Assistant Commissioner of Income-tax, V. Ambejogai Peoples' Co.op Bank Ltd., Beed

ITA 2040/PUN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0406 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 14-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Question of law; Cost of acquisition; Bad and doubtful debts; Revised return; Provision of bad debts; Revenue expenditure
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 37(1); 264; 9(1); 9(1); 9(1); 13

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , ! , # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.2040/PN/2014 & & / ASSESSMENT YEAR : 2010-11 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2, JEEVAN SUMAN 2 ND FLOOR, LIC BUILDING, N-5, CIDCO, AURANGABAD 431 003. ....... / APPELLANT ' / V/S. AMBEJOGAI PEOPLES CO-OP.BANK LTD., 01, PRASHANT NAGAR, SAWARKAR CHOWK, AMBAJOGAI, BEED 431 517. PAN : AAAAA2883L. / RESPONDENT ()$ . / CO NO.41/PN/2016 & & / ASSESSMENT YEAR : 2010-11 AMBEJOGAI PEOPLES CO-OP.BANK LTD., 01, PRASHANT NAGAR, SAWARKAR CHOWK, AMBAJOGAI, BEED 431 517. PAN : AAAAA2883L. ....... / APPELLANT ' / V/S. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2, JEEVAN SUMAN 2 ND FLOOR, LIC BUILDING, N-5, CIDCO, AURANGABAD 431 003. / RESPONDENT ASSESSEE BY : SHRI S.N.PURANIK REVENUE BY : SHRI SUHAS KULKARNI. 2 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 * / ORDER PER ANIL CHATURVEDI, AM : 1. THE PRESENT APPEAL FILED BY THE REVENUE AND THE C.O. FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A), AURAN GABAD DT.18.08.2014 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER : ASSESSEE IS A CO-OPERATIVE BANK REGISTERED U/S 9(1) OF MAHARASHTRA CO-OPERATIVE SOCIETIES ACT, 1960. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2010-11 ON 15.10.2010 DECLARING TOTA L INCOME OF RS.62,41,840/-. THE CASE WAS SELECTED FOR SCRUTIN Y AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER D T.26.02.2013 AND THE TOTAL INCOME WAS DETERMINED AT RS.1,31,89,900/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT (A), WHO VIDE ORDER DT.18.08.2014 (IN APPEAL NO.ABD/CIT(A)/108/2013- 14) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE O RDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS: '1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.10,5 7,475/- ON ACCOUNT OF DISALLOWANCE OF AMORTIZATION OF PREMIUM ON HTM SECURITIES, WHICH WAS CAPITAL IN NATURE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.24,86,9 62/- ON ACCOUNT OF DISALLOWANCE OF CAPITAL LOSS ON SALE OF SECURITI ES. 3. THE ORDER OF THE AO BE RESTORED AND THAT OF THE CIT(A) BE VACATED. / DATE OF HEARING : 22.11.2016 / DATE OF PRONOUNCEMENT: 30.11.2016 3 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY GROUNDS OF APPEAL. 3. ASSESSEE HAS ALSO FILED CROSS-OBJECTIONS AND THE GROUN DS RAISED BY THE ASSESSEE IN THIS C.O., READS AS UNDER : 1. CROSS OBJECTOR, OF PRAYS FOR CANCELLATION OF DISALLO WANCE U/S 36(1)(VIIA) OF RS.34,03,621/- CONFIRMED BY CIT(A). 2. CROSS OBJECTORS, OF PRAYS TO CONFIRM CIT(A) ORDER ON THE ISSUE OF 1) AMORTIZATION OF PREMIUM AND 2) LOSS ON S ALE OF SECURITIES. 3. CROSS OBJECTOR / RESPONDENT PRAYS FOR JUST AND EQ UITABLE RELIEF. 4. RESPONDENT PRAYS TO ADD, ALTER, AMEND, MODIFY AND / OR WITHDRAW THE GROUND OF CROSS OBJECTION. 4. THE REGISTRY HAS INFORMED THAT THE CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE FILED AFTER THE PRESCRIBED DUE DATE. LD. AR AT THE TIME OF HEARING HAS FILED SWORN AFFIDAVIT OF THE CHIEF EXECUTIVE OFFICE R OF THE ASSESSEE, WHEREIN THE REASONS FOR DELAYED FILING OF C.O HAVE BEEN STATED AND IT IS FURTHER PRAYED WITH THE DELAY IN FILING THE CROSS-O BJECTIONS BE CONDONED. LD. DR DID NOT SERIOUSLY OPPOSE THE PRAYER O F ASSESSEE OF CONDONATION OF DELAY. IN VIEW OF THE AFORESAID FACTS AND CO NSIDERING THE REASONS GIVEN BY THE C.E.O., OF THE BANK FOR DELAY IN FILING THE CROSS- OBJECTIONS, THE DELAY IN FILING THE C.O BY THE ASSESSEE IS CO NDONED AND THE C.O IS ADMITTED FOR HEARING. 5. WE FIRST TAKE UP REVENUES APPEAL IN ITA NO.2040 OF 2014. 6. THE FIRST GROUND IS WITH RESPECT TO DELETING THE ADDITIO N OF RS.10,57,475/- ON ACCOUNT OF DISALLOWANCE OF AMORTIZATION OF PREMIUM ON HTM SECURITIES. 4 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON P ERUSING THE DETAILS FILED BY THE ASSESSEE, AO NOTICED THAT THE ASS ESSEE HAD DEBITED RS.10,57,475/- ON ACCOUNT OF AMORTIZATION OF PREMIU M ON INVESTMENTS IN GOVERNMENT SECURITIES BY THE ASSESSEE W HICH WERE CLASSIFIED BY IT IN HELD TO MATURITY CATEGORY. AO WAS OF THE VIEW THAT THE AMORTIZATION PREMIUM REPRESENTED THE EXCESS O F ACQUISITION COST OVER FACE VALUE OF SECURITIES AND IT BEING OF CAPITAL IN NATURE AND THEREFORE NOT AN ALLOWABLE EXPENDITURE. HE WAS FURTHER OF THE VIEW THAT THOUGH THE MASTER CIRCULAR ISSUED BY R.B.I. PROVIDES FOR AM ORTIZATION OF PREMIUM BUT THE GUIDELINES OF RBI CIRCULAR WAS NOT APPLICAB LE UNDER THE INCOME TAX ACT. HE, THEREFORE, HELD THAT THE AMORT IZATION PREMIUM TO BE OF CAPITAL IN NATURE AND ACCORDINGLY DISALLOWED RS. 10,54,475/-. