MAHARASHTRA STATE CO OP AGRICULTURAL RURAL MULTIPURPOSE DEVELOPEMENT BANK LTD, MUMBAI V. DCIT (OSD) 1, MUMBAI

ITA 2171/MUM/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2905 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 26-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Assessee Lawyers: RUTURAJ GURJAR
• Keywords: Rule of consistency; Bad and doubtful debts; Set aside
• Section: 145; 143(3); 80P; 201; 143(2); 119

Judgement Text

ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 1 THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.2171/Mum/2017 (A.Y. 2012-13) Maharashtra State Co- op, Agricultural Rural Multipurpose Development Bank Ltd. 15-A, Morvi Lane, Chowpatty, Girgaum, Mumbai – 400 007 Vs. DCIT-(OSD)-1 Aayakar Bhavan, M.K. Road, Mumbai – 400 020 लेख सं./ज आइआर सं./PAN/GIR No: AAAAM9669E Appellant .. Respondent ITA No.2962/Mum/2017 (A.Y. 2012-13) DCIT-1(3)(2) R. No. 540, 5 th Floor Aayakar Bhavan, M.K. Road, Mumbai – 400 020 Vs. M/s Maharashtra State Co-op, Agricultural Rural Multipurpose Development Bank Ltd. 15-A, Morvi Lane, Chowpatty, Girgaum, Mumbai – 400 007 लेख सं./ज आइआर सं./PAN/GIR No: AAAAM9669E Appellant .. Respondent Appellant by : Ruturaj Gurjar Respondent by : Salil Mishra Date of Hearing 23.02.2022 Date of Pronouncement 06.05.2022 ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 2 आदेश / O R D E R PER AMARJIT SINGH, AM: The present cross appeal filed by the assessee and the revenue are directed against the order passed by the CIT(A)-2, dated 02.01.2017 which in turn arises from the order passed by the A.O. u/s 143(3) of the Income Tax Act, 1961 for A.Y. 2012-13. We shall first take up the appeal of the assessee i.e ITA No.2171/Mum/2017. The assessee has raised following grounds before us: “1. Not appreciating that the activity of the appellant is eligible for deduction u/s.80P(2)(a)(i) of the Act. In doing so the Ld. CIT(A) has further erred in rejecting the explanations forwarded by the appellants) with regards to the deduction claimed u/s 80P(2)(a)(i) of the Act. 2. Rejecting the appellant's claim of Rs.72,03,63,815/- on account of Provision for bad & doubtful reserves (NPA). In doing so the Ld CIT(A) has further erred in upholding the view of AO regarding application of provisions of section 36(1)(viia) & restricting the claim to Rs.l,80,79,235/- being 7.5% of Rs.72,03,63.815/-. 3. The appellant craves leave of your Honour to add to, alter, amend and/or delete all or any of the foregoing grounds of appeal.” 2. The fact in brief is that return of income declaring income at Rs.nil was filed on 26.09.2012. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 26.08.2013. The assessment u/s 143(3) of the Act finalized on 10.11.2014 and total income was assessed at Rs.33,51,47,728/- after making disallowance u/s 14A, disallowance of provision for overdue interest and disallowance of provision for bad and doubtful debt etc. The further remaining facts are discussed while adjudicating the ground of appeal of the assessee as follows: ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 3 Ground 1: Claim of deduction u/s 80P(2)(a)(i) of the Act: 3. The assessee has filed appeal before the ld. CIT(A) regarding its eligibility for deduction u/s 80P of the Act. The assessee has submitted that it is registered under the provision of Maharashtra Cooperative Society Act, 1960 and its income is subject to the provision of Sec. 80P of the Act. The assessee has made detailed submission before the ld. CIT(A) reproduced at page no. 4 to 10 of the ld. CIT(A) order. The assessee has also submitted in its submission before the ld. CIT(A) that it is admittedly not engaged in the banking business, even though the assessee is not. However, the ld. CIT(A) has dismissed the appeal of the assessee holding that since the assessee has been involved in providing refinance to the district level entities, had failed to satisfy the condition of primary agricultural credit society or Primary Cooperative Agricultural & Rural Development Banks. 4. Heard both the side and perused the material on record. During the course of appellate proceedings before us the ld. Counsel has contended that identical issue on similar facts for the A.Y. 2008-09 to A.Y. 2012 vide ITA No. 4806 to 4808 & 6053/Mum/2014 dated 09.02.2015 was restored to the file of the A.O for deciding the issue as per the direction given by the ITAT. The relevant part of the decision of ITAT is reproduced as under: “6. Vide ground Nos. 2 & 3 the assessee submits that the activity of the assessee is eligible for deduction under section 80P(2)(a) of the Act. Brief facts, relevant to appreciate the issue, deserve to be noticed. The assessee bank was established in 1935 under the Bombay Cooperative Society Act, 1925 for the purpose of providing credit facility to its members which in turn to be utilised for agriculture and rural development. According to the assessee it is not a cooperative bank within the meaning of Banking Regulations Act, 1949; it neither carries on nor is