M/s Haryana State Co-operative Apex Bank Ltd., Chandigarh V. DCIT, Panchkula

ITA 155/CHANDI/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4915 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 14-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 29-02-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GULSHAN RAJ
• Assessee Lawyers: SAHIL CHADHA
• Keywords: Capital asset; Capital expenditure
• Section: 37(1); 37; 15; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NOS. 1157 & 1158/CHD/2014 ASSESSMENT YEARS : 2010-11 & 2011-12 THE HARYANA STATE CO-OPERATIVE VS. THE DCIT, APEX BANK LTD., PANCHKULA CIRCLE, SCO 78-80(BANK SQUARE), SEC.17, PANCHKULA CHANDIGARH PAN NO. AAAJH0029E & ITA NOS. 154 TO 156/CHD/2016 ASSESSMENT YEARS : 2008-09, 2009-10 & 2012-13 THE HARYANA STATE CO-OPERATIVE VS. THE DCIT, APEX BANK LTD., PANCHKULA CIRCLE, SCO 78-80(BANK SQUARE), SEC.17, PANCHKULA CHANDIGARH PAN NO. AAAJH002E (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SAHIL CHADHA, C.A. RESPONDENT BY : SH. GULSHAN RAJ, CIT- DR DATE OF HEARING : 23.05.2018 DATE OF PRONOUNCEMENT : 05.06.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE CAPTIONED BUNCH OF APPEALS HAVE BEEN PREFER RED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF THE COMM ISSIONER OF INCOME ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 2 TAX(A), PANCHKULA [HEREINAFTER REFERRED TO AS CIT (A)] DATED 30.10.2014 (ITA NOS. 1157 & 1158/CHD/2014), DATED 2 6.11.2015 (ITA NOS. 154 & 155/CHD/2014) AND DATED 4.12.2015 ( ITA NO. 156/CHD/2014). 2. SINCE IDENTICAL ISSUE HAS BEEN RAISED IN THE AFO RESAID APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON AND CONSOLIDATED ORDER. FOR THE SAKE OF CONVENIENC E, THE FACTS ARE TAKEN FROM ITA NO. 1157/CHD/2014. 3. THE ASSESSEE IN ITS APPEAL HAS TAKEN THE FOLLOWI NG EFFECTIVE GROUNDS:- 1 THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING AN ADDITION OF RS. 3,22,00,879/- ON ACCOUNT OF INTEREST ON AGRICULTURAL CREDIT STABILIZATION FUND. 2. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS. 33,85,0000/- ON ACCOUNT OF EXCESS PROVISIONING OF STANDARD ASSETS. GROUND NO.1 : THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS NOTED THAT THE ASSESSEE HAD CREATED AN AGRICULTURAL CREDIT STABILIZATION FUND (ACSF) WHICH WAS PART OF RESERV ES AND SURPLUSES OF THE ASSESSEE BANK. ON THIS FUND, THE ASSESSEE H AD ALSO CONTRIBUTED INTEREST OF RS. 3,22,00,879/- FOR THE ASSESSMENT Y EAR 2010-11 AND RS. 3,56,54,370/- OF THE ASSESSMENT YEAR 2011-12 BY CHARGING 3% P.A. ON TOTAL AMOUNT AT THE OPENING BALANCE OF THE FUN D. THE AMOUNTS OF RS. 3,22,00,879/- AND RS. 3,36,54,370/- WERE CLAIM ED AS ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 3 EXPENDITURE IN THE P&L ACCOUNT BY THE ASSESSEE ON A CCOUNT OF INTEREST PAID / CONTRIBUTED. THE ASSESSING OFFICE R, HOWEVER, WAS OF THE VIEW THAT INTEREST CREDITED TO THE AGRICULTURAL CREDIT STABILIZATION FUND WAS NOT EXPENDITURE. THAT THE SAID AMOUNT WAS JUST AN ADDITION TO THE AGRICULTURAL CREDIT STABILIZATION FUND RETAI NED BY THE ASSESSEE ITSELF. HE, THEREFORE, ADDED THE AMOUNT OF RS. 3,2 2,00,879/- CLAIMED BY THE ASSESSEE AS EXPENDITURE ON ACCOUNT OF INTERE ST CREDITED TO THE AGRICULTURAL CREDIT STABILIZATION FUND. 4. IN APPEAL BEFORE THE CIT(A), THE ASSESSEE RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF M/S HARYAN A STATE COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BAN K, PANCHKULA (ITA NO. 228 & 241/CHD/20011 DATED 28.4.2011 FOR TH E ASSESSMENT YEAR 2007-08) AND SUBMITTED THAT IN THE SIMILAR FACTS AND CIRCUMSTANCES, THE ITAT HAS UPHELD THE FINDINGS OF THE CIT(A) IN THAT CASE, ALLOWING THE DEDUCTION IN RESPECT OF IN TEREST CREDITED TO THE AGRICULTURAL CREDIT STABILIZATION FUND. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS A CO OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING IN THE S TATE OF HARYANA WHOSE MAIN OBJECTIVE WAS TO PROVIDE CREDIT FACILITI ES IN THE AGRICULTURAL SECTOR AND TAKING CARE OF INTEREST OF THE POOR FARMERS IN THE STATE OF HARYANA. THE BUSINESS OF BANKING WAS G OVERNED AS PER THE NORMS FIXED BY THE RESERVE BANK OF INDIA AND WO RK PURELY UNDER THE INSTRUCTION OF NABARD / REGISTRAR CO-OPERATIVE SOCIETIES AND THE MINISTRY OF AGRICULTURE. THE ASSESSEE FURTHER S UBMITTED THAT THE MINISTRY OF AGRICULTURE / DEPARTMENT OF CO-OPERATIO N ISSUED ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 4 INSTRUCTIONS VIDE THEIR LETTER DATED 15.7.2012 TO THE REGISTRAR OF COOPERATIVE SOCIETIES IN ALL THE STATES / UTS THR OUGHOUT INDIA FOR THE CREATION, FORMATION AND MAINTENANCE OF STABILIZ ATION FUND KNOWN AS AGRICULTURAL CREDIT STABILIZATION FUND. THE ASSE SSEE HAD FURTHER SUBMITTED THAT THE FUND WAS ONLY TO DEAL WITH THE NATURAL CALAMITIES WHICH WAS A NATURAL PHENOMENON IN THE AGRICULTURAL SECTOR. AT THE TIME OF CREATION OF FUND, 15% OF THE NET PROFITS W AS REQUIRED TO BE APPROPRIATED FROM THE NET PROFITS OF CONCERNED B ANK AS DESCRIBED IN PARA 1 OF THE STATED LETTER. SINCE NATURAL CALAMIT IES WERE REGULAR PHENOMENON IN THE AGRICULTURAL