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT, WHO DELETED THE ADDITION MADE BY A.O. BY HOLDING AS UNDER: 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE RIVAL SUBMISSIONS . IN THIS REGARD, THE MASTER CIRCULAR ON INVESTMENT BY PRIMARY (URBAN) CO OPERATIVE BANKS (UP DATED UP TO 30 / 06/2007) ISSUED BY RBI IS RELEVANT FOR DECIDING THE ISSUE UNDER APPEAL . THE RELEVANT PORTION OF THE CIRCULAR IS REPRODUCED BELO W - '16. VALUATION OF INVESTMENTS 16.1 VALUATION STANDARDS 16.1 . 1 INV E STMENTS CLASSIFIED UNDER 'HELD TO MATURITY' CATEGOR Y NEED NOT BE MARKED TO MARKET AND WILL BE CARRIED AT ACQUISITION COST UNLESS IT IS MORE THAN THE FACE VALUE, IN WHIC H CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINI NG TO MATURITY . 16.1.2 THE INDIVIDUAL SCRIP IN THE 'AVAILABLE FOR SALE' CATEGORY WILL BE MARKED TO MARKET AT THE YEAR - END OR AT MORE FREQUENT INTERVALS. THE BOOK VALUE OF THE INDIVIDUAL SECURIT IES WOULD NOT UNDERGO ANY CHANGE AFTER THE REVALUATION. 16.1 . 3 THE INDIVIDUAL SCRIP IN THE 'HELD FOR TRADING' CATEGORY WILL BE MARKED TO MARKET AT MONTHLY OR AT MORE FREQUENT INTERVALS. THE BOOK VALUE OF INDIVIDUAL SECURITIES IN THIS CATEGORY WOULD NOT UNDERGO ANY CHANGE AFTER MARKING TO MARKE T. 5 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 NOTE:- SECURITIES UNDER AFS AND HFT CATEGORIES SHA LL BE VALUED SCRIP WISE AND DEPRECIATION / APPRECIATION SHALL BE AGGREGATED FOR EACH CLASSIFICATION AS INDICATED AT PARA 15.6 ABOVE SEPARATELY FOR AFS AND HFT. NET DEPRECIATION, IF AN Y, SHALL BE PROVIDED FOR. NET APPRECIATION, IF ANY, SHOULD BE I GNORED . NET DEPRECIATION REQUIRED TO BE PROVIDED FOR IN ANYONE CLASSIFICATION SHOULD NOT BE R E DUCED ON ACCOUNT OF NET APPRECIATION IN ANY OTHER CLASSIFICATION . SIMILARLY NET DEPRECIATION FOR ANY CLASSIFICATION IN ONE CATEGORY SHOULD NOT BE REDUCE D FROM APPRECIATION IN SIMILAR CLASSIFICATION IN ANOTHER CA TEGORY. ' FURTHER IT HAS BEEN LAID DOWN BY CBDT VIDE INSTRUCT ION NO. 17 OF 2008 DATED 26/11/2008 VIDE PARA 2(VII) AS UNDER . AS PER RBI GUIDELINES DATED 16 TH OCTOBER,2000, THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATURITY (HTM), HELD FOR TR ADING (HFT) AND AVAILABLE FOR SALE (AFS). INVESTMENTS CLASSIFIE D UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND ARE CARRI ED AT ACQUISITION COST UNLESS THESE ARE MORE THAN THE FAC E VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. IN THE CASE OF HFT AND AFS S ECURITIES FORMING STOCK IN TRADE OF THE BANK, THE DEPRECIATIO N/ APPRECIATION IS TO BE AGGREGATED SCRIP WISE AND ONLY NET DEPRECI ATION, IF ANY, IS REQUIRED TO BE PROVIDED FOR IN THE ACCOUNTS. THE LATEST GUIDELINES OF THE RBI MAY BE REFERRED TO FOR ALLOWI NG ANY SUCH CLAIMS.' THE HON'BLE MUMBAI TRIBUNAL IN THE CASE OF ACIT VS. BANK OF RAJASTHAN LTD . (2011) TIOL - 35 ITAT (MUM.) HAS FOLLOWED THE ABOVE INSTRUCTIONS OF CBDT. THE ABOVE DECISION LAYS DOWN THAT IN THE CASE OF BANKS THE PREMIUM PAID IN EXCESS OF THE FACE VALUE OF INVESTMENTS CLASSIFIED UNDER HTM CATEGORY, WHICH HA S BEEN AMORTIZED OVER THE PERIOD TILL MATURITY, IS ALLOWAB LE AS REVENUE EXPENDITURE SINCE THE CLAIM IS AS PER RBI GUIDELINE S AND THE CBDT ALSO HAS DIRECTED TO ALLOW SUCH PREMIUM. IN VIEW OF THE ABOVE CIRCULARS, INSTRUCTIONS AND GU IDELINES ISSUED BY THE CBDT AND RESERVE BANK OF INDIA, THE AMORTIZA TION OF PREMIUM PAID ON GOVERNMENT SECURITIES IS AN ALLOWAB LE EXPENDITURE. THE CONTENTION OF THE APPELLANT AND ALLOWABILITY OF THE SAID EXPENDITURE IS SUPPORTED BY THE ABOVE MENT IONED DECISIONS RELIED ON BY THE APPELLANT (SUPRA). FURTHER THE AMORTIZATION OF PREMIUM ON GOVERNMENT S ECURITIES IS ALLOWABLE DEDUCTION AS HELD BY HONBLE ITAT, PUNE I N FOLLOWING RECENT DECISIONS :- (1) DCIT, CENTRAL CIRCLE-I, NASHIK VS. VISHWAS COO PERATIVE BANK LTD., NASHIK ITA NO.1439/PN/2011 A . Y . 2008-09 DATED 28/06 / 2013. (2) RATNAKAR BANK LTD., ITA NO.789/PN / 2010 DATED 08/02/2013 (3) BHAVANI URBAN COOPERATIVE BANK LTD., GEORAI, D IST. BEED VS. ACIT, CIRCLE-2, AURANGABAD, ITA NO.610 / PN / 2010-11 (A . Y.2007-08) ORDER DATED 31/08/2012. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, THE CLAI M OF THE APPELLANT THAT THE AMORTIZATION OF PREMIUM PAID ON G OVERNMENT 6 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 SECURITIES IS ALLOWABLE EXPENDITURE IS ACCEPTED. TH E A.O. IS ACCORDINGLY DIRECTED TO ALLOW THE SAID CLAIM OF THE APPELLANT OF RS.I0,57 , 475 / - AND TO REDUCE THE INCOME ASSESSED TO THE EXTENT OF RS.I0,57,475 / -. GROUND NO.1 IS ALLOWED. 8. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN A PPEAL BEFORE US. 9. BEFORE US, LD.DR SUPPORTED THE ORDER OF AO. LD.AR ON THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD. C IT(A) AND FURTHER SUBMITTED THAT APART FROM VARIOUS DECISIONS THAT HAVE BEEN RELIED BY CIT(A) WHILE DECIDING THE ISSUE, THE HONBLE BOMBAY HIGH COURT, ON IDENTICAL FACTS, IN THE CASE OF CIT VS. HDFC BANK REPORTED IN 107 DTR 140 (BOM) HAS ALSO DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. LD. AR FURTHER SUBMITTED THAT ON IDENTICAL FACTS HONBLE PU NE TRIBUNAL IN THE CASE OF ACIT VS. RATANCHAND SHAH SAHAKARI BANK LIMITED AND OTHERS (ORDER DT.28.11.2014), HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. HE THUS SUPPORTED THE ORDER OF LD. CIT(A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO DELETION OF DISALLOWANCE OF AMORTIZATION OF PREMIUM OF GOVERNMENT SECURIT IES. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD GOVERNMEN T SECURITIES WHICH WERE CLASSIFIED BY IT UNDER HELD TO MATURITY (HTM) CA TEGORY. AS PER THE PREVAILING RBI GUIDELINES, WHICH ARE APPLICABLE TO TH E ASSESSEE, WHERE THE ACQUISITION COST OF INVESTMENTS CLASSIFIED UNDER HTM CATEGORY ARE MORE THAN THE FACE VALUE, THE PREMIUM IS R EQUIRED TO BE AMORTIZED OVER THE REMAINING PERIOD. THE ASSESSEE HAS FO LLOWED RBI GUIDELINES AND HAS ACCORDINGLY AMORTIZED THE PREMIUM. WE FIND THAT LD.CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT THE AMO RTIZATION OF PREMIUM TILL MATURITY IS ALLOWABLE AS REVENUE EXPENSES AND T HAT CBDT 7 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 HAS ALSO DIRECTED TO ALLOW SUCH PREMIUM AS REVENUE EXPEN SES. HE HAS FURTHER RELIED ON THE DECISION OF PUNE TRIBUNAL IN THE CASE OF CIT VS. VISHWAS CO-OPERATIVE BANK LIMITED (SUPRA) AND OTHER DECISIO NS. WE FURTHER FIND THAT THE ISSUE OF AMORTIZATION OF PREMIUM ALSO A ROSE BEFORE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BA NK LIMITED IN ITA NO.330 OF 2012. THE HONBLE HIGH COURT VIDE ORDER DT.23.07.2014 DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. THE RELEVANT QUESTION BEFORE THE HONBLE HIGH COURT AND ITS DECISION IN THE AFORESAID ORDERS ARE AS UNDER :- C. WHETHER THE ITAT IS RIGHT IN LAW IN HOLDING TH AT THE ASSESSEE IS ENTITLED FOR DEDUCTION WITH RESPECT TO THE DIMIN UTION IN VALUE OF THE INVESTMENT AND AMORTIZATION OF PREMIUM ON INVES TMENT HELD TO MATURITY ON THE GOUNDS OF MANDATE BY RBI GUIDELI NES THEREBY IGNORING THE DECISION OF THE SUPREME COURT IN THE C ASE OF SOUTHERN TECHNOLOGIES VS. CIT (320 ITR 577) THE HONBLE HIGH COURT OBSERVED AS UNDER:- 7. AS FAR AS QUESTION (C) IS CONCERNED, WE FIND TH AT AN IDENTICAL QUESTION OF LAW WAS FRAMED AND ANSWERED IN FAVOUR O F THE ASSESSEE BY THIS COURT IN ITS JUDGEMENT DATED 4 TH JULY, 2014 IN INCOME TAX APPEAL NO.1079 OF 2012, COMMISSIONER OF INCOME TAX-2 V/S M/S LORD KRISHNA BANK LTD. (NOW MERGED WI TH HDFC BANK LTD.). MR SURESH KUMAR FAIRLY STATED THAT QUES TION (C) REPRODUCED ABOVE IS COVERED BY THE SAID ORDER. IN VIEW THEREOF, WE ARE OF THE VIEW THAT EVEN QUESTION (C) DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW THAT REQUIRES AN ANSWER FROM US. WE THUS FIND THAT THE ISSUE IN THE PRESENT CASE IS SQUAR ELY COVERED BY THE AFORESAID DECISION RENDERED BY HONBLE BOMBAY HIGH CO URT. BEFORE US REVENUE HAS NOT PLACED ANY CONTRARY BINDING DECISION IN ITS SUPPORT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS, THIS GROUND OF REVENUE IS DISMISSED. 11. SECOND GROUND IS WITH RESPECT TO DELETION OF RS.24,86 ,962/- ON SALE OF SECURITIES. 8 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 12. AO NOTICED THAT ASSESSEE HAD DEBITED RS.24,86,962/- O N ACCOUNT OF SALE OF SECURITIES. AO NOTICED THAT THE LOSS WAS ON ACC OUNT OF SALE OF DIFFERENT UTI FUNDS. THE SUBMISSION OF THE ASSESSEE THAT THE INVESTMENTS IN FUNDS WERE TRADING INVESTMENTS AND HENCE THE LOSS WAS ALLOWABLE WAS NOT FOUND ACCEPTABLE TO THE AO AS HE WAS OF THE VIEW THA T SINCE ASSESSEE WAS A BANK AND WAS PROVIDING BANKING SER VICES TO ITS CUSTOMERS, THE SECURITIES / SHARES AND MUTUAL FUNDS PURC HASED BY THE BANK WERE FOR THE PURPOSE OF INVESTMENTS AND THEREFORE ANY LOSS INCURRED ON ITS SALE WAS IN THE NATURE OF CAPITAL LOSS AND THEREFORE NOT ALLOWABLE. HE ACCORDINGLY DISALLOWED THE CLAIM OF RS.24,86,962/ -. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD. CIT(A) WHO DELETED THE ADDITION BY HOLDING AS UNDER :- 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME, IT HAS BEEN NO TICED THAT THE APPELLANT HAS CLAIMED DEPRECIATION/DIMINUTION IN VAL UE OF GOVERNMENT SECURITIES FOR THE YEAR UNDER APPEAL AT RS.24,86,962/-. THE APPELLANT HAS CLAIMED THAT THE SAID GOVERNMENT SECURITIES ARE STOCK-IN-TRADE OF THE BAN KING BUSINESS CARRIED OUT BY THE APPELLANT AND HENCE LOSS ON SALE OF THE SAME IS ALLOWABLE EXPENDITURE. THE AO. HAS, HOWEVER, HELD THAT THE SAID GOVERNMENT SECURITIES WERE OF THE CATEGORY OF 'HELD TO MATURITY' AND IS, THEREFORE, A CAPITAL ASSET AND HENCE SHOULD HAVE BEEN VALUED BY THE APPELLANT BANK AT COST; THE DIMINUTION IN THE VALUE OF CAPITAL ASSET CANNOT BE TREATED AS REVENUE EXPENDITURE AND HENCE CANNOT BE ALLOWED IN VIEW OF PROVISIONS OF SECTION 37(1) OF THE ACT. THE AO. HAS ALSO RELIED ON THE DECISION IN THE CASE OF VIJAYA BANK LTD. VS. CIT 187 ITR 