licenced to carry on the business of banking. It is entitled to lend money for agriculture and rural development and it is refinance oriented and the bank gets its refinance from the State/Central Governments and National Bank for ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 4 Agriculture and Rural Development (NABARD) on the State Government guarantee, by floating special development debentures. The loans are given to district banks, who are members of the society, who in turn provide credit facility for agriculturists/agriculture labourers/rural artisans. By its very constitution the assessee is a co-operative agricultural and rural development bank. It was thus contended that appellant was not a cooperative bank and hence it is eligible for deduction under section 80P of the Act. 7. The AO, on the other hand, observed that the assessee was a refinancing agent and such an entity is not eligible for deduction under section 80P of the Act. The AO further relied upon section 80P(4) of the Act, which is inserted from A.Y. 2007-08, to observe that it is not applicable to cooperative societies carrying on the business of banking other than primary agricultural credit society or a primary cooperative agricultural and rural development bank. The AO, thus, concluded that the society was neither primary agricultural cooperative society nor a primary cooperative agricultural and rural development bank and hence exclusion intended under section 80P(4) is not applicable to the assessee. 8. Aggrieved, assessee contended before the CIT(A) that assessee was registered under the Maharashtra Cooperative Societies Act, 1960 in the year 2000 and it has its own bye-laws. It was also stated that it was not doing any banking activity as defined in section 5(1)(b) of the Banking Companies Act, 1949. It was also not governed by Reserve Bank of India Act, 1934. Reference was also made to section 80P(4) of the Act to submit that the appellant was not a cooperative bank and hence it was eligible for deduction under section 80P. The learned CIT(A) also rejected the contention of the assessee as, in his opinion, it was neither a primary agricultural credit society or a primary cooperative agricultural and rural development bank. Further aggrieved, assessee is in appeal before the Tribunal. 9. At the time of hearing the learned counsel for the assessee as well as the learned D.R. referred to the decision of the ITAT Cochin Bench in the case of Kerala Sate Co-operative Agricultural Rural Development Bank Ltd. 58 DTR 1 and in particular to paras 4 & 5 to highlight that though the Tribunal accepted the plea of the Revenue that it is a cooperative bank but the other aspect, i.e. whether the assessee is providing primary support to members of co-operative society needs to be verified and thus the matter was set aside to the file of the AO. There is no contrary decision on this aspect, by any higher forum, and in the light of the decision of the ITAT Cochin Bench the matter deserves to be remitted to the file of the AO for fresh adjudication. Needless to observe that the assessee shall place the bye-laws and other documentary evidences before the AO to support its claim that it was eligible for deduction under section 80P of the Act. Assessee has to prove that it has undertaken primary level agricultural development activities. Both the parties admitted that the issue stands covered by the aforecited decision. In line with the view taken therein we set aside the matter to the file of the AO with a direction to him to consider as to whether the assessee is entitled to deduction under section 80P of the Act. Ordered accordingly.” ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 5 During the course of appellate proceedings before us the ld. Counsel has not brought to our notice any material change in the facts and circumstances in this year the status of the similar issue pertaining to A.Y. 2008-09 to 2012 which was set aside by the ITAT as supra for deciding afresh to the file of A.O. We find that issue raised before us in this year are similar to preceding A.Y, it would not be appropriate for us to deviate from the view taken in earlier years without pointing out any material change in the facts and circumstances in subsequent years. Since, identical issue was dealt in earlier years as cited (supra) in the assessee’s own case, following the principle of consistency for the reason given therein we set aside the matter to the file of the A.O for readjudication in line with the observations made by the coordinate bench of the ITAT, Mumbai as supra. Therefore, this ground of the assessee is allowed for statistical purposes. Ground 2: Claim of Rs.72,03.63,815/- on account of provision for bad and doubtful debt reserves: (NPA): 5. During the course of assessment the A.O noticed that assessee has debited Rs.72,03,63,815/- as bad and doubtful debt reserves fund (NPA) to the profit and loss account. On query, the assessee explained that the said provision is mandatory as per Maharashtra Cooperative Society Act as per NABARD guidelines. However, the A.O has stated that assesse has not proved the same with any documentary evidences. The A.O further stated that as per provisions of Sec. 36(1)(viia) of the I.T. Act the deduction claimed with respect to NPA is to be restricted to 7.5% of total income computed before making any deduction. Therefore, the A.O has restricted the deduction @ 7.5% to the amount of Rs.1,80,79,235/-. ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 6 6. Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 7. During the course of appellate proceedings before us, the ld. Counsel contended that assessee is entitled for deduction u/s 36(1)(vii) as it is governed by the Cooperative Society Act. The ld. Counsel placed reliance on the decision of Hon’ble Supreme Court vide T.R.F. Ltd. Vs. CIT, Civil Appeal No. 5292 to 5294 of 2003 dated 09.02.2010 and the decision of the Hon’ble High Court vide ITA No. 270 of 2008 Hinduja Ventures Ltd. DCIT-8(2) dated 02.08.2018. The ld. Counsel has also referred Maharashtra Cooperative Rules, 1961. On the other hand, the ld. D.R contended that there is no alternative option available to the assessee in view of the specific provision of Sec. 36(1)(viia) as per which A.O and CIT(A) has rightly allowed the deduction @ 7.5%. 8. Heard both side and perused the material on record. The assessee has debited Rs.72,03,63,815/- as Bad and Doubtful Debt Resource Fund (NPA) to the P.S.C A/c. The A.O has disallowed the claim of the assessee stating that as per provision of Sec. 36(1)(viia) the assessee is allowed a deduction @ 7.5% of the total income computed. The A.O has also stated that assessee has not proved its claim with any documentary evidences. The ld. CIT(A) has allowed the deduction to the extent of Rs.1,80,79,235 in accordance with provisions of Section 36(1) (viia) of the Act. The assessee claimed that the provision of Sec. 36(1)(vii) of the Act allows the deduction on account of bad and doubtful funds once conditions have been fulfilled and no restrictions have been provided under the said provision for working out quantum of deduction. We have perused the ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 7 provision of Sec. 36(1)(vii) of the Act. The relevant part is reproduced as under: “(vii) subject to the provisions of sub-section (2), the amount of [any bad debt or part thereof which is written off as irrecoverable in accounts of the assessee for the previous year]: [Provided that in the case of [an assessee] to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or pan thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause;] [Provided further that where the amount of such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof becomes irrecoverable or of an earlier previous year on the basis of income computation and disclosure standards notified under subsection (2) of section 145 without recording the same in the accounts then, such debt or part thereof shall be allowed in the previous year in which such debt or part thereof becomes irrecoverable and it shall be deemed that such' debt or part thereof has been written off a; irrecoverable in the accounts for the purposes of this clause.] [Explanation 1], For the purposes of this clause, any bad debt or part thereof written off as irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts made in the accounts of the assessee;] [Explanation 2.—For the removal of doubts, it is hereby clarified that for the purposes of the proviso to clause (vii) of this sub-section and clause (v) of sub-section (2), the account referred to therein shall be only one account in respect of provision for bad and doubtful debts under clause (viia) and such account shall relate to all types of advances, including advances made by rural branches;]” During the course of assessment proceedings the assessee has not proved with relevant material that how it is entitled for deduction u/s 36(1)(vii) of the Act. Even during the course of appellate proceedings before us the assessee has also not brought before us any specific material to substantiate its claim of 100% deduction on account of bad and doubtful debt NPA u/s 36(1)(vii) of the Act. We have also perused the provision of Sec. 36(1)(viia) of the Act, the same is reproduced as under: “[(viia) [in respect of any provision for bad and doubtful debts made by – ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 8 (a) a scheduled bank [not being [***] a bank incorporated 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 [eight and one-half per cent]] of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding [ten] per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner : [Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year:] [Provided further that for the relevant assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect as if for the words "five per cent", the words "ten per cent" had been substituted :] [Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government: Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head "Profits and gains of business or profession”] [Explanation. — For the purposes of this sub-clause, “relevant assessment years” means the five consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005;] (b) a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A);] [(c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A):] [Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, its option, be allowed in any of the two consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, of an ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 9 amount not exceeding ten per cent of the amount of such assets shown in the books of account of such institution or corporation, as the case may be, on the last day of the previous year;] [(d) a non-banking financial company, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A).] Explanation.—For the purposes of this clause,— [(i) “on-scheduled bank" means a 2 banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank;] [(ia)] “rural branch” means a branch of a scheduled bank [or a non-scheduled bank] situated in a place which has a population of not more than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; [(ii)] “scheduled bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934) [***];] [(iii) “public financial institution” shall have the meaning assigned to it in section 4A y of the Companies Act, 1956 (1 of 1956); (iv] “State financial corporation" means a financial corporation established under section 3 or section 3 A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951); (v) State industrial investment corporation" means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects and ''[eligible for deduction under clause (viii) of this sub-section];] [(vi) “co-operative bank”, “primary agricultural credit society” and “primary co- operative agricultural and rural development bank” shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P;] [(vii) “non-banking financial company” shall have the meaning as-signed to it in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934)”;] [(viii) in respect of any special reserve created and maintained by a specified entity, an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head “Profits and gains of business ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 10 or profession” (before making any deduction under this clause) carried to such reserve account: Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance under this clause shall be made in respect of such excess. Explanation.—In this clause,— (a) “specified entity” means,— (i) a financial corporation specified in section 4A of the Companies Act, 1956 (1 of 1956); (ii) a financial corporation which is a public sector company; (iii) a banking company; (iv) a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank; (v) a housing finance company; and (vi) any other financial corporation including a public company; (b) “eligible business” means,— [(i) in respect of the specified entity referred to in sub-clause (i) or sub- clause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a), the business of providing long-term finance for— (A) industrial or agricultural development; (B) development of infrastructure facility in India; or (C) development of housing in India;] (ii) in respect of the specified entity referred to in sub-clause (v) of clause (a), the business of providing long-term finance for the construction or purchase of houses in India for residential purposes; and (iv) in respect of the specified entity referred to in sub-clause (vi) of clause (a), the business of providing long-term finance for development of infrastructure facility in India; (c) “banking company” means a company to which the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; (d) “co-operative bank”, “primary agricultural credit society” and “primary co- operative agricultural and rural development bank” shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P; (e) “housing finance company” means a public company formed or registered in India with the main object of carrying on the business of providing long- term finance for construction or purchase of houses in India for residential purposes; ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 11 (f) “public company” shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956); (g) “infrastructure facility” means — (i) an infrastructure facility as defined in the Explanation to clause (i) of sub-section (4) of section 80-IA, or any other public facility of a similar nature as may be notified 21 by the Board in this behalf in the Official Gazette and which fulfils the conditions as may be prescribed; (ii) an undertaking referred to in clause (ii) or clause (iii) or clause (iv) or clause (vi) of sub-section (4) of section 80-IA; and (iii) an undertaking referred to in sub-section (10) of section 80-IB; (h) “long-term finance” means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years;].” The assessee claimed