SECTOR, THE MAINTENA NCE WAS MUCH MORE REQUIRED TO DEAL WITH UNFORESEEN CIRCUMSTANCES . THE GOVERNMENT FOUND IT FIT AND APPROPRIATE TO CHARGE 3% ON OPENING BALANCE OF THE FUND AS EXPENDITURE IN EACH RESPECTI VE FINANCIAL YEAR AS IT WAS EVIDENT FROM PARA 2 OF THE LETTER. THE A SSESSEE CHARGED AN INTEREST OF RS. 3,22,00,879/- FOR THE A.Y. 2010-11 AND INTEREST OF RS. 3,56,54,370/- FOR THE A.Y. 2011-12 IN PURSUANCE TO THE INSTRUCTIONS GIVEN BY GOVERNMENT OF INDIA THROUGH MINISTRY OF AG RICULTURE. THE ASSESSEE CLAIMED THE SAME AS EXPENDITURE ON ACCOUNT OF INTEREST @ 3% PER ANNUM AS PER THE PARA 2 OF THE INSTRUCTION AND THAT THE SAME WAS APART FROM THE APPROPRIATION OF 15% OF NET P ROFITS AS PER PARA 1 OF THE INSTRUCTION. THE LD. CIT(A,) HOWEVER, DID NO T AGREE WITH THE ABOVE SUBMISSIONS OF THE ASSESSEE AND UPHELD THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS ISSUE, OBSERVING A S UNDER:- 5.2 I HAVE GONE THROUGH THE FACTS OF THE CASE AN D WRITTEN SUBMISSION FILED BY THE APPELLANT. IT IS NOTED CHAT THE APPELLANT HAS APPROPRIATED 15% OF THE NET PROFI T AND CREDITED 3% OF INTEREST ON THE TOTAL AMOUNT AT THE CREDIT OF ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 5 FUND AT THE BEGINNING OF YEAR FOR BUILDING UP STABI LIZATION FUND IN ACCORDANCE WITH LETTER DATED 15.07.1972 OF MINISTRY OF AGRICULTURAL. DEPARTMENT OF CO-OPERATIO N, (GOVERNMENT. OF INDIA ADDRESSED TO THE REGISTRAR OF COOP. SOCIETIES. THOUGH, THE APPROPRIATION OF 15% OF THE NET PROFIT HAS BEEN CONSIDERED BY THE APPELLANT AS APPROPRIATED AMOUNT FOR THE STABILIZATION FUND BUT THE CREDIT OF INTEREST AT 3% OF OPENING BALANCE OF FUND HAS BEEN CLAIMED AS EXPENDITURE. THE AO HAS DISALLOWED THE CLAIM OF EXPENDITURE ON THE GROUND THAT INTEREST PR OVISION HAS RESULTED INTO ADDITION IN AGRICULTURAL CREDIT STABILIZATION FUND WHICH IS A PART OF RESERVES AND SURPLUS MEANING THEREBY THAT IT IS AN APPROPRIATION OF PROF IT AND AS PER ACCOUNTING PRINCIPLES APPROPRIATION OF PROFI T CAN ONLY BE MADE FROM THE PROFIT AFTER TAX. FURTHER, TH ERE HAS BEEN NO ACTUAL PAYMENT OF INTEREST. 5.3 ON THE OTHER HAND, THE APPELLANT HAS REFERRED T O THE LETTER ISSUED BY DEPARTMENT OF CO-OPERATION DATED 15.07.1972 AND MADE DISTINCTION IN SUB PARA (1) AND (2) OF PARA 2 OF THE LETTER. THE APPELLANT SUBMITS THAT AS PER SUB PARA (1), THE WORDS USED ARE ' APPROPRIATION OF 15% OF THE NET PROFIT' WHEREAS AS PER SUB PARA (2) THE INTERE ST IS REQUIRED TO BE CREDITED TO THE FUND AT THE BEGINNIN G OF EACH YEAR IRRESPECTIVE OF PROFIT. BASED ON THIS LOG IC, THE APPELLANT CONSIDERS 15% OF THE NET PROFIT AS APPROP RIATION OF FUND AND CREDIT OF INTEREST AT 3% OF THE FUND AS EXPENDITURE, THE APPELLANT HAS ALSO RELIED ON THE D ECISION OF HON'BLE ITAT CHANDIGARH BENCH IN THE CASE OF M/S HARYANA STATE COOP. AGRICULTURAL & RURAL DEVELOPMEN T BANK DATED 28.04.2011 FOR A.Y. 2007-08. 5.4 AFTER CONSIDERING THE FACTS AND SUBMISSIONS, T HE ORDER OF HON'BLE ITAT IS REFERRED FOR FINDING GIVEN BY HON'BLE ITAT. IT IS NOTED THAT IN THE ORDER IN CASE OF M/S HARYANA STATE CO-OP. AGRICULTURAL & RURAL DEVELOPME NT ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 6 BANK, THE HON'BLE ITAT UPHELD THE REASONING GIVEN B Y CIT(A). THE LD. CIT(A) ON THE BASIS OF SUBMISSIONS MADE BY THE APPELLANT OBSERVED THAT THE INTEREST @ 3% IS TO BE CREDITED IRRESPECTIVE OF PROFITABILITY OF THE BANK AND THEREFORE, IT IS NOT IN THE NATURE OF APPROPRIATIO N OF PROFIT AND IT IS IN THE NATURE OF EXPENDITURE INCURRED AS CLAIMED BY THE APPELLANT. HOWEVER, IN MY OPINION, THE LD. CIT(A)S OBSERVATION DOES NOT INCLUDE THE APPRECIA TION OF FACTS IN THE INSTANT CASE AS BROUGHT BY THE AO IN T HE ASSESSMENT ORDER. THE LD. CIT(A) HAS NOT GIVEN ANY OBSERVATION ON THE FACT THAT INTEREST ADDED TO THE AGRICULTURAL CREDIT STABILIZATION FUND, WHICH IS A PART OF RESERVES AND SURPLUS, IN FACT, MAKES ADDITION TO TH E SAME STABILIZATION FUND. FURTHER, THERE WAS NO ACTUAL PA YMENT OF INTEREST BY THE APPELLANT. IN ANOTHER SIMILAR CA SE OF KARNAL CENTRAL CO-OP. BANK LTD FOR A.Y. 2008-09, T HE LD. CIT(A), KARNAL HAS UPHELD THE DISALLOWANCE OF SIMIL AR INTEREST CREDITED TO THE STABILIZATION FUND. THEREF ORE, ON THE SAME ISSUE TWO CIT(A)S HAVE DIFFERENT OBSERVATI ONS. THE APPELLANT RELIANCE OF DECISION OF HON'BLE ITAT ONLY CONFIRMS THE OBSERVATIONS OF CIT(A) WITHOUT ANY FUR THER DISCUSSION ON MERIT. THEREFORE, RESPECTFULLY I INTE ND TO DIFFER FROM THE DECISION OF HON'BLE 1TAT GIVEN IN A NOTHER SEPARATE CASE BY MAKING FURTHER ELABORATION ON THE FACTS OF INSTANT CASE AS IN SUBSEQUENT PARA. 5.5 NORMALLY, THE PROFITS AND GTAINS OF BUSINESS AR E COMPUTED ON ORDINARILY COMMERCIAL PRINCIPLES. HOWEV ER, WHEN THERE IS A STATUTORY STIPULATION, REGARDLESS O F ORDINARILY COMMERCIAL PRINCIPLES, THE STATUTE HAS T O BE FOLLOWED. IN THE INSTANT CASE THE INTERPRETATION OF CREDIT OF INTEREST IS BASED ON A LETTER ISSUED IN 1972 BY A DEPARTMENT OF GOVT. OF INDIA. SINCE, THE WORD 'APPROPRIATION' HAS NOT BEEN MENTIONED IN SUB PARA (2) OF PARA 2 OF THE LETTER, THE APPELLANT HAS INTERPRETED THE CREDIT OF INTEREST AS