541 (SC) IN SUPPORT OF TH IS ADDITION. THE DECISION IN THE CASE OF VIJAYA BANK LTD. IS NOT ON THE ISSUE UNDER APPEAL AS IN THE SAID CASE IT HAS BEEN HELD THAT AMOUNT SPENT ON PURCHASE OF SECURITIES BEING CAPITAL OUTLA Y CANNOT BE SET OFF AGAINST INTEREST INCOME FROM THE SECURITIES. THE ISSUE UNDER APPEAL IS THAT WHETHER THE GOVERNME NT SECURITIES HELD BY THE ASSESSEE AS SLR AS STATUTORI LY REQUIRED AND WHICH ARE CLASSIFIED UNDER 'HELD TO MATURITY' C ATEGORY ARE TO BE TREATED AS STOCK-IN-TRADE AS CLAIMED BY THE APPE LLANT OR CAPITAL ASSET AS HELD BY THE AO. THIS ISSUE IS COVE RED IN FAVOUR OF THE ASSESSEE BANK IN VIEW OF THE RATIO LAID DOWN BY THE DECISION OF HON'BLE ITAT, PUNE IN THE CASE OF LATUR URBAN CO OPERATIVE BANK LTD., LATUR VS. DCIT, CIRCLE-3, NANDED IN ITA NOS.778 & 792/PN/2011 DATED 31/08/2012 FOR AY.2007-08. THE CONCLUDING PARA OF THE ABOVE REFERRED DECISION IS A S UNDER - 9 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 15. IN THE CASE OF UNITED COMMERCIAL BANK (SUPRA), EVEN THE ISSUE OF VALUATION OF THE STOCK IN TRADE OF THE INVESTMENT WAS BEFORE THE HON'BLE SUPREME COURT. IN THE CASE OF TH E ASSESSEE, THE ISSUE IS REGARDING ALLOWABILITY OF THE LOSS ON THE SALE OF T HE SECURITIES. MERELY BECAUSE THE SECURITIES ARE KEPT UNDER THE HEAD TILL THE MATURITY, THE SAID SECURITY CANNOT BE TREA TED AS A PURELY INVESTMENT. LAW IS WELL SETTLED THAT THE SECURITIES HELD BY THE BANK ARE IN THE NATURE OF STOCK-IN- TRADE. WE MAY L IKE TO QUOTE HERE THE DECISION OF HON'BLE HIGH COURT- OF KERALA IN THE CASE OF CIT VS. NEDUNGADI BANK LTD., 264 ITR 545. IN THE SA ID CASE, THE HON'BLE HIGH COURT HAS HELD THAT THE SECURITIES HEL D BY THE BANK ARE IN THE NATURE OF STOCK-IN-TRADE. BOTH THE AUTHO RITIES BELOW HAS MERELY GONE ON THE NOMENCLATURE OF THE HEAD UNDER W HICH THE SECURITIES ARE HELD. IN OUR CONSIDERED VIEW, NOMEN CLATURE CANNOT BE DECISIVE FOR THE ASSESSEE BANK. WE, THEREFORE, HOLD THAT THE LOSS ON THE SALE OF THE SECURITIES IS REVENUE IN NA TURE AND SAME IS ALLOWABLE. ACCORDINGLY, GROUND NO.2 IS ALLOWED. IN THE ABOVE MENTIONED DECISION OF HON'BLE ITAT, PU NE, THE ASSESSEE BANK HAS HELD THE GOVERNMENT SECURITIES IN THE CATEGORY OF 'HELD TO MATURITY', HOWEVER, THE HON'BL E ITAT HAS HELD THAT THE NOMENCLATURE GIVEN CANNOT BE DECISIVE AND HELD THAT THE SAID GOVERNMENT SECURITIES ARE TO BE TREAT ED AS STOCK-IN- TRADE OF THE BANK. IT IS SETTLED LAW THAT THE STOCK -IN-TRADE IS TO BE VALUED AT COST OR MARKET PRICE WHICHEVER IS LEAST. IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND RESPE CTFULLY FOLLOWING THE RATIO LAID DOWN BY THE DECISION OF HO N'BLE ITAT, PUNE REFERRED TO ABOVE AND ALSO THE DECISIONS RELIE D ON BY THE HON'BLE ITAT OF HON'BLE SUPREME COURT IN THE CASE O F UNITED COMMERCIAL BANK VS. CIT (1999) 240 ITR 355 AND HON' BLE KERALA HIGH COURT IN THE CASE OF CIT VS. NEDUNGADI BANK LT D., 264 ITR 545, I HOLD THAT THE A.O. IS NOT JUSTIFIED IN MAKIN G ADDITION OF RS.24,86,962/- ON ACCOUNT OF LOSS ON SALE OF GOVERN MENT SECURITIES. THE ADDITION OF RS.24,86,962/- IS, THER EFORE, DELETED. THE A.O. IS DIRECTED ACCORDINGLY. GROUND NO.3 STAND S ALLOWED. 13. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 14. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF AO. LD. AR O N THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD. CIT(A) AND FURTHER SUBMITTED THAT ON IDENTICAL FACTS, THE CO-ORDIN ATE BENCH OF TRIBUNAL IN THE CASE OF LATUR URBAN CO-OPERATIVE BANK LIM ITED IN ITA NO.778 OF 2011 ORDER DT.31.08.2012 HAS DECIDED THE ISSUE I N FAVOUR OF THE ASSESSEE. HE ALSO PLACED ON RECORD A COPY OF THE A FORESAID DECISION. HE, THEREFORE, SUBMITTED THAT CONSIDERING THE FACT THAT T HE TRIBUNAL HAS 10 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 BEEN CONSISTENTLY TAKEN A STAND IN ASSESSEES FAVOUR, N O INTERFERENCE TO THE ORDER OF LD. CIT(A) IS CALLED FOR. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH REFERENC E TO ALLOWABILITY OF LOSS ON SALE OF UNITS OF UTI. IT IS ASSESSEES STAND T HAT THOUGH THE NOMENCLATURE USED FOR SHOWING THE UNITS OF UTIS IS INVEST MENTS BUT IN REALITY IT IS STOCK IN TRADE WHEREAS ON THE OTHER HAND IT IS REVENUES STAND THAT IT IS INVESTMENT. WE FIND THAT LD. CIT(A) WHILE DE CIDING THE ISSUE IN FAVOUR OF ASSESSEE AND AFTER RELYING ON THE DEC ISION OF CO- ORDINATE BENCH IN THE CASE OF LATUR URBAN CO-OPERATIVE BANK LIMITED (SUPRA) AND OTHER DECISIONS HELD THAT THE NOMENCLATURE GI VEN BY THE ASSESSEE CANNOT BE DECISIVE AND HELD THAT THE GOVERNME NT SECURITIES WERE TO BE TREATED AS STOCK-IN-TRADE BY THE BANK. B EFORE US REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO CONTROVERT TH E FINDINGS OF LD. CIT(A) NOR HAS PLACED ANY CONTRARY BINDING DECISION IN ITS S UPPORT. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDERS OF C IT(A) AND THUS, THIS GROUND OF REVENUE IS DISMISSED. 16. IN THE RESULT THE APPEAL OF REVENUE IS DISMISSED. 