in its submission before the ld. CIT(A) at para 5.1 of the order that it is a Bank Operating under the Federal Structure and all the District Cooperative Agricultural and Rural Development Banks were functioning as separate independent entities. It is also submitted that w.e.f 2001 the assessee was operating as Apex Bank with 29 District ADRB working as independent and separate entities under the “Federal Structure.” Proviso to Section 36(1)(vii) mandates that if in case of bank to which clause (viia) applies, i.e. a provision is made for bad debts with respect to rural branches, then amount of deduction granted under section 36(1)(vii) shall be limited to amount by which written off amount exceed credit balance in provision for bad and doubtful debt account. Section 36(1)(vii) meant for bad debt deduction which is written off as irrecoverable in the account of the assessee is eligible for deduction. The facts in the case of the assessee are distinguishable from the facts of the cases referred by the assessee during the course of appellate proceedings before us. The Hon’ble Supreme Court in Catholic Syrian Bank Ltd. Vs. CIT(2012) 206 Taxman 182 has given the interpretation on the application of section 36(1)(vii) vis-à-vis section 36(1)(viia) of the Act. The ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 12 provision of Sec. 36(1)(vii) and 36(1)(viia) are distinct and independent items of deduction and operates in their respective fields. The circular no. 258 dated 14.06.1979 was also referred in the judgment stating that Section 36(viia) was introduced to promote rural banking and assist the scheduled commercial banks in making adequate provision out of their current profits in order to provide risk in respect of rural branches. The circular state that the deduction on account of provision for doubtful debt is distinct and independent of Section 36(1)(vii) relating to allowance of deduction for bad debt. The Hon’ble court held that bad debt written off u/s 36(1)(vii) is subject to satisfaction of condition contained in Section 36(2) of the Act. In the light of the above facts and findings it is observed that during the course of assessment the assessee has not furnished the relevant material in support of its claim of full deduction of Rs.72,03,63,815/- as Bad and Doubtful Debt Reserve Fund (NPA). These facts have also been incorporated by the A.O in his findings at para 6.2 of the assessment order. Even during the course of appellate proceedings before us, the assessee has not furnished supporting material to demonstrate the correctness in its claim of impugned deduction. Therefore, the assessment in the case of the assessee was made without verification of claim of written off of provision for bad and doubtful reserves (NPA). Therefore, in order to decide this case on merit we consider it appropriate to restore this issue to the file of the A.O to decide de novo after conducting necessary verification of the specific details relating to the impugned claim of deduction to be furnished by the assessee. Accordingly, this ground of appeal of the assessee is allowed for statistical purposes. ITA No.2962/Mum/2017 (Department’s Appeal) ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 13 9. We shall now take up the appeal of the revenue for A.Y. 2012-13. The revenue has raised the following grounds before us: “(i) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the assessee's claim of provision towards overdue interest reserve Rs.126,09,18,997/- has to be allowed as deduction ? (ii) Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing the assessee's claim and thereby failing to appreciate that since assessee is following mercantile system of accounting and as there was no dispute' that the impugned interest amounting to Rs. 126,09,18,997/- accrued it during the previous year, the same was taxable on accrual basis in A.Y. 2012-13 ? (iii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming disallowance to the extent of only Rs.70,22,84,580/- out of Rs. 72,03,63,851/- claimed on account of provision for bad and doubtful debts reserve ? (iv) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in giving separate relief to the assessee of Rs.1,80,79,235/- on account of deduction u/s 36(l1)(viia) @ 7.5% of total income, when deduction for the said amount had already been granted by the AO in the assessment order ? (v) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in accepting the contention of the assessee that the AO omitted to allow deduction u/s 36(1)(viia) amounting to Rs.1,80,79,235/-, @ 7.5% of total income and giving directions based on such contention without appreciating that it was factually incorrect as borne out from the assessment order ? The appellant craves leave to add to, amend or withdraw the aforesaid ground of appeal.” Grounds i & ii: Claim of overdue interest reserves of Rs.1,26,09,18,997/-: 10. During the course of assessment the A.O noticed that assessee has debited Rs.1,26,09,18,997/- to profit and loss account as provisions towards overdue interest reserves. The assessee explained that overdue interest is the interest receivable on the overdue account. However, the A.O has not accepted the explanation of the assessee stating that ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 14 assessee was following mercantile system of accounting and the interest accrued to the assessee for the year under consideration, therefore, the claim of deduction of overdue interest of Rs.1,26,09,18,997/- was disallowed and added to the total income of the assessee. 11. Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has allowed the claim of the assessee after referring the decision of Hon’ble jurisdictional High Court of Bombay in the case of Uco Bank Vs. CIT 237 ITR 889 and the CBDT Circular No. 1186 dated 20.06.1978. During the course of appellate proceedings before us the ld. counsel has referred decision of ITAT, Mumbai in the case of the assessee itself pertaining to assessment year 2008-09 vide ITA No. 2594/Mum/2019 wherein the similar claim of the assessee was allowed. On the other hand ld. D.R relied on the order of A.O. 12. Heard both the side and perused the material on record. The relevant part of the decision of ITAT as supra in the case of the assessee vide ITA No.2594/Mum/2019 is reproduced as under: “4. The learned CIT(A) has allowed the assessee appeal by holding as under – 7.4.1 I have considered the rival contentions. The appellant's explanation that the provision for interest receivable on overdue loans made in its annual accounts represents provision for interest which will not be recovered. The appellant's submission that though it credited interest receivable on the sticky loans, there was practically no chance of actual receipt of those interest income is acceptable. Therefore, the provision made by the appellant is allowable in terms of the CBDT circular no. 201 dated 09/10/1984. 7.4.2 In the case of UCO Bank vs. CIT (237 ITR 889) 2013, the Hon ole Supreme Court held as under; “Section 5 read with section 119 and 145, the Income tax Act 1961 - Income - Accrual of Asstt. Year 1981-82. Whether in view of CBDT Circular, dt 09-10-1984, interest on loan whose recovery is doubtful and which has not been recoverable by assessee bank for last three years tut ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 15 has been, kept in a suspense account and has not been brought or loss account of the assessee, cannot be included in Income of assessee held, yes - Whether CBDT Circular dt 09.10.1984 is in conflict with provisions of section 145 -No. Section 119 of the Income Tax Act, 1961 - Central Board of Direct Taxes power to issue circulars etc.-Whether, since Board has considered it necessary to lay down a general test for deciding what is doubtful debt in circular dated 09.10.1984 and directed that all Income Tax Officers should treat such amount as not forming part of Income of Assessee until reali2ed, this direction by way of circular cannot be considered as travelling beyond powers of Board under section 119 and such a circular is binding u/s 119- Held, yes. 7.4.3 In view of the above, I hold that the provision made by the appellant is allowable. 5. Against the above under revenue is in appeal before us. We have heard both the parties and perused the records. We find that the issue is covered in favour of the assessee. The learned CIT(A) has taken a correct view of the matter. Learned Departmental Representative could not make any convincing rebuttal.” In the light of the above decision of coordinate bench we find that issue raised before the Tribunal in this year is similar to the preceding A.Y., therefore after applying the fining of the ITAT decision on identical facts and similar is covered in favour of the assessee, therefore, this ground of appeal of the revenue stand dismissed stand dismissed. Ground Nos. iii to v: (Claim on account of provision for bad and doubtful debts reserve: 13. Since while adjudicating the ground of appeal of the assessee at para 5 of this order we have restored the claim of deduction of Rs.72,03,63,815/- on account of provision for bad and doubtful debt reserves (NPA) to the file of the A.O for deciding a fresh, therefore, this ground of appeal of the Revenue has become infructuos and the same stand dismissed. ITA Nos.2171 &2962/Mum/2017 A.Y. 2012-13 Maharashtra State Co-op Agricultural Rural Multipurpose Development Bank Ltd. Vs. DCIT (OSD)-1 16 14. In the result, the appeal of the assesse is partly allowed for statistical purposes while for the appeal of the revenue stand dismissed. Order pronounced in the open court on 06.05.2022 Sd/- Sd/- (SANDEEP SINGH KARHAIL) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 06.05.2022 PS: Rohit आदेश की े /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. संबंिधत आयकर आय / The CIT(A) 4. आयकर आय ( ) / Concerned CIT 5. िवभ ग य िति िध, आयकर य िधकरण, हमद ब द / DR, ITAT, Mumbai 6. ग $% फ ई / Guard file. आदेशानुसार/BY ORDER, स ािपत ित //True Copy// (Asst. Registrar) ITAT, Mumbai