EXPENDITURE. IN FACT, THE CRE DIT OF ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 7 INTEREST IS ALSO PARTED FROM THE AVAILABLE CAPITAL WITH THE APPELLANT AND ADDED TO THE SAME STABILIZATION FUND WHICH IS IN NATURE OF RESERVES AND SURPLUS. HERE, 1 WOUL D LIKE TO REFER TO THE DICTIONARY MEANING OF WORDS, INTER EST 1 AND 'APPROPRIATION' AS GIVEN IN WEBSTARS DICTIONARY AS UNDER :- INTEREST : - A SUM PAID OR CHARGED FOR THE USE OF MONEY OR FOR BURROWING MONEY OR SUCH A SUM EXPRESSED AS A PERCENTAGE OF MONEY BORROWED TO BE PAID OVER A GIVEN PERIOD. APPROPRIATION : - ANYTHING APPROPRIATED FOR A SPECIFIC PURPOSE SPECIALLY MONEY. APPROPRIATE: - TO SET APART, AUTHORIZED OR LEGISLATE FOR SOME SPECIFIC PURPOSE OR USE. THE ABOVE MEANING OF INTEREST CLARITIES THAT INTERE ST IS A SUM PAID FOR USE OF BORROWED MONEY. EVEN IN THE INC OME TAX ACT, THE DEDUCTION ON ACCOUNT OF INTEREST IS SPECIFICALLY GOVERNED BY PROVISIONS OF SECTION 36(1 )(III) WHICH ALLOWS DEDUCTION OF INTEREST ON BORROWED CAPI TAL. IN THE INSTANT CASE THE APPELLANT HAS NOT CLAIMED I NTEREST ON ANY SUCH BORROWED CAPITAL. NO FUND HAS BEEN UTIL IZED BY THE APPELLANT FOR THE PURPOSE OF ITS BUSINESS ON WHICH THE INTEREST EXPENDITURE HAS BEEN CLAIMED NOR HAS A NY INTEREST BEEN ACTUALLY PAID. THE APPELLANT BY FOLLO WING THE INSTRUCTION OF THE LETTER HAS FURTHER CREDITED THE STABILIZATION FUND BY ANOTHER 3% ON THE CREDIT BALA NCE OF THE FUND WHICH MEANS THE CAPITAL AVAILABLE WITH THE APPELLANT HAS BEEN FURTHER ADDED IN THE NAME OF INT EREST TO THE SAME RESERVES AND SURPLUS. THE DICTIONARY ME ANING OF WORD 'APPROPRIATE' CLARIFIES THAT THE MONEY HAS BEEN SET APART OR AUTHORIZED FOR SPECIFIC PURPOSE OR USE OF STABILIZATION FUND. THIS CLARIFIES THAT INTEREST CR EDITED TO THE STABILIZATION FUND IS IN THE NATURE OF APPROPRI ATION TO THE FUND WHICH HAS BEEN APPROPRIATED FROM THE CAPIT AL ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 8 AVAILABLE WITH THE APPELLANT. SO, SUCH APPROPRIATIO N OR CHARGE IS NOT IN ACCORDANCE WITH ANY PROVISION OF S TATUTE. THE APPELLANT'S CLAIM DOES NOT FALL WITHIN THE PROV ISION OF SECTION 36(1)(III) WHICH HAS BEEN SPECIFICALLY PROV IDED UNDER THE INCOME TAX ACT FOR CLAIM OF DEDUCTION ON ACCOUNT OF INTEREST. EVEN OTHERWISE, THE APPELLANT' S CLAIM ALSO DOES NOT FALL AS PER PROVISIONS OF RESIDUARY SECTION 37 OF THE ACT AS THE EXPENSE HAS NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES OF THE AP PELLANT BECAUSE THE STABILIZATION FUND IS NOT BEING USED BY THE APPELLANT FOR ITS OWN BUSINESS PURPOSES. NO GAIN OR PROFIT IS BEING DERIVED BY THE APPELLANT BY ANY USE OF STABILIZATION FUND. IN THE NORMAL BANKING BUSINESS THE INTEREST PAID BY THE BANKS ON THE DEPOSITS AVAILABL E WITH BANK ARE ON THE BASIS OF COMMERCIAL GAINS RECEIVED BY THE BANKS ON THE DEPOSITS. NO SUCH ACTIVITY IS AVAILABL E IN THE APPELLANT'S CASE. SO, THERE IS NO STATUTORY PROVISI ON FOR THE CLAIM OF SUCH INTEREST WHICH IS ONLY BASED ON A LETTER THAT INTEREST HAS TO BE CREDITED TO THE FUND MAINTA INED FOR SOME SPECIFIC PURPOSE. THE APPELLANT WILL BE ENTITL ED TO A PARTICULAR EXPENDITURE OR DEDUCTION DEPENDING UPON PROVISIONS OF LAW AND NOT ON THE BASIS OF EXISTENCE OF ENTRY IN ITS BOOKS WHICH IS NOT CONCLUSIVE. 5.6 THEREFORE, IN VIEW OF ABOVE DISCUSSED FACTS. I AM OF THE OPINION THAT THE AMOUNT OF RS. 3,22,00,879/- AN D RS.3,56,54,370/- ON ACCOUNT OF INTEREST CREDITED T O AGRICULTURAL CREDIT STABILIZATION FUND FOR A.YS. 20 10-11 AND 2011-12 RESPECTIVELY ARE NOT ALLOWABLE DEDUCTIO N AS PER THE PROVISIONS OF THE ACT. THE GROUNDS OF APPE AL IN BOTH THE YEARS ARE DISMISSED. 5. BEING AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A), THE ASSESSEE HAS, THUS, COME IN APPEAL BEFORE US. ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 9 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE ALS O GONE THROUGH THE RECORDS. THE LD. COUNSEL FOR THE ASSESSEE HAS S UBMITTED THAT THE AGRICULTURAL CREDIT STABILIZATION FUND WAS CREATED IN PURSUANCE TO THE INSTRUCTIONS ISSUED BY THE DEPARTMENT OF CO-OPE RATION, MINISTRY OF AGRICULTURE VIDE FILE NO. K11011/24/17-CREDIT DA TED 15.7.1972 AND BY RESERVE BANK OF INDIA DATED 8.10.1971 WHEREI N IT WAS RECOMMENDED THAT IN ORDER ENSURE UNINTERRUPTED FLOW OF LONG TERM DEVELOPMENT, FINANCE FOR AGRICULTURE IN THE AREA AF FECTED BY NATURAL CALAMITIES LIKE FLOOD, DROUGHT, ETC., THE POSSIBILI TY OF INTRODUCING STABILIZATION ARRANGEMENTS IN THE LONG TERM CO-OPER ATIVE CREDIT STRUCTURE ALSO SHOULD BE EXAMINED. ACCORDINGLY, IT WAS DECIDED TO START BUILDING STABILIZATION FUND BY MORTGAGE / DEV ELOPMENT BANKS AT VARIOUS LEVELS. AS PER THE INSTRUCTIONS, 15% OF THE NET PROFITS ARE REQUIRED TO BE APPROPRIATED FROM THE NET PROFITS OF THE CONCERNED BANK AND FURTHER INTEREST @ 3% ON THE OPENING BALAN CE OF THE FUND IS ALSO REQUIRED TO BE CREDITED TO THE FUND IN EACH R ESPECTIVE FINANCIAL YEAR. THE SAID FUND IS CREATED AND MAINTAINED TO DE AL WITH THE NATURAL CALAMITIES IN THE AGRICULTURAL SECTOR. AS PER THE INSTRUCTIONS, TILL THE USAGE OF THE FUNDS, THE UNUTILIZED FUNDS SHALL