17. NOW WE TAKE UP THE GROUNDS RAISED BY THE ASSESSEE IN THE C.O. 18. ON PERUSING THE COMPUTATION OF INCOME, AO NOTICED THAT ASSESSEE HAD CLAIMED DEDUCTION OF RS.36,03,621/- U/S 36(1)(V IIA) THOUGH IT HAD MADE A PROVISION OF ONLY RS.2,00,000/-. AO WAS OF THE VIEW THAT THE DEDUCTION U/S 36(1)(VIIA)(A) IS ALLOWABLE ONLY T O THE EXTENT OF PROVISION MADE BY THE ASSESSEE. HE ACCORDINGLY DISALLOW ED THE DIFFERENCE OF RS.34,03,621/-. (RS.36,03,621/- RS.2,00,000/-) 11 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD. CIT(A) WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER: 7.3 I HAVE CAREFULLY CONSIDERED FACTS OF THE CASE A ND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOT ICED THAT IN ORDER TO CLAIM DEDUCTION U/S 36(1)(VIIA), THE BANK HAS TO MAKE PROVISION FOR BAD AND DOUBTFUL DEBTS. THE RELEVANT PORTION OF THE SAID SECTION IS AS UNDER 36 (1) THE DEDUCTION PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THE REIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28- . (VIIA) IN RESPECT OF ANY PROVISION FOR BAD AND DOU BTFUL DEBTS MADE BY-' FROM THE ABOVE MENTIONED PROVISION OF SE CTION 36(1)(VIIA), IT IS CLEAR THAT IN ORDER TO CLAIM DEDUCTION FOR BA D AND DOUBTFUL DEBTS, THE PROVISION IN RESPECT OF THE SAME IS REQU IRED TO BE MADE. THIS PROPOSITION IS ALSO SUPPORTED/CLARIFIED BY (CBDT INSTRUCTION NO.17/2008 DATED 26/11/2008. THIS PROPO SITION OF LAW IS ALSO SUPPORTED BY THE DECISION IN THE CASE O F STATE BANK OF PATIALA VS. CIT & ANR (2005) 272 ITR 54 (P&H). IN T HIS CASE, IT HAS BEEN LAID DOWN THAT MAKING A PROVISION FOR BAD AND DOUBTFUL DEBTS EQUAL TO THE AMOUNT MENTIONED IN SECTION 36(L )(VIIA) IS A CONDITION PRECEDENT FOR ALLOWING DEDUCTION; ASSESSE E CLAIMING DEDUCTION FOR BAD DEBT UNDER UN-AMENDED SECTION 36( 1)(VIIA) BUT AFTER AMENDMENT ENHANCING THE DEDUCTION IN THE RETU RN BY MAKING-UP THE SHORTFALL IN THE PROVISION IN THE BAL ANCE SHEET OF SUBSEQUENT YEAR, THE CLAIM TO THE EXTENT OF ENHANCE MENT IS NOT ALLOWABLE. FROM THE ABOVE REFERRED DECISION IT IS C LEAR THAT IN ORDER TO CLAIM DEDUCTION U/S 36(1)(VIIA), THE PROVISION HAS TO BE MADE IN THE YEAR IN WHICH THE DEDUCTION HAS BEEN CL AIMED; THE PROVISION MADE IN THE SUBSEQUENT YEAR IS OF NO RELE VANCE. IT IS ALSO UNDISPUTED FACT THAT THE APPELLANT HAS CLAIMED BAD AND DOUBTFUL DEBTS AT RS.36,03,621/- BUT HAS MADE PROVI SION FOR BAD AND DOUBTFUL DEBTS ONLY TO THE EXTENT OF RS.2,00,00 0/- IN THE YEAR UNDER APPEAL. FURTHER, THIS ISSUE UNDER APPEAL HAS BEEN DECIDED BY HON'BLE I.T.A.T., PUNE IN FAVOUR OF REVENUE IN T HE CASE OF SHRI WARANA SAHAKARI BANK LTD. VS. ACIT, CIRCLE-L , KOLH APUR, ITA NO.2508/PN/2012-A.Y. 2009-10 DATED 16/04/2014. IN T HIS CASE, IT HAS LAID DOWN THAT PROVISION IS TO BE MADE IN THE BOOKS OF ACCOUNTS FOR CLAIMING DEDUCTION U/S 36(1)(VIIA) OF THE ACT. IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND UNAMBIGUOUSLY WORDED PROVISION OF SECTION 36(1)(VIIA) AND (CBDT CIRCULAR CLARIFYING THE PROVISIONS OF THE SAID SECTION, I AM OF THE CONSIDE RED VIEW THAT THE A.O. IS JUSTIFIED IN MAKING DISALLOWANCE ON ACC OUNT OF SHORT PROVISION OF BDDR AMOUNTING TO RS.34,03,621/- CLAIM ED BY THE APPELLANT U/S 36(L)(VIIA) OF THE ACT. THE ADDITION OF RS.34,03,621/- IS, THEREFORE, CONFIRMED. GROUND NO. 3 STANDS DISMISSED. 19. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 12 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 BEFORE US, AT THE OUTSET, LD.AR FAIRLY SUBMITTED THAT ON ID ENTICAL FACTS THE CO-ORDINATE BENCH IN THE CASE OF MAHALAKSHMI CO-OPER ATIVE BANK LIMITED. HAS DECIDED THE ISSUE AGAINST THE ASSESSEE HE, T HEREFORE SUBMITTED THAT THE GROUND BE DECIDED ACCORDINGLY. LD.DR ON THE OTHER HAND SUPPORTED THE ORDER OF AO AND LD. CIT(A). 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL O N RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH REFEREN CE TO CLAIM OF DEDUCTION U/S 36(1)(VIIA) OF THE ACT. IT IS AN UNDISPUTED FACT THAT THOUGH THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS.36,03,62 1/- BUT HAD MADE A PROVISION OF BAD DEBTS OF ONLY RS.2,00,000/-. A O ALLOWED THE CLAIM OF DEDUCTION ONLY TO THE EXTENT OF PROVISION MAD E BY THE ASSESSEE. WE FIND THAT IDENTICAL ISSUE AROSE IN THE CASE O F SHRI MAHALAKSHMI CO-OPERATIVE BANK LIMITED VS. ACIT BEFORE CO-O RDINATE BENCH OF PUNE AND THE ISSUE WAS DECIDED IN REVENUES FA VOUR VIDE ORDER DT.16.04.2014 (ITA NO.162/PN/2013) BY OBSERVING AS UNDER : 2. FIRST, WE SHALL TAKE-UP THE APPEAL OF THE ASSES SEE IN ITA NO.162/PN/2013. IN THIS APPEAL, THE SOLITARY DISPU TE IS WITH REGARD TO THE ACTION OF THE INCOME-TAX AUTHORITIES IN RESTRICTING THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 36(1)(VIIA) O F THE ACT TO THE ACTUAL AMOUNT OF PROVISION MADE IN THE BOOKS OF ACCOUNT FOR BAD AND DOUBTFUL DEBTS AMOUNTING TO RS.66,22,634/- AS AGAINST ASSESSEES CLAIM FOR DEDUCTION OF RS.1,70,40,528/-. 