co-operative Act, the assessee is also allowed deduction of Rs. 1.067 Crore, which in line with the provisions of section 67A of Gujarat Co-operative Society Act. 35. So far as objection of assessing officer is that in the profit and loss accounts of the year no such provision is made by the assessee, is concerned, we find that Hon’ble Supreme Court in Kedar Nath Jute Manufacturing Company Vs CIT (supra) held that nomenclature or treatment in the books of accounts in not decisive or conclusive for a particular deduction otherwise allowable under the law. In the result, the ground of appeal raised by the assessee is allowed. 36. In the result, the appeal of the assessee is allowed. Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 48 ITA No.1543/Ahd/2016 for AY 2010-11 by assessee. 37. The assessee has raised following grounds of appeal. “1. The C.I.T.(Appeals) erred in not allowing deduction of Rs. 1,93,84,396/- u/s. 36(1)(viia) of the Income Tax Act, 1961in respect of the provision made for bad and doubtful debts in accordance with the provision of the Gujarat Cooperative Societies Act, 1961 read with the consequential provision in the bye-laws of the assessee.” 38. We find that the assessee has raised similar grounds of appeal as raised in appeal for AY 2009-10, which we have allowed, therefore following the principle pf consistency the grounds of appeal of assessee for AY 2010-11 is also allowed with similar observation. 39. In the result, the appeal of the assessee for AY 2010-11 is allowed. ITA No.1530/Ahd/2016 for AY 2010-11 by revenue. 40. The revenue has raised following grounds of appeal. “1. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in directing the AO to allow deduction claimed by the assessee of Rs.8,00,00,000/- @ 10% of average advances made by rural branches of the assessee bank u/s 36(1)(viia) of the Act, holding that the assessee co-operative bank falls under the category of non-scheduled bank and eligible for above deduction without appreciating the Explanation (ia) below section 36(1)(viia) of the Act. 2. The Ld. CIT(A) failed in interpreting the statute in the entirety, section 36(1)(viia) enshrines the three categories of banks namely Schedule Bank, Non-Schedule Bank and Co-operative Bank for deduction of bad and doubtful debts @ 7.5% of Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 49 the total income computing before making any deduction under this clause and chapter VIA, whereas for the provisions for deduction @10% of average advances made by the rural branches, the Explanation (ia) clearly defines rural branches of Schedule and Non-Schedule Banks. The assessee being a Co- operative Bank did not find its place in the Explanation (ia) below section 36(1)(viia) of the Act, rendering the findings of Ld. CIT(A) erroneous and misleading. 41. We find that the revenue has raised similar grounds of appeal as raised in appeal for AY 2009-10, which we have dismissed by affirming the order of ld CIT(A), therefore following the principle of consistency the grounds of appeal of revenue for AY 2010-11 is also dismissed with similar observation. 42. In the result, the appeal of the revenue is dismissed. ITA No. 1544/Ahd/2016 for AY 2011-12 by assessee.– 43. The assessee has raised following grounds of appeal. “1. The C.I.T.(Appeals) erred in not allowing deduction of Rs. 1,70,03,421/- u/s. 36(1)(viia) of the Income Tax Act, 1961in respect of the provision made for bad and doubtful debts in accordance with the provision of the Gujarat Cooperative Societies Act, 1961 read with the consequential provision in the bye-laws of the assessee.” 44. We find that the assessee has raised similar grounds of appeal as raised in appeal for AY 2009-10, which we have allowed, therefore following the principle of consistency the grounds of Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 50 appeal of assessee for AY 2011-12 is also allowed with similar observation. 45. In the result, the appeal of the assessee for AY 2011-12 is allowed. ITA No.1531/Ahd/2016 for AY 2011-12 by revenue 46. The revenue has raised following grounds of appeal. “1. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in directing the AO to allow deduction claimed by the assessee of Rs.7,25,00,000/- @ 10% of average advances made by rural branches of the assessee bank u/s 36(1)(viia) of the Act, holding that the assessee co-operative bank falls under the category of non-scheduled bank and eligible for above deduction without appreciating the Explanation (ia) below section 36(1)(viia) of the Act. 2. The Ld. CIT(A) failed in interpreting the statute in the entirety, section 36(1)(viia) enshrines the three categories of banks namely Schedule Bank, Non-Schedule Bank and Co-operative Bank for deduction of bad and doubtful debts @ 7.5% of the total income computing before making any deduction under this clause and chapter VIA, whereas for the provisions for deduction @10% of average advances made by the rural branches, the Explanation (ia) clearly defines rural branches of Schedule and Non-Schedule Banks. The assessee being a Co- operative Bank did not find its place in the Explanation (ia) below section 36(1)(viia) of the Act, rendering the findings of Ld. CIT(A) erroneous and misleading. 3. The appellant craves to add to, amend or alter the above grounds as may be deemed necessary.” 47. We find that the revenue has raised similar grounds of appeal as raised in appeal for AY 2009-10, which we have dismissed Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 51 by affirming the order of ld CIT(A), therefore following the principle of consistency the grounds of appeal of revenue for AY 2011-12 is also dismissed with similar observation. 48. In the result, the appeal of the revenue is dismissed.- ITA No. 362/SRT/2018 for AY 2012-13 by assessee. 49. The assessee has raised following grounds of appeal– “1. On the Facts and in the circumstances of the Appellant's case and in law, the Honourable Commissioner of Income Tax (Appeal)-3, Vadodara has erred in confirming disallowance made by Ld.AO of an amount of Rs. 1,70,21,853/- towards provision for bad and doubtful debts appropriated from the profits of the year under appeal as per RBI guidelines towards Statutory Bad Debt Reserve Provision i.e. 15 percent of profits ,on the ground that no such provision has been made in the profit and loss account for the year under the appeal. your Appellant submits that total claim made by appellant is of Rs.4,05,21,853/-of which provision of Rs. 2,35,00,000/- have been made by the appellant in profit and loss account while balance Rs. 1,70,21,853/- have been apportioned by the appellant from profits of the year under appeal towards Statutory Bad Debts Reserve i.e. 15% of net profits as per RBI guidelines. The same appears in the financial statements as a proposed appropriation requiring approval in General Meeting of Members. As per the norms and procedures applicable to co-operative banks and as per the practice followed by all the Co-Operative banks the appropriation is disclosed in the audited financial statements and the director's report which are approved by the General Meeting. Thus, the amount being an actual appropriation out of profits and it is required to be considered for allowing deduction u/s36(1)(viia) of the Act.” Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 52 50. We find that the assessee has raised similar grounds of appeal as raised in appeal for AY 2009-10, which we have allowed, therefore following the principle of consistency the grounds of appeal raised by assessee for AY 201213 is also allowed with similar observation. 51. In the result, the appeal of the assessee for AY 2012-13 is allowed. ITA No.641/SRT/2018 by assessee for AY 2014-15. “1. On the Facts and in the circumstances of the Appellant's case and in law, the Honorable Commissioner of Income Tax (Appeal)-3, Vadodara has erred in confirming disallowance made by Ld.AO of an amount of Rs. 1,76,35,183/- towards provision for bad and doubtful debts appropriated from the profits of the year under appeal as per RBI guidelines towards Statutory Bad Debt Reserve Provision i.e.15 percent of profits ,on the ground that no such provision has been made in the profit and loss account for the year under the appeal. Your Appellant submits that total claim made by appellant is of Rs.1,76,35,183/- which has been apportioned by the appellant from profit of the year under appeal towards Statutory Bad Debts Reserve i.e. 15% of net profits as per RBI guidelines. The same appears in the financial statements as a proposed appropriation requiring approval in General Meeting of Members. As per the norms and procedures applicable to co-operative banks and as per the practice followed by all the Co-Operative banks the appropriation is disclosed in the audited financial statements and the director's report which are approved by the General Meeting. Bharuch Dist. Central Co-Op.Bank Ltd. AYs 12-13, 14-15, 09-10-11-12 53 Thus, the amount being an actual appropriation out of profits and it is required to be considered for allowing deduction u/s 36(1)(viia) of the Act.” 52. We find that the assessee has raised similar grounds of appeal as raised in appeal for AY 2009-10, which we have allowed, therefore following the principle of consistency the grounds of appeal raised by assessee for AY 2014-15 is also allowed with similar observation. 53. In the result, the appeal of the assessee for AY 2014-15 is allowed. 54. A copy of the instant common order be placed in the respective case file(s). Order pronounced in the open court on 23/06/2022 result was also placed on the Notice Board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 23/06/2022 Dkp. Out Sourcing P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order Sr. Private Secretary /Assistant Registrar, ITAT, Surat