BE I NVESTED IN THE GOVERNMENT OR TRUSTEE SECURITIES. THE LD. COUNSEL HAS ALSO SUBMITTED THAT AS PER THE NABARD GUIDELINES, THE SAID AGRICUL TURAL CREDIT STABILIZATION FUND IS NEITHER A PART OF FREE RESER VES OUT OF WHICH THE BANK CAN DECLARE THE DIVIDEND NOR IT IS A PART OF LENDABLE RESOURCES WHICH THE BANK CAN LEND OUT OF AVAILABLE FUND. THA T DURING THE FINANCIAL YEARS 2009-10 AND 2010-11, THE ASSESSEE I NVESTED THE ENTIRE AMOUNT OF AGRICULTURE STABILIZATION FUND AND RS. 10 9.07 CRORES IN THE ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 10 GOVERNMENT SECURITIES FOR THE PERIOD ENDING 31.3.20 11. THAT THE USAGE OF THE AGRICULTURAL CREDIT STABILIZATION FUND HAD BEEN PROPOSED TO BE MADE BY CONVERTING THE SHORT TERM LO ANS INTO THE MEDIUM TERM LOANS IN THE EVENT OF NATURAL CALAMITY. THAT BASED ON THE REQUEST, THE STATE CO-OPERATIVE APEX BANK SANCT IONED THE PROPOSAL GIVEN BY THE DISTRICT CO-OPERATIVE BANKS BY CONVERT ING THE SHORT TERM LOANS IN TO MEDIUM TERM LOANS TO ENABLE THE FARMERS TO REPAY THEIR LOAN OVER A PERIOD OF TIME. 7. THE LD. COUNSEL HAS FURTHER SUBMITTED THAT IN TE RMS OF THE RBI CIRCULAR NO. ACD.PLAN.1060/PR.26(GEN|) -71/72 DATED 8.10.1971 UNDER RULE 4D, THE CENTRAL COOPERATIVE AND APEX BAN KS SHALL PAY TO THE FUND AN INTEREST @ 3% PER ANNUM ON THE AMOUNTS OF CREDIT OF FUND AT THE COMMENCEMENT OF THE YEAR. HE HAS FURTH ER SUBMITTED THAT, THUS, IN ALL THE INSTRUCTIONS, THE APPROPRIAT ION AT THE TIME OF CREATION OF FUND AND FURTHER PROVISIONING OF INTERE ST DURING THE YEAR @ 3% PER ANNUM ARE TWO DIFFERENT THINGS. THE APPROP RIATION WAS MADE ONLY OUT OF PROFITS WHEREAS THE PROVISIONING O F INTEREST MADE IN EACH YEAR ON THE OPENING BALANCE OF THE AGRICULT URE CREDIT STABILIZATION FUND WAS AN EXPENSE WHICH WAS TO BE I NCURRED IRRESPECTIVE OF THE FACT WHETHER THE ASSESSEE MADE PROFITS OR NOT. IT WAS FURTHER STATED THAT IN THE ASSESSMENT YEAR 201 0-11, WHEN THE ASSESSEE INCURRED THE LOSS, THERE WAS NO PROVISION OF THE APPROPRIATION OF THE AGRICULTURAL STABILIZATION FUN D WHEREAS THE ASSESSEE PROVIDED THE INTEREST OF RS. 3,22,00,879/- . THE LD. COUNSEL HAS FURTHER RELIED UPON THE DECISION OF THE TRIBUNA L IN THE CASE OF ITO VS. M/S HARYANA STATE CO-OP AGRI. & RURAL DEV. BANK LTD., ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 11 PANCHKULA ITA NOS. 228 & 241/CHD/2011 ORDER DATE D 28.4.2011 AND HAS STATED THAT THE ISSUE IS SQUARELY COVERED I N FAVOUR OF THE ASSESSEE BY THE ABOVE DECISION OF THE TRIBUNAL. THE LD. COUNSEL HAS FURTHER RELIED ON - A) CIT VS. ORISSA INDUSTRIES LTD 91993) 203 ITR 0449 DATED 8.2.1993 ORISSA HIGH COURT. - IT WAS CONC LUDED THAT THE PRODUCTION & MAINTENANCE BONUS OVER AND ABOVE MAXIMAL ALLOWABLE U/S 36(1)(III) OR FACTS HAV ING BEEN FOUND NOT BEING BONUS AS SUCH BUT INCENTIVE WA GES SAME ALLOWABLE U/S 37(1) OF THE INCOME-TAX ACT, 196 1. B) THE KARNATAKA STATE CO-OP APEX BANK LTD VS. DCIT, BANGLORE DATED 29.2.2016 ITAT, BANGLORE BENCH WHEREIN THE ONLY CONTROVERSY IS WHETHER THE AMOUNT SPENT OUT OF ABOVE FUNDS IS AN EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS U/S 37 OF THE INCOME-TAX ACT, 1961. IT WAS CONCLUDE D THAT THE SAID EXPENDITURE WAS A STATUTORY OBLIGATIO N TO SPEND MONEY FOR THE ABOVE PURPOSES AS THE PROVISION OF THE KARNATAKA CO-OPERATIVE SOCIETIES ACT STIPULATES THAT CERTAIN PERCENTAGE OF PROFITS SHOULD BE SPENT TOWAR DS THE SPECIFIED PURPOSE WHICH IS WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF BUSINESS AND WE DIRECT THE ASSESSIN G OFFICER TO ALLOW THE AMOUNT AS DEDUCTION U/S 37(1) OF THE ACT WHILE COMPUTING INCOME OF THE ASSESSEE CO- OPERATIVE BANK. 8. THE LD. COUNSEL, THEREFORE, SUMMED UP HIS SUBMI SSIONS AS UNDER:- - THAT THE FUND HAS BEEN CREATED TO DEAL WITH THE POSITION ARISING OUT OF THE NATURAL CALAMITIES LIKE FLOOD, DROUGHT ETC. ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 12 - THAT THE FUND CANNOT BE USED FOR ANY OTHER PURPOSES LIKE FREE RESERVE OR ANY OTHER LENDABLE RESOURCES B Y ASSESSEE. - TILL ITS USAGE OR OCCURRING OF EVENTUALITY AS MENTI ONED ABOVE THE FUND WILL BE INVESTED ONLY IN GOVERNMENT SECURITIES OR TRUSTEE SECURITIES. - THAT THE CREATION AND MAINTENANCE OF LAND IS A SOCI O- ECONOMIC NEED OF THE INSTITUTION WILL BE UTILIZED O NLY FOR THE BUSINESS PURPOSES. - THAT THE CHARGE OF INTEREST AND THE APPROPRIATION O F PROFITS ARE TWO DIFFERENT THINGS WHICH SHOULD NOT B E CLUBBED TOGETHER. AS THE INTEREST IS TO BE PROVIDED EVEN IN THE YEAR WHEN THE ASSESSEE DOES NOT EARN AN Y PROFIT AND WHEREAS THE CREATION OF FUND WILL BE DON E ONLY WHEN THE ASSESSEE EARNS THE PROFITS WHICH IS EVIDENT FROM ASSESSMENT YEAR 2010-11. 