3. ON THIS GROUND, IT WAS A COMMON POINT BETWEEN TH E PARTIES THAT SIMILAR ISSUE HAD COME UP BEFORE THE TR IBUNAL IN THE ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING AS SESSMENT YEAR OF 2008-09 VIDE ITA NO.1658/PN/2011 DATED 29.1 0.2013 WHEREIN THE ISSUE WAS DECIDED AGAINST THE ASSESSEE. A COPY OF THE SAID PRECEDENT HAS BEEN PLACED ON RECORD. 4. IN VIEW OF THE AFORESAID PRECEDENT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 (SUPRA) THE ISSUE IS LI ABLE TO BE DECIDED AGAINST THE ASSESSEE. HOWEVER, IN ORDER TO IMPART COMPLETENESS TO THE ORDER ON THIS ASPECT A BRIEF DI SCUSSION IS NECESSARY. THE ASSESSEE IS A CO-OPERATIVE BANK ENG AGED IN THE BUSINESS OF BANKING AND IN TERMS OF SECTION 36(1)(V IIA) OF THE ACT, IT IS ENTITLED TO CLAIM A DEDUCTION IN RESPECT OF A NY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE ON ACCOUNT OF AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF THE ASSESSEE BANK. 13 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 SECTION 36(1)(VIIA) OF THE ACT PROVIDES THAT SUCH D EDUCTION SHALL NOT EXCEED 7.5% OF THE TOTAL INCOME (COMPUTED BEFOR E MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A OF THE ACT) AND AN AMOUNT NOT EXCEEDING 10% OF THE AGGREGATE AVERAGE A DVANCES MADE BY THE RURAL BRANCHES OF THE BANK. BY RELYING ON SECTION 36(1)(VIIA) OF THE ACT, ASSESSEE BEING A CO-OPERATI VE BANK, CLAIMED A DEDUCTION OF RS.1,70,40,528/- IN ITS RETU RN OF INCOME ON ACCOUNT OF BAD AND DOUBTFUL DEBTS RELATING TO TH E ADVANCES MADE BY THE RURAL BRANCHES. IT WAS NOTICED THAT AS AGAINST THE CLAIM OF RS.1,70,40,528/- MADE IN THE RETURN OF INC OME, ASSESSEE HAD MADE A PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS.66,22,634/- ONLY IN THE BOOKS OF ACCOUNT. FOR T HE SAID REASON ASSESSEES CLAIM FOR DEDUCTION U/S 36(1)(VIIA) OF T HE ACT WAS RESTRICTED THE EXTENT OF PROVISION FOR BAD AND DOUB TFUL DEBTS MADE IN THE ACCOUNT BOOKS I.E. RS.66,22,634/- AND T HE BALANCE OF RS.1,04,17,894/- WAS DISALLOWED. THE AFORESAID CON TROVERSY IS BEFORE US. IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR OF 2008-09 ALSO THE REVENUE HAD DENIED THE CLAIM OF TH E ASSESSEE U/S 36(1)(VIIA) OF THE ACT BY RESTRICTING IT TO THE EXTENT OF THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACTUALLY MADE IN THE ACCOUNT BOOKS. THE TRIBUNAL, AFTER CONSIDERING THE RIVAL STANDS AS ALSO THE VARIOUS AUTHORITIES CITED AT BAR CAME T O CONCLUDE THAT THE DEDUCTION SOUGHT TO BE CLAIMED BY THE ASSESSEE U/S 36(1)(VIIA) OF THE ACT WAS LIABLE TO BE RESTRICTED TO THE EXTENT OF THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACTUALLY MADE IN THE ACCOUNT BOOKS. THE RELEVANT DISCUSSION CONTAINED I N THE ORDER OF THE TRIBUNAL IS REPRODUCED HEREINAFTER:- 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. WE HAVE ALSO ANXIOUSLY PERUSED THE AUTHORITIES CITED A T BAR IN ORDER TO DETERMINE THE CONTROVERSY ON HAND. THE REL EVANT PORTION OF SECTION 36(1)(VIIA) OF THE ACT, AS APPLI CABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. A.Y. 2008- 09 READS AS UNDER : - [(VIIA) [IN RESPECT OF ANY PROVISION FOR BAD AND D OUBTFUL DEBTS MADE BY (A) A SCHEDULED BANK [NOT BEING [* * *] A BANK INCO RPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA] OR A NON- SCHEDULED BANK [OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK], AN AMOUNT [NOT EXCEEDING SEVEN AND ONE-HALF PER CENT] OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NO T EXCEEDING [TEN] PER CENT OF THE AGGREGATE AVERAGE A DVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER : 10. A BARE PERUSAL OF AFORESAID SECTION CLEARLY BR INGS OUT THAT THE DEDUCTION SPECIFIED THEREIN IS IN RESPECT OF A NY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY.. AN ELIGIBLE ASSESSEE. THE PRESENCE OF THE AFORESAID EXPRESSION IN THE SEC TION SUPPORTS THE PLEA OF THE REVENUE, WHICH IS TO THE EFFECT THA T THE DEDUCTION ALLOWABLE UNDER SECTION 36(1)(VIIA) OF THE ACT IS I N RESPECT OF THE PROVISION MADE BY THE ASSESSEE. IN OUR CONSIDERED OPINION, THE JUDGEMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF STATE BANK OF PATIALA (SUPRA) CLEARLY C OVERS THE CONTROVERSY IN FAVOUR OF THE REVENUE AND BELIES THE INTERPRETATION SOUGHT TO BE CANVASSED BY THE ASSESS EE. IN THE CASE BEFORE THE HONBLE HIGH COURT, ASSESSEE-BANK H AD ORIGINALLY FILED ITS RETURN OF INCOME FOR ASSESSMEN T YEAR 1985- 14 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 86 CLAIMING DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT AT RS.1,90,36,000/-. AFTER FILING OF THE RETURN THE PR OVISIONS OF SECTION 36(1)(VIIA) OF THE ACT WERE AMENDED BY FINA NCE ACT, 1985 WHEREBY DEDUCTION WAS ENHANCED TO 10% OF THE P ROFIT OR 2% OF THE AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES OF THE BANK, WHICHEVER WAS HIGHER. ON ACCOUNT OF TH E AMENDED PROVISIONS, ASSESSEE FILED A REVISED RETURN OF INCO ME ON 24.04.1986 ENHANCING THE CLAIM FOR DEDUCTION FROM RS.1,90,36,000/- TO RS.1,94,21,000/-. THE ASSESSING OFFICER RESTRICTED THE DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT TO RS.1,90,36,000/- ONLY AND DISALLOWED THE BALANCE ON THE GROUND THAT IN THE BOOKS OF ACCOUNT PERTAINING TO T HE RELEVANT ASSESSMENT YEAR, ASSESSEE HAD MADE A PROVISION FOR BAD AND DOUBTFUL DEBTS OF RS.1,90,36,000/- ONLY. THE ASSESS EE ARGUED THAT THE PROVISION OF RS.1,90,36,000/- WAS MADE IN THE BALANCE-SHEET FINALIZED ON 14.02.1985 WHICH WAS AS PER THE UNAMENDED PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT AND THAT IN VIEW OF THE AMENDMENT OF SECTION 36(1)(VIIA) OF THE ACT PERMITTING HIGHER CLAIM OF DEDUCTION, THE ASSESSEE COULD NOT HAVE POSSIBLY MADE THE HIGHER PROVISION IN THE BALA NCE-SHEET FINALIZED ON A PRIOR DATE, BUT IT MADE UP THE SHORT FALL BY MAKING AN ADEQUATE PROVISION IN THE BALANCE-SHEET OF THE S UBSEQUENT ASSESSMENT YEAR. ON THIS BASIS, IT WAS SOUGHT TO BE MADE OUT THAT THERE WAS SUBSTANTIAL COMPLIANCE WITH THE REQU IREMENT OF LAW OF MAKING PROVISION FOR BAD AND DOUBTFUL DEBTS AND THEREFORE ASSESSEE JUSTIFIED THE CLAIM OF DEDUCTION FOR THE COMPLETE AMOUNT OF RS.1,94,21,000/- AND NOT RESTRIC TED TO RS.1,90,36,000/-. THE CIT(A) AS WELL AS THE TRIBUNA L NEGATED THE PLEA OF THE ASSESSEE AND ACCORDINGLY, THE MATTE R WAS CARRIED BEFORE THE HONBLE PUNJAB & HARYANA HIGH CO URT. THE HONBLE HIGH COURT REFERRED TO THE PROVISIONS OF SE CTION 36(1)(VIIA) OF THE ACT AND OBSERVED THAT ..THE DE DUCTION ALLOWABLE UNDER THE ABOVE PROVISIONS IS IN RESPECT OF THE PROVISION MADE AND FURTHER WENT ON TO HOLD THAT ..MAKING OF A PROVISION FOR BAD AND DOUBTFUL DEBTS EQUAL TO THE AMOUNT MENTIONED IN THIS SECTION IS MUST FOR CLAIMING SUCH DEDUCTION. IN VIEW OF THE AFORESAID JUDGEMENT OF THE HONBLE P UNJAB & HARYANA HIGH COURT, IN OUR VIEW, THE POSITION SOUGH T TO BE CANVASSED BY THE ASSESSEE DESERVES TO BE REPELLED. WE REPRODUCE HEREINAFTER THE RELEVANT PORTION OF THE O RDER OF THE HONBLE HIGH COURT, WHICH READS AS UNDER :- 5. SEC.36(1)(VIIA) OF THE ACT AS APPLICABLE TO THE ASST. YR. 1985- 86, READS AS UNDER : IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL D EBTS MADE BY A SCHEDULED BANK [NOT BEING A BANK APPROVED BY T HE CENTRAL GOVERNMENT FOR THE PURPOSES OF CL.(VIIIA) O R A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTS IDE INDIA] OR A NON-SCHEDULED BANK, AN AMOUNT NOT EXCEEDING TE N PER CENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING AN Y DEDUCTION UNDER THIS CLAUSE AND CHAPTER VI-A) OR AN AMOUNT NOT EXCEEDING TWO PER CENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK, COMPUTED I N THE PRESCRIBED MANNER, WHICHEVER IS HIGHER. 6. A BARE PERUSAL OF THE ABOVE SHOWS THAT THE DEDUC TION ALLOWABLE UNDER THE ABOVE PROVISIONS IS IN RESPECT OF THE PROVISION MADE. THEREFORE, MAKING OF A PROVISION FO R BAD AND DOUBTFUL DEBTS EQUAL TO THE AMOUNT MENTIONED IN THI S SECTION IS A MUST FOR CLAIMING SUCH DEDUCTION. THE TRIBUNAL HA S RIGHTLY 15 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 POINTED OUT THAT THIS ISSUE STANDS FURTHER CLARIFIE D FROM THE PROVISO TO CL.(VII) OF S.36(1) OF THE ACT, WHICH RE ADS AS UNDER : PROVIDED THAT IN THE CASE OF AN ASSESSEE TO WHICH CL.(VIIA) APPLIES, THE AMOUNT OF THE DEDUCTION RELATING TO AN Y SUCH DEBT OR PART THEREOF SHALL BE LIMITED TO THE AMOUNT BY W HICH SUCH DEBT OR PART THEREOF EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE UNDER THAT CLAUSE. 7. THIS ALSO CLEARLY SHOWS THAT MAKING OF PROVISION EQUAL TO THE AMOUNT CLAIMED AS DEDUCTION IN THE ACCOUNT BOOK S IS NECESSARY FOR CLAIMING DEDUCTION UNDER S. 36(1)(VII A) OF THE ACT. THE TRIBUNAL HAS DISTINGUISHED VARIOUS AUTHORITIES RELIED UPON BY THE ASSESSEE WHEREIN DEDUCTIONS HAD BEEN ALLOWED UNDER VARIOUS PROVISIONS WHICH ALSO REQUIRED CREATION OF RESERVE AFTER THE ASSESSEE HAD CREATED SUCH RESERVE IN THE ACCOUN T BOOKS BEFORE THE COMPLETION OF THE ASSESSMENT. IT HAS BEE N CORRECTLY POINTED OUT THAT IN ALL THOSE CASES, RESERVES/PROVI SIONS HAD BEEN MADE IN THE BOOKS OF ACCOUNT OF THE SAME ASSES SMENT YEAR AND NOT OF THE SUBSEQUENT ASSESSMENT YEAR. 8. IN THE PRESENT CASE, THE ASSESSEE HAS NOT MADE A NY PROVISION IN THE BOOKS OF ACCOUNT FOR THE ASSESSMEN T YEAR UNDER CONSIDERATION, I.E., 1985-86, BY MAKING SUPPL EMENTARY ENTRIES AND BY REVISING ITS BALANCE SHEET. THE PROV ISION HAS BEEN MADE IN THE BOOKS OF ACCOUNT OF THE SUBSEQUENT YEAR. 9. WE ARE, THEREFORE, SATISFIED THAT THE TRIBUNAL W AS RIGHT IN HOLDING THAT SINCE THE ASSESSEE HAD MADE A PROVISIO N OF RS.1,19,36,000 FOR BAD AND DOUBTFUL DEBTS, ITS CLAI M FOR DEDUCTION UNDER S. 36(1)(VIIA) OF THE ACT HAD TO BE RESTRICTED TO THAT AMOUNT ONLY. SINCE THE LANGUAGE OF THE STATUTE IS CLEAR AND IS NOT CAPABLE OF ANY OTHER INTERPRETATION, WE ARE SATISFIED THAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR CONSIDERATION BY THIS COURT. 