9. THE LD. DR, ON THE OTHER HAND, HAS RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES AND HAS SUBMITTED THAT THE SAID F UND LYING WITH THE ASSESSEE THOUGH HAD A SPECIFIC PURPOSE, BUT THE AM OUNT OF INTEREST APPORTIONED ON THE FUNDS CANNOT BE SAID TO BE ALLOW ABLE EXPENDITURE SPENT FOR BUSINESS PURPOSES. THE AMOUNT WAS FURTHER INVESTED BY THE ASSESSEE IN THE GOVERNMENT SECURITIES AND, HENCE, T HE ASSESSEE HAD NOT PARTED WITH THE FUNDS AS A BUSINESS EXPENDITU RE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMIT TEDLY, THERE ARE TWO COMPONENTS OF CONTRIBUTION OF THE AGRICULTU RAL CREDIT STABILIZATION FUND (ACSF) WHICH THE ASSESSEE IS R EQUIRED TO CREATE AND MAINTAINED AS PER THE GOVERNMENTS STATUARY INS TRUCTIONS / ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 13 GUIDELINES. THE FIRST PART IS THE 15% APPROPRIATION OUT OF THE PROFITS AND THE SECOND PART IS THE INTEREST @ 3% ON THE OPE NING BALANCE OF THE FUND. SO FAR AS THE APPROPRIATION OF THE 15% ON THE PROFI TS TOWARDS THE FUNDS IS CONCERNED, THE ASSESSEE HAS NOT CLAIME D THE SAME AS DEDUCTION. THE DISPUTE IS REGARDING THE CLAIM ON TH E INTEREST AMOUNT CREDITED TO THE FUNDS. THE MAIN CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE SAID CREDIT OF INTEREST WA S NOT OUT OF APPORTIONMENT OF THE PROFITS. THAT EVEN IF, THE AS SESSEE RUNS INTO LOSSES, STILL THE ASSESSEE IS REQUIRED TO CREDIT 3% OF THE INTEREST ON THE OPENING BALANCE OF THE FUND. THE LD. COUNSEL HA S REFERRED TO THE INSTRUCTIONS OF THE GOVERNMENT OF INDIA DATED 15.7. 1972 (SUPRA) TO STATE THAT SO FAR AS THE CREDIT OUT OF THE PROFITS IS CONCERNED THE WORDS USED APPROPRIATION OF 15% OF THE NET PROFIT S WHEREAS REGARDING THE SECOND PART OF CONTRIBUTION, THE WORD S USED ARE CREDIT OF INTEREST OF 3% PER ANNUM HAS BEEN USED. HE, THE REFORE, HAS SUBMITTED THAT THE SECOND PART I.E. CREDIT OF INTER EST TO THE FUND IS AN ADMISSIBLE EXPENDITURE U/S 36(1)(III) OF THE ACT. 11. WE, HOWEVER, ARE NOT CONVINCED BY THE ABOVE SUB MISSION OF THE LD. COUNSEL OF THE ASSESSEE. THOUGH, THE AGRICULTUR AL CREDIT STABILIZATION FUND WAS REQUIRED TO BE CREATED AND MAINTAINED AS PER THE GOVERNMENT INSTRUCTIONS / GUIDELINES, HOWEVER, THE FUND CONTRIBUTED REMAINED WITH THE ASSESSEES BANK WHICH THE ASSESSEE INVESTED IN GOVERNMENT SECURITIES AND EARNED INCOME THEREUPON . IT IS NOT A PAYMENT OF AMOUNT TO A THIRD PARTY. EVEN T HE INCOME ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 14 RECEIVED FROM FURTHER INVESTMENT OF THE FUND DOES N OT GO TO ANY THIRD PARTY BUT TO THE ASSESSEE ONLY. THE CONTRIBUTION TO THE SAID FUND IS NOT AN OUTGO OF THE ASSESSEE THAT CAN BE TERMED AS EXPENDITURE. THE LD. CIT(A) HAS RIGHTLY REFERRED TO THE DEFINITION OF INTEREST TH AT IS A SUM PAID OR CHARGED FOR THE USE OF MONEY OR FOR B ORROWING MONEY OR SUCH A SUM EXPRESSED AS A PERCENTAGE OF MONEY BO RROWED TO BE PAID OVER A GIVEN PERIOD. THE LD . CIT(A) HAS RIGHTLY POINTED OUT THAT EVEN AS PER THE PROVISIONS OF SECTION 36(1)(II I) OF THE ACT, THE DEDUCTION IS ALLOWABLE ON THE INTEREST ON BORROWE D CAPITAL. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAS NOT CLAIMED INTEREST ON ANY SUCH BORROWED CAPITAL. THE FUND, IN QUESTIO N, WAS CREATED TO BE USED BY THE ASSESSEE ITSELF IN PECULIAR CIRCUMST ANCES. THOUGH, THE FUND HAD TWO COMPONENTS, ONE IS OUT OF APPROPRIATIO N OF PROFITS @ 15% AND THE OTHER IS INTEREST @ 3% ON THE OPENING B ALANCE OF THE FUND, HOWEVER, THE FACT IS THAT THE SAID AMOUNT CRE DITED BY THE ASSESSEE TOWARDS THE AGRICULTURAL CREDIT STABILIZAT ION FUND IS NOT PARTED WITH BY THE ASSESSEE. AS POINTED OUT IN THE RELEVANT NOTIFICATION, AS ALSO CLAIMED BY THE ASSESSEE, THE FUND IS USED IN THE CASE OF NEED TO CONVERT THE SHORT TERM CROP LOANS I N THE CASE OF NATURAL CALAMITY INTO TERM LOAN. WHENEVER, THE A SSESSEE HAS TO INCUR SUCH AN EXPENDITURE FROM THE FUND MAINTAINED BY IT, THAT IT CAN OF COURSE BE CLAIMED AS DEDUCTION. HOWEVER, MERE CONTRITION TO THE FUND MAINTAINED AND RETAINED BY THE ASSESSEE, WHICH IS FURTHER INVESTED BY THE ASSESSEE, GOVERNMENT SECURITIES AND THE INCOME IS ALSO EARNED BY THE ASSESSEE ON SUCH INVESTMENTS, C ANNOT BE CLAIMED AS EXPENDITURE. ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 15 SO FAR AS THE RELIANCE OF THE LD. COUNSEL FOR THE ASSESSEE ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBU NAL IN ITO VS. M/S HARYANA STATE CO-OP AGRI. & RURAL DEV. BANK LTD ., PANCHKULA ITA NOS. 228 & 241/CHD/2011 ORDER DATED 28.4.2011 I S CONCERNED, WE AGREE WITH THE FINDINGS OF THE CIT(A) THAT THE O NLY POINT TAKEN INTO CONSIDERATION BY THE ITAT WHILE UPHOLDING THE ORDER OF THE CIT(A) IN THAT CASE WAS THAT CONTRIBUTION TOWARDS T HE FUNDS @ 3% ON THE OPENING BALANCE OF THE FUND IS NOT FROM THE APPROPRIATION OF PROFITS. HOWEVER, THE FACT THAT THE FUND SO CREATE D AND MAINTAINED IS RETAINED BY THE ASSESSEE ITSELF AND IS USED AND INV ESTED BY THE ASSESSEE ITSELF, THOUGH AS PER THE RELEVANT GUIDEL INES / INSTRUCTIONS HAS BEEN MISSING IN THE SAID DECISION OF THE ITAT I N THE CASE OF M/S M/S HARYANA STATE COOPERATIVE AGRICULTURAL AND RUR AL DEVELOPMENT BANK, PANCHKULA(SUPRA). THE SAID DISTINGUISHING F ACTS HAVE NEITHER BEEN BROUGHT TO THE KNOWLEDGE OF THE TRIBUNAL NOR T HE SAME HAS BEEN CONSIDERED OR DISCUSSED IN THE ABOVE REFERRED TO DE CISION OF THE TRIBUNAL. HOWEVER, THE ISSUE IS SQUARELY COVERED B Y THE DIRECT DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF SOLAPUR DISTRICT CENTRAL COOP BANK LTD [2014] 52 TAXMAN.C OM 358. THE FACTS AND