11. IN VIEW OF THE AFORESAID INTERPRETATION OF SECT ION 36(1)(VIIA) OF THE ACT BY THE HONBLE PUNJAB & HARYANA HIGH COU RT, THE ORDERS OF THE LOWER AUTHORITIES DESERVE TO BE UPHEL D INASMUCH AS THE ASSESSEE HAS NOT MADE A PROVISION FOR BAD AND D OUBTFUL DEBTS IN THE BOOKS OF ACCOUNT EQUAL TO THE AMOUNT O F DEDUCTION SOUGHT TO BE CLAIMED UNDER SECTION 36(1)(VIIA) OF T HE ACT, AND THEREFORE, IN OUR VIEW, THE LOWER AUTHORITIES WERE JUSTIFIED IN RESTRICTING THE DEDUCTION TO RS.50,00,000/-, BEING THE AMOUNT OF PROVISION ACTUALLY MADE IN THE BOOKS OF ACCOUNT. 12. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CITED CERTAIN DECISION IN SUPPORT OF HIS PROPOSITION THAT THE CLA IM OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT IS NOT LINKED TO MAKING OF A PROVISION IN THE ACCOUNT BOOKS. AT THE OUTSET, WE M AY OBSERVE THAT THE DECISIONS RELIED UPON BY THE ASSESSEE ARE OF VARIOUS BENCHES OF THE TRIBUNAL AND NOT OF ANY HIGH COURT. THEREFORE, THE JUDGEMENT OF THE HONBLE HIGH COURT IN THE CASE OF STATE BANK OF PATIALA (SUPRA), WHICH IS CONTRARY TO THE DECISIONS OF THE TRIBUNAL RELIED UPON BY THE ASSESSEE; AND BEING SOLITARY JUD GEMENT OF A HIGH COURT, IS REQUIRED TO BE APPLIED, HAVING REGAR D TO THE ESTABLISHED NORMS OF JUDICIAL DISCIPLINE. FOR THE S AID REASON, WE REFRAIN FROM DISCUSSING EACH OF THE DECISIONS OF TH E TRIBUNAL RELIED BY THE ASSESSEE BEFORE US. 13. THE OTHER PLEA OF THE ASSESSEE WAS THAT THE CON TENTS OF THE CBDT CIRCULAR DATED 26.11.2008 (SUPRA) IS CONTRARY TO THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT AND TH EREFORE THE SAME SHOULD BE DISREGARDED. IN OUR VIEW, THE FOLLOWING E XPLANATION IN RESPECT OF SECTION 36(1)(VIIA) OF THE ACT RENDERED BY THE CBDT IN 16 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 CIRCULAR DATED 26.11.2008 (SUPRA) BY WAY OF PARA 2( III)(B) AS UNDER :- (B) THE DEDUCTION FOR PROVISION FOR BAD AND DOUBTF UL DEBTS SHOULD BE RESTRICTED TO THE AMOUNT OF SUCH PR OVISION ACTUALLY CREATED IN THE BOOKS OF THE ASSESSEE IN TH E RELEVANT YEAR OR THE AMOUNT CALCULATED AS PER PROVISIONS OF SECTION 36(1)(VIIA), WHICHEVER IS LESS. IS IN LINE WITH THE INTERPRETATION OF THE SECTION R ENDERED BY THE HONBLE PUNJAB & HARYANA HIGH COURT AND CANNOT BE S AID TO BE CONTRARY TO THE PROVISIONS OF THE ACT. THEREFORE, T HE RELIANCE PLACED BY THE LOWER AUTHORITIES ON THE CBDT CIRCULA R DATED 26.11.2008 (SUPRA) CANNOT BE FAULTED. 14. BEFORE PARTING, WE MAY REFER TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK L TD. (SUPRA) RELIED UPON BY THE ASSESSEE AND ALSO THE DECISION O F OUR CO- ORDINATE BENCH IN THE CASE OF JAYSINGPUR UDGAON SAH AKARI BANK LTD. (SUPRA). WE HAVE CAREFULLY PERUSED THE SAID DE CISION AND FOUND THAT THE ISSUE BEFORE THE HONBLE SUPREME COU RT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. (SUPRA) WAS QUITE DIFFERENT; AND, IN ANY CASE NONE OF THE OBSERVATIONS OF THE HO NBLE SUPREME COURT RUN CONTRARY TO THE PRONOUNCEMENT OF THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF STATE BANK OF PAT IALA (SUPRA) TO THE EFFECT THAT MAKING OF A PROVISION FOR BAD AN D DOUBTFUL DEBTS EQUAL TO THE AMOUNT MENTIONED IN SECTION 36(1 )(VIIA) OF THE ACT IS MUST FOR CLAIMING SUCH DEDUCTION. THEREFORE, THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CATHOLI C SYRIAN BANK LTD. (SUPRA) DOES NOT HELP THE ASSESSEE IN THE PRES ENT CONTROVERSY BEFORE US. FURTHER, EVEN IN THE CASE OF JAYSINGPUR UDGAON SAHAKARI BANK LTD. (SUPRA), THE TRIBUNAL HAS MERELY SET-ASIDE THE MATTER FOR ADJUDICATION AFRESH BACK TO THE FILE OF THE ASSESSING OFFICER AND IT DOES NOT CONTAIN ANY POSIT IVE FINDING WITH RESPECT TO THE CONTROVERSY BEFORE US. 15. IN THE RESULT, CONSIDERING THE AFORESAID DISCUS SION, IN OUR VIEW, THE ORDERS OF THE AUTHORITIES BELOW ON THIS A SPECT ARE LIABLE TO BE UPHELD. WE HOLD SO. 5. FOLLOWING THE AFORESAID PRECEDENT AND IN VIEW OF THE CONVERGENCE OF STAND OF BOTH THE PARTIES THAT THE F ACTS AND CIRCUMSTANCES IN THE YEAR UNDER CONSIDERATION ARE I DENTICAL TO THOSE CONSIDERED BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2008- 09 (SUPRA), THE GROUND OF APPEAL RAISED BY THE ASSE SSEE IS LIABLE TO BE DISMISSED. WE HOLD SO. 21. IN VIEW OF THE AFORESAID DECISION OF THE CO-ORDINATE BEN CH AND LD. ARS SUBMISSION THAT THE ISSUE BEING COVERED AGAINST T HE ASSESSEE BY THE AFORESAID DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF MAHALAKSHMI URBAN CO-OPERATIVE BANK (SUPRA), WE FIND NO RE ASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS, THIS GROUND OF ASSESSEE IS DISMISSED. 22. THUS THE CROSS-OBJECTIONS OF ASSESSEE ARE DISMISSED . 17 ITA NO.2040/PN/2014 CO.NO.41/PN/2016 23. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE C ROSS- OBJECTIONS OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS WEDNESDAY, THE 30 TH DAY OF NOVEMBER, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE; DATED : 30 TH NOVEMBER, 2016. YAMINI * + ( ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE LD.CIT - (A), AURANGABAD 4. 5 6. THE LD.CIT, AURANGABAD !' ##$%, ' $%, A / DR, ITAT, A PUNE; '() * / GUARD FILE * / BY ORDER , / / TRUE COPY / / //TRUE +,- #. $/ / SR. PRIVATE SECRETARY ' $% , / ITAT, PUNE