ISSUES INVOLVED IN OTHER CASE LAWS RELIED UPON BY THE ASSESSEE ARE DIFFERENT, HENCE, THEY ARE NOT RELEVAN T FOR THE PURPOSE OF ADJUDICATION OF THIS CASE. THE MERE CONTRIBUTION TO THE FUND, IN OUR VIEW, CANNOT BE CLAIMED AS EXPENDITURE FOR THE PURPOSE OF BUSINESS. THE ASSESSEE NO DOUBT CAN CLAIM THE EXPEN DITURE WHEN SUCH FUND OR PART OF SUCH FUND IS EXPENDED AS PER T HE PRESCRIBED PROCEDURE, INSTRUCTIONS OR GUIDELINES. THE RELIANCE IN THIS RESPECT ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 16 CAN ALSO BE PLACED ON THE DECISION OF THE ITAT BA NGALORE BENCH IN THE CASE OF KARNATAKA STATE CO-OPERATIVE APEX BAN K LTD. VS. DCIT [2017] 83 TAXMANN.COM 327 (BANGLORE-TRIB) AND OF ITAT HYDERABAD BENCH IN THE CASE OF A.P MAHESH CO-OP URB AN BANK LTD V DCIT [2015] 55 TAXMANN.COM 429 (HYDERABAD TRIB). 12. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE AND UPHOLD THE SAME. 13. GROUND NO.2 IS RELATING TO THE PROVISIONING OF THE DISALLOWANCE ON ACCOUNT OF EXCESS PROVISIONING OF STANDARD ASSE TS. 14. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSING OFFICER NOTED FROM THE ANNUAL REPORT THAT THE ASSESSEE WAS REQUIRED TO MAKE PROVISION OF LOANS AND ADVANCES AS PER RBI GUIDELINES TO THE TUNE OF RS. 842.31 LACS FOR THE A.Y. 2010-11 AN D RS. 1378.74 LACS FOR THE A.Y. 2011-12, WHEREAS IT HAD ALREADY M ADE PROVISIONS OF RS.4364.21 LACS FOR THE A.Y. 2010-11 AND RS.3886 .49 LACS FOR A.Y. 2011-12 IN THE BOOKS OF ACCOUNT. THEREFORE, AS PER SECTION 41 OF THE ACT, A SUM OF RS.3721.90 LACS FOR THE A.Y, 2010-11 AND RS.3886.49 LACS FOR THE A.Y. 2011-12 BEING EXCESS P ROVISIONS WERE REQUIRED TO BE ADDED BACK TO THE RETURNED INCO ME AS ASSESSEE HAD ALREADY CHARGED EXCESS PROVISIONS THAN REQUIRE D. THEREFORE, THE ASSESSEE BANK WAS ASKED AS TO WHY THIS AMOUNT N OT BE ADDED TO ITS RETURNED INCOME. THE ASSESSEE FILED REPLY WHICH WAS REPRODUCED IN PARA 3 OF THE ASSESSMENT ORDERS. AS PER ASSESSEE 'S REPLY, IT WAS FOUND FROM P&L ACCOUNT AND ALSO FROM ANNEXURE 'B' T O THE FINANCIAL ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 17 STATEMENTS THAT THE ASSESSEE HAD NOT CHARGED THE BA D AND DOUBTFUL DEBT RESERVE TO P&L ACCOUNT, BUT THE PROVISION ON STANDARD ASSETS WAS BEING CHARGED TO THE P&L ACCOUNT. THE OPENING BALANCE OF PROVISIONS AGAINST STANDARD ASSETS WAS RS.780.51 LA CS FOR THE A.Y. 2010-11 AND RS.940.51 LACS FOR THE A.Y. 2011-12, WH EREAS, AS PER ANNEXURE B TO P&L ACCOUNT, THE PROVISIONS REQUIRED TO BE MAINTAINED DURING THE YEAR UNDER CONSIDERATION WAS RS.746.66 LAES FOR THE A.Y. 2010-11 AND RS.934 19 LACS FOR THE A.Y . 2011-12. THEREFORE, SUM OF RS.33.85 LACS FOR THE A.Y. 2010-1 1 AND RS.6.32 LACS FOR THE A.Y. 2011-12 WAS ADDED TO THE RETURNED INCOME OF THE ASSESSES U/S 4I(L)(A) OF THE ACT. 15. IN APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITIO NS SO MADE BY THE ASSESSING OFFICER OBSERVING AS UNDER:- 6.2 I HAVE GONE THROUGH THE FACTS OF THE CASE AND WRITTEN SUBMISSIONS FILED BY THE APPELLANT. IT IS N OTED THAT ON THE BASIS OF ANNEXURE 'B', THE FINANCIAL STATEMENT, THE AO OBSERVED THERE WERE PROVISIONS AGAINST STANDARD ASSETS DEBITED IN P&L ACCOUNT WHIC H WERE IN EXCESS TO THE PROVISIONS REQUIRED TO BE MAINTAINED DURING THE YEAR. THEREFORE, THE AO DISALLOWED THE PROVISION IN EXCESS TO THE REQUIRED PROVISION TO BE MAINTAINED AND ADDED TO THE INCOME U/S 41(L)(A) OF THE ACT. ON THE OTHER HAND, THE APPELLA NT HAS SUBMITTED THAT THE AO HAS TAKEN FIGURES OF RS.746.6 6 LACS AND RS.934.9 LACS FOR A.Y. 2010-11 AND 2011-12 BUT FORGOT TO CONSIDER THE FIGURES OF LOSS ASSETS OF RS. 211.6 LACS AND RS.212.51 LACS FOR A.YS. 2010-11 AND 2011-12 AS DISCLOSED IN PARA 4 OF ANNEXURE 'B' UNDE R THE HEAD PROVISIONING. THE SUM OF BOTH THESE ITEMS ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 18 AMOUNTS TO RS.958.26 LACS AND RS. 1146.70 LACS FOR THE A.YS. 2010-11 AND 2011-12 RESPECTIVELY. THIS IS FAR LESS THAN THE AMOUNTS CONSIDERED BY THE AO. IN NUTSHELL, THE APPELLANT CONTENTION IS THAT THE AO'S FINDING IS NO T APPLICABLE AS THE PROVISIONS IN THE BALANCE SHEET ARE LESS THAN THE COMBINED PROVISIONS RECOMMENDED IN ANNEXURE 'B' TO THE BALANCE SHEET. 6.3 AFTER CONSIDERING THE FACTS AND SUBMISSIONS, T HE FINANCIAL STATEMENT AT ANNEXURE 'B' TO THE BALANCE SHEET IS REFERRED.THE ANNEXURE DEALS WITH ASSETS CLASSIFICATION AND PROVISIONING STATEMENT. THE SR. NO. ILL OF ANNEXURE 'B' DEALS WITH PROVISIONING REQUIRE D HAVING THREE SUB ITEMS ON STANDARD. SUB STANDARD A ND DOUBTFUL ASSETS. THE SR. NO. 4 OF ANNEXURE B DEA LS WITH LOSS ASSETS OF ITEM NUMBER 11(4) UNDER THE ASS ET CLASSIFICATION. SO, BOTH HEADS UNDER TWO SR. NOS. D EAL PROVISIONING AND CANNOT BE CLUBBED TOGETHER . THE REASON FOR NON-CLUBBING IS GATHERED FROM THE PERUS AL OF P&L ACCOUNT WHERE UNDER ITEM NO . 10(X) AND I0(XI) SEPARATE PROVISION FOR NPA AND AGAINST STANDARD ASS ETS HAVE BEEN DEBITED. SO, THE PROVISIONING OF STANDAR D ASSETS UNDER SR.NO. III IS TO BE CONSIDERED SEPARAT ELY FROM THE PROVISIONING OVER AND ABOVE AS REQUIRED TO BE MAINTAINED IN THE CASE OF CASE OF STANDARD ASSETS ONLY. THEREFORE, IN MY OPINION THE AO WAS JUSTIFIED IN DISALLOWANCE OF EXCESS PROVISIONING ON ACCOUNT OF STANDARD ASSETS AS THE SAME CANNOT BE CLUBBED TOGET HER WITH SEPARATE PROVISIONING ON LOSS ASSETS AGAINST WHICH THE PROVISION ON NPA HAS BEEN SEPARATELY DEBITED IN THE P&L ACCOUNT. THE GROUNDS OF APPEAL FOR BOTH YEARS A RE DISMISSED . ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 19 16. WE HAVE HEARD THE RIVAL SUBMISSIONS. AS PER TH E PROVISIONS OF THE INCOME TAX ACT, GENERALLY THE DED UCTION OF EXPENDITURE ACTUALLY INCURRED SOLELY FOR THE BUSINE SS PURPOSES ARE ALLOWED, HOWEVER, THE PROVISION FOR AN EXPENDITURE IS ALLOWED AS A SPECIAL MEASURE IN THE CASE OF EXPECTED EXPENDITURE / LOSSES THAT ARE LIKELY TO OCCUR IN SUCH CIRCUMSTANCES AND, HENCE, D EDUCTION AS A PROVISION OF SAID EXPENDITURE IS ALLOWED EVEN BEFOR E THE EXPENDITURE IS ACTUALLY INCURRED. HOWEVER, SUCH PROVISIONS IS REQUIRED TO BE SQUARED OFF AT THE END OF THE YEAR WHEN THE ACTUAL EXPENDITURE IS INCURRED BY THE ASSESSEE AGAINST THE PROVISION IS A LLOWED. IF THE ACTUAL EXPENDITURE IS LESS THAN THE PROVISION MADE OF THE ESTIMATING AMOUNT, IT IS TO BE ADDED TO THE INCOME OF THE ASSE SSEE AND IF THE ACTUAL EXPENDITURE IS MORE THAN THE PROVISION MADE FOR, THE ASSESSEE CERTAINLY CAN CLAIM THE BALANCE EXPENDED AMOUNT. HO WEVER, ALL THESE ADJUSTMENTS ARE SUBJECT TO THE PROVISIONS MADE IN T HE NEXT ASSESSMENT YEAR. UNDER THE CIRCUMSTANCES, IF THE PR OVISIONS MADE AS PER RBI GUIDELINES IN EARLIER YEARS IS MORE THAN TH E PROVISION OF EXPENDITURE FOR WHICH THE ASSESSEE IS ENTITLED TO M AKE IN THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION, THEN THE ASSES SEE CANNOT CLAIM THE BENEFIT OF PERPETUITY OF THE EXCESS PROVISION M ADE. THAT AT THE END OF THE YEAR IS REQUIRED TO BE SQUARED OFF AND, HENCE, THE EXCESS PROVISIONING MADE BY THE ASSESSEE IS REQUIRED TO BE ADDED TO THE INCOME OF THE ASSESSEE. HOWEVER, THE CONTENTION OF THE ASSESSEE THAT WHILE CONSIDERING THE PROVISIONS ALLOWABLE TO THE A SSESSEE ON THE ALLOWABLE STANDARD ASSETS, THE LOWER AUTHORITIES H AVE NOT CONSIDERED THE FIGURES OF LOST ASSETS, WE ARE OF THE VIEW, TH AT THIS REQUIRES TO BE ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 20 EXAMINED AT THE END OF THE ASSESSING OFFICER. WE, T HEREFORE, DIRECT THE ASSESSING OFFICER TO CONSIDER THE EXPENDITURE / PROVISION FOR EXPENDITURE / LOSS ON THE STANDARD ASSETS / SUB-STA NDARD ASSETS AND LOSS ASSETS AND THEN TO DECIDE, IF ANY, DISALLOWANC E IS ATTRACTED FOR EXCESS PROVISIONING IN ACCORDANCE WITH LAW. THIS GR OUND OF APPEAL IS TREATED AS PARTLY ALLOWED. 17. GROUND NO.3 IS GENERAL IN NATURE AND DOES NOT R EQUIRE ANY ADJUDICATION. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATE D AS PARTLY ALLOWED. ITA NO. 1158/CHD/2014 (ASSESSMENT YEAR 2011-12) 18. THE GROUNDS TAKEN BY THE ASSESSEE IN THIS APPEA L ARE IDENTICAL TO THAT HAVE BEEN TAKEN BY THE ASSESSEE FOR ASSESSM ENT YEAR 2010-11 IN ITA NO. 1157/CHD/2014. 19. IN VIEW OF OUR FINDINGS GIVEN ABOVE, ON SIMILA R LINES, THE GROUND NO.1 OF THE APPEAL IS DISMISSED AND GROUND NO.2 IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH IDENTICAL DIRECTIONS. THIS APPEAL OF THE ASSESSEE IS ALSO TREATED AS PAR TLY ALLOWED. ITA NO. 154/CHD/2016 (ASSESSMENT YEAR : 2008-09) 20. THE APPEAL IS BARRED BY LIMITATION OF 21 DAYS. THE ASSESSEE HAS MOVED AN APPLICATION DATED 29.2.2016 FOR CONDON ATION OF DELAY, WHEREIN, DETAILED REASONS HAVE BEEN FURNISHE D. ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 21 21. IN VIEW OF THE REASONS GIVEN IN THE APPLICATION AND ALSO CONSIDERING THE SHORTNESS OF THE PERIOD OF DELAY, T HE DELAY OF 21 DAYS IN FILING THE APPEAL IS HEREBY CONDONED. 22. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT R EQUIRE ANY SPECIFIC ADJUDICATION, HENCE, DISMISSED. 23. VIDE GROUND NO.2, THE ASSESSEE HAS AGITATED THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE DISALLOWANCE OF INTERES T EXPENDITURE ON THE AGRICULTURAL CREDIT STABILIZATION FUND, WHIC H IS IDENTICAL TO THAT OF GROUND NO.1 OF THE APPEAL FOR ASSESSMENT YEAR 2010-11 (ITA NO. 1157/CHD/2014). IN VIEW OF OUR FINDINGS GIVEN ABOVE, THIS GROUND IS DISMISSED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. ITA NO. 155/CHD/2016 (ASSESSMENT YEAR : 2009-10) 24. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT R EQUIRE ANY ADJUDICATION, HENCE, DISMISSED. 25. VIDE GROUND NO.2, THE ASSESSEE HAS AGITATED THE ACTION OF CIT(A) IN UPHOLDING OF DISALLOWANCE OF CONVEYANCE D EED CHARGES OF RS. 44,71,550/- HOLDING THE SAME AS CAPITAL IN NAT URE. 26. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD DEBITED RS. 1, 55,35,789/- UNDER THE HEAD OTHER EXPENDITURE WHICH INCLUDED A SUM OF RS. 44,71,550/- TOWARDS CONVEYANCE DEED CHARGES PAID TO ESTATE OFFI CER, PANCHKULA @ 8% OF THE COST OF PLOT NO. GH-92, SECTOR 20 : PANCHKULA. THE AO ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 22 ASKED THAT WHY THE ADDITION OF RS. 44,71,550/- ON T HIS GROUND SHOULD NOT BE MADE. THE ASSESSEE REPLIED THAT AMOUNT OF RS .44,71,550/- PAID FOR CONVEYANCE DEED TO HUDA IS REVENUE IN NATURE AS IT DOES NOT RESULT TO ANY NEW CAPITAL ASSET. THE AO FOUND THAT THE ASSET BEING CAPITAL IN NATURE AND THE SAID EXPENDITURE WAS INCU RRED ON THE SAID ASSETS; THEREFORE, THE EXPENDITURE CLAIMED WAS A CAPITAL EXPENDITURE. THUS, THE ADDITION OF RS.44 ,71.550/- WAS MADE TO THE TOTAL INCOME. 27. BEFORE THE CIT(A), THE COUNSEL FOR THE APPELLANT SUBMITTED THAT THE SAID PLOT WAS PURCHASED BY THE ASSESSEE FROM HU DA WHICH WAS ALLOTTED TO THE ASSESSEE FOR CONSTRUCTING THE FLATS WHICH WERE LATER ON ALLOTTED TO THE EMPLOYEES WORKING WITH THE ASSES SEE. THE PLOT WAS ALLOTTED BY THE WAY OF ALLOTMENT LETTER AND BASED O N THE ALLOTMENT LETTER, THE ASSESSEE COULD AVAIL LOAN FACILITY FROM ANY BANK / FINANCIAL INSTITUTIONS. IN ORDER TO MORTGAGE THE LA ND WITH THE BANK / FINANCIAL INSTITUTIONS TO AVAIL LOAN FOR THE PURPOS E OF CONSTRUCTING FLATS ON THE SAID PLOT, IT WAS NECESSARY TO EXECUTE THE CONVEYANCE DEED WHICH IN NO WAY LEAD TO ENHANCING THE VALUE OF THE PLOTS OR ANY ADDITION THERETO. IT WAS THE NEED OF THE TIME TO CR EATE THE MORTGAGE ON THE SAID PLOT BY WAY OF EXECUTION OF THE CONVEYA NCE DEED. FOR EXECUTING THE CONVEYANCE DEED, THE ASSESSEE INCURRE D THE STAMP DUTY TO THE EXTENT OF RS.44,71,550/- WHICH EXPENDITURE WAS REVENUE IN NATURE. HOWEVER, THE LD. CIT(A) DISALLOWED THE CLAIM OF TH E ASSESSEE OBSERVING AS UNDER:- ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 23 4.2 1 HAVE GONE THROUGH THE FACTS OF THE CASE AND WRITTEN SUBMISSIONS FILED BY THE APPELLANT. IT IS N OTED THAT THE APPELLANT CLAIMED EXPENDITURE OF RS. 44,71 ,550/- ON ACCOUNT OF CONVEYANCE DEED CHARGES IN RESPECT OF A PLOT PURCHASE FROM HUDA FOR CONSTRUCTION OF FLATS. THE APPELLANT'S ARGUMENT IS THAT THE EXPENDITURE DID NO T CREATE ANY NEW CAPITAL ASSET. HOWEVER, THE EXPENDIT URE RELATES TO PLOT OF LAND WHICH IS A CAPITAL ASSET AN D THE CONVEYANCE DEED WAS MADE IN ORDER TO CREATE MORTGAG E ON THE SAID PLOT. THEREFORE, THE CHARGES WERE RELAT ED TO THE TITLE OF THE LAND WHICH WAS A CAPITAL ASSET AND ANY EXPENDITURE RELATED TO TITLE OF CAPITAL ASSET WAS A LSO IN NATURE OF CAPITAL EXPENDITURE. HERE, THE RELIANCE I S PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF V JAGANMOHAN RAO VS. CIT 75 ITR 373 WHERE THE HON'BLE APEX COURT HELD THAT WHERE MONEY IS PAI D TO PERFECT A TITLE OR AS CONSIDERATION FOR GETTING RID OF A DEFECT IN THE TITLE OR A THREAT OF LITIGATION, THE PAYMENT WOULD BE CAPITAL PAYMENT AND NO REVENUE PAYMENT. THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN H OLDING THE CONVEYANCE DEED CHARGES OF RS. 44,71,550/- AS CAPITAL EXPENDITURE. THUS, THIS GROUND OF APPEAL IS DISMISSED. 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMIT TEDLY, THE CONTENTION OF THE ASSESSEE IS THAT THE CONVEYANCE D EED CHARGES WERE INCURRED FOR GETTING LOAN FOR CONSTRUCTION OF FLATS ON THE LAND. THAT CONVEYANCE DEED CHARGES DID NOT IN ANY MANNER LEAD TO ENHANCING THE VALUE OF THE PLOT OR ANY ADDITION THERETO. THA T THE SAID FLATS WERE USED FOR THE EMPLOYEES OF THE ASSESSEE. NO DO UBT, THE CONVEYANCE DEED / MORTGAGE DEED OF THE LAND WAS MAD E BY THE ASSESSEE FOR TAKING LOAN FOR CONSTRUCTION OF FLATS. THE SAID ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 24 EXPENDITURE INCURRED BY THE ASSESSEE CAN BE SAFELY CONSIDERED TOWARDS THE CONSTRUCTION OF FLATS. NO DOUBT, THE SA ID FLATS ARE CONSTRUCTED FOR THE EMPLOYEES OF THE ASSESSEE BUT T HAT, IN OUR VIEW, IS A CAPITAL EXPENDITURE HAVING ENDURING BENEFIT. THE CONSTRUCTION OF FLAT OVER THE LAND HAS ADDED TO THE VALUE AND UT ILITY OF THE LAND, HENCE, THE EXPENDITURE INCURRED BY THE ASSESSEE O N THE STAMP DUTY FOR MORTGAGE OF THE LAND CANNOT BE SAID TO BE REVEN UE EXPENDITURE. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN TH E ORDER OF THE CIT(A) ON THIS ISSUE AND THE ISSUE IS DECIDED AGAIN ST THE ASSESSEE. 29. GROUND NO.3 TAKEN BY THE ASSESSEE IS REGARDING THE DISALLOWANCE OF INTEREST CREDITED TO THE EXPENDITUR E ON THE AGRICULTURAL CREDIT STABILIZATION FUND, WHICH IS ID ENTICAL TO THAT OF GROUND NO.1 OF THE APPEAL FOR ASSESSMENT YEAR 20 10-11 (ITA NO. 1157/CHD/2014). IN VIEW OF OUR FINDINGS GIVEN A BOVE, THIS ISSUE IS ACCORDINGLY DECIDED AGAINST THE ASSESSEE. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISS ED. ITA NO. 156/CHD/2016 (ASSESSMENT YEAR : 2012-13) 30. WE FIND THAT BOTH THE GROUNDS TAKEN BY THE ASSE SSEE IN THIS APPEAL ARE IDENTICAL TO THAT HAVE BEEN TAKEN BY THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 1157/CHD/2014. 31. IN VIEW OF OUR FINDINGS GIVEN ABOVE, ON SIMILAR LINES, THE GROUND NO.1 OF THE APPEAL IS DISMISSED AND GROUND N O.2 IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH IDENTICAL DIRECTIONS. THIS APPEAL OF THE ASSESSEE IS ALSO TREATED AS PART LY ALLOWED ITA NOS.1157 & 1158/CHD/2014 & 154 TO 156/CHD/2016/CHD/2016- HARYANA STATE COOP APEX BANK LTD., CHANDIGARH 25 ORDER PRONOUNCED IN THE OPEN COURT ON 05.06.2018. SD/- SD/- (B.R.R.KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 05.06.2018 RKK COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR