ACIT, Aurangabad V. The Beed District Central Co-Opp Bank Ltd, Beed

ITA 2329/PUN/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0746 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DIVYA BAJPAI
• Keywords: Capital asset; Business income; Depreciation; Opportunity of being heard; Additional evidence; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 143(3); 201(1); 6; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO S . 1108 & 1109 /PN/201 1 / ASSESSMENT YEAR S : 200 7 - 0 8 & 200 8 - 0 9 THE BEED DISTRICT CENTRAL CO - OP. BANK LTD., RAJURI VES BEED, DIST BEED - 431122 . / APPELLANT PAN: AAAAT5256C VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 2, AURANGABAD . / RESPONDENT . / ITA NO. 2329 /PN/201 2 / ASSESSMENT YEAR : 2009 - 10 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 2, AURANGABAD . / APPELLANT VS. THE BEED DISTRICT CENTRAL CO - OP. BANK LTD., RAJURI VES BEED, DIST BEED 431122 . / RESPONDENT PAN: AAAAT5256C 2 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. . / ITA NO. 2330 /PN/201 2 / ASSESSMENT YEAR : 200 9 - 1 0 THE BEED DISTRICT CENTRAL CO - OP. BANK LTD., RAJURI VES BEED, DIST BEED - 431122 . / APPELLANT PAN: AAAAT5256C VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 2, AURANGABAD . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : S MT. DIVYA BAJPAI / DATE OF HEARING : 0 7 . 12 .2015 / DATE OF PRONOUNCEMENT: 31 . 12 .2015 / ORDER PER SUSHMA CHOWLA, JM : OUT OF THIS BUNCH OF APPEAL S , TWO APPEALS FILED BY THE ASSESSEE ARE AGAINST SEPARATE ORDERS OF CIT(A), AURANGABAD, BOTH DATED 30.06.2011 RELATING TO ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 AGAINST RESPECTIVE ORDERS PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE ARE AGAINST THE ORDER OF CIT(A) , AURANGABAD , DATED 28 . 09 .201 2 RELATING TO ASSESSMENT YEAR 200 9 - 1 0 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . 3 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. 2. THE APPEALS FILED BY THE ASSESSEE RELATING TO ASSESSMENT YEARS 200 7 - 0 8 AND 2008 - 09 AND THE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE RELATING TO ASSESSMENT YEAR 200 9 - 1 0 WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO. 1108 /PN/201 1 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - L. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE PROVISION OF RS. 17,82,000.00 MADE BY THE APPELLANT ON STANDARD ASSETS IS A PROVISION FOR BAD AND DOUBTFUL DEBTS WHICH QUALIFIES FOR DEDUCTION U/S 36 [1] [VIIA] OF THE I. T. ACT 1961. IN THE CIRCUMSTANCES THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED THE DEDUCTION OF THE SAID PROVISION U /S 36 [1] [VIIA] OF THE I. T. ACT 1961. THE SAID DEDUCTION MAY PLEASE BE ALLOWED TO THE APPELLANT. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED DEPRECIATION ON COMPUTERS AND SOFTWARES PURCHASED DURING THE YEAR AMOUNTING TO RS. 48,44,760.00. THE FINDING GIVEN BY THE LEARN ED CIT(A) THAT THE COMPUTERS AND SOFTWARES WERE PUT TO USE IN A.Y.2008 - 09 BEING PERVERSE AND ARBITRARY AND BEING DEVOID OF MERITS THE SAME MAY PLEASE BE VACATED AND THE DEPRECIATION BE DIRECTED TO BE ALLOWED IN ACCORDANCE WITH THE PROVISIONS OF LAW. 3. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE LOSS OF RS. 2,35,66,000.00 SUSTAINED BY THE APPELLANT DURING THE YEAR ON SALE OF SECURITIES WAS A CAPITAL LOSS, NOT ENTITLED TO BE SET OFF AGAINST THE BU SINESS INCOME OF THE APPELLANT. THE SAID FINDING BEING PERVERSE, ARBITRARY, AND PATENTLY ILLEGAL, DEVOID OF MERITS AND BEING LEGALLY UNSUSTAINABLE THE SAME MAY PLEASE BE VACATED. IT MAY PLEASE BE HELD THAT THE ALL THE SECURITIES HELD BY THE APPELLANT BANK UNDER ALL CATEGORIES, ARE S TO CK IN TRADE AND LOSS ARIS ING ON SALE OF THE SAME IS A LOSS ARISING OUT OF THE BANKING BUSINESS CARRIED ON BY THE APPELLANT AND THE DEDUCTION OF THE SAID AMOUNT AS A BUSINESS LOSS MAY PLEASE BE ALLOWED TO THE APPELLANT. 4. THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER IN RESPECT OF COMMISSION PAID BY THE APPELLANT TO PIGMY DEPOSIT AGENTS AMOUNTING TO RS. 17,09,767.00 U /S 40[A ] [IA ] OF THE I .T. ACT 1961 BEING PATENTLY ILLEGAL, BAD IN LAW AND VOID AB INITIO THE SAME MAY PLEASE BE DELETED AND THE DEDUCTION OF THE SAME MAY PLE ASE BE ALLOWED BY HOLDING THAT THERE IS NO ESTOPPEL IN TAXATION AND FURTHER THE APPELLANT CANNOT BE DENIED ANY LAWFUL DEDUCTION ON THE GROUND OF HIS INADVERTENT FAILURE TO RAISE THE NECESSARY GROUND OF APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. THE APPELLANT CRAVES THE P ERMISSION TO ADD, AMEND, MODIFY, ALTER, REVISE, SUBSTITUTE, DELETE ANY OR ALL GROUNDS NECESSARY AT THE TIME OF HEARING OF THE APPEAL. 4. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS OF APPEAL, WHICH READ AS UNDER: - 4 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. 1. IT MAY PLEASE BE HELD THAT THE APPELLANT IS ENTITLED TO CLAIM THE DEDUCTION U/S 36[1][VIIA] OF THE I.T. ACT, 1961 AS PER THE FORMULA PRESCRIBED IN THE SAID SECTION IRRESPECTIVE OF THE AMOUNT ACTUALLY DEBITED TO PROFIT AND LOSS ACCOUNT AND THE LEARNED ASSES SING OFFICER BE ACCORDINGLY DIRECTED TO ALLOW SUCH DEDUCTION AS PER THE FORMULA PRESCRIBED IN THE SAID SECTION AS AGAINST THE AMOUNT OF DEDUCTION OF RS.18,03,42,000.00 ERRONEOUSLY CLAIMED BY THE APPELLANT BANK IN ITS RETURN OF INCOME. 2. IT MAY PLEASE BE HELD THAT THE STATUTORY RESERVE AMOUNTING TO RS.86,00,000.00 FOR THE YEAR UNDER CONSIDERATION PROVIDED IN ANNUAL GENERAL MEETING HELD ON 13/08/2007 IS AN ALLOWABLE DEDUCTION WHILE COMPUTING THE BUSINESS INCOME OF THE APPELLANT BANK. 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE RAISED VIDE ADDITIONAL GROUND OF APPEAL NO.1 WAS PURELY LEGAL AND THE COMPLETE FACTS WERE ON RECORD AND HENCE, THE SAME MERITS TO BE ADMITTED. HE FURTHER POINT ED OUT THAT THE ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE ORDER OF TRIBUNAL IN SHRI MAHALAXMI CO - OP. BANK LTD. VS. ITO IN ITA NO.1658/PN/2011, RELATING TO ASSESSMENT YEAR 2008 - 09, ORDER DATED 29.10.2013 . IN RESPECT OF ADDITIONAL GROUND OF APPE AL NO.2, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DID NOT PRESS THE SAME, HENCE, THE SAME IS REPRESENTATIVE FOR THE ASSESSEE DID NOT PRESS THE SAME, HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 6. NOW, COMING TO THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IN ORIGINAL GROUNDS OF APPEAL. THE ISSUE RAISED IS AG AINST THE DISALLOWANCE OF PROVISION OF RS. 17,82,000/ - MADE ON ACCOUNT OF STANDARD ASSETS, WHICH IS CLAIMED TO BE CLASSIFIED DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY POINTED OUT THAT BOTH THE ASSESSING OFFICER AND THE CIT(A) HAD ALLOWED THE CLAIM OF THE ASSESSEE VIS - - VIS PROVISION FOR BAD AND DOUBTFUL DEBTS. HOWEVER, THE PROVISION MADE ON ACCOUNT OF STANDARD ASSETS AS DEDUCTIBLE UNDER SECTION 36(1)(VIIA) OF THE ACT WAS NOT ALLOWED BY THE CIT(A). THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY ADMITTED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF AHMEDABAD BENCH OF 5 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. TRIBUNAL IN BHARUCH DIST. CENTRAL CO - OP. BANK LTD. VS. ITO (2013) 59 SOT 150 (AHMEDABAD). 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW AND ORDER OF TRIBUNAL IN THE COSMOS CO - OP. BANK LTD. VS. DCIT IN ITA NOS.460 & 461/PN/2012, RELATING TO ASSESSMENT YEAR 2007 - 08 & 2008 - 09, ORDER DATED 23.01.2014 . 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS A COOPERATIVE BANK REGISTERED UNDER THE HYDERABAD CO - OPERATIVE SOCIETIES ACT. THE ASSESSEE HAD FURNISHED THE RETURN OF IN COME DECLARING TOTAL INCOME OF RS.2,21,42,030/ - . ON VERIFICATION OF PROFIT & LOSS ACCOUNT , THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD MADE PROVISION FOR STANDARD ASSETS TOTALING RS.17,82,000/ - , WHICH WAS ADDED BACK IN THE COMPUTATION OF INCOME AND SUBSEQUENTLY WAS REDUCED FROM THE TOTAL INCOME. THE ASSESSING OF INCOME AND SUBSEQUENTLY WAS REDUCED FROM THE TOTAL INCOME. THE ASSESSING OFFICER HELD THAT THE SAME WAS NOT AN ALLOWABLE EXPENDITURE ON ACCOUNT OF BAD AND DOUBTFUL DEBTS AS AVAILABLE UNDER SECTION 36(1)(VIIA) OF THE ACT . THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER. 9. WE FIND THAT SIMILAR ISSUE OF ALLOWABILITY OF PROVISION MADE ON ACCOUNT OF STANDARD ASSETS BEING ELIGIBLE UNDER SECTION 36(1)(VIIA) OF THE ACT , AROSE BEFORE THE PUNE BENCH OF TRIBUNAL IN THE COSMOS CO - OP. BANK LTD. VS. DCIT (SUPRA ) AND THE ISSUE WAS DECIDED AGAINST THE ASSESSEE HOLDING AS UNDER: - 21. IN GROUND OF APPEAL NO.5, THE CLAIM OF THE ASSESSEE IS WITH REGARD TO A PROVISION MADE BY THE ASSESSEE BY WAY OF DEBIT TO PROFIT AND LOSS ACCOUNT OF RS.4,18,90,000/ - UNDER THE HEAD C ONTINGENT PROVISIONS AGAINST STANDARD ASSET. EXPLAINING THE SAID CLAIM, IT WAS STATED BEFORE THE ASSESSING OFFICER THAT A PROVISION IS MADE IN THE ACCOUNT BOOKS AGAINST A CONTINGENCY WHICH MIGHT OCCUR IN FUTURE WITH REGARD TO NON - PERFORMING ASSETS (NPAS) . IT WAS SOUGHT TO BE CANVASSED THAT THE PROVISION HAS BEEN MADE IN LINE WITH THE RBI GUIDELINES AND THEREFORE ACCORDING TO THE ASSESSEE, THE SAME WAS AN ALLOWABLE DEDUCTION. THE ASSESSING OFFICER DISALLOWED THE SAME ON THE GROUND THAT IT WAS ONLY A CONT INGENT LIABILITY WHICH CANNOT BE ALLOWED. THE CIT(A) HAS ALSO SUSTAINED THE DISALLOWANCE FOLLOWING THE 6 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. VS. JCIT, (2010) 320 ITR 577 (SC). 22. FACTUALLY, IT IS NOT IN DISPUTE THAT THE IMPUGNED CLAIM IS A CONTINGENT PROVISION MADE ON THE BASIS OF A PERCENTAGE ON THE VALUE OF STANDARD ASSETS. THE PROVISION DOES NOT REFLECT ANY PARTICULAR DEBT WHICH IS DOUBTFUL OR BAD AND IT IS ONLY A GENERAL AND NON - SPECIFIC PROVISION AND IT HAS BEEN RIGHTLY CLASSIFIED AS A CONTINGENT PROVISION BY THE INCOME - TAX AUTHORITIES. IN - FACT, THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE TIME OF HEARING, FAIRLY CONCEDED THE CONTINGENT NATURE OF THE PROVISION AND THEREFORE THE LOWER AUTHORITIES MADE NO MIS TAKE IN DISALLOWING THE SAME IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA). ACCORDINGLY, THE AFORESAID GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 10. THE ISSUE ARISING BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN THE COSMOS CO - OP. BANK LTD. VS. DCIT (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE UPHOLD THE ORDER OF CIT(A) AND CONFIRM THE ADDITION OF RS. 17,82,000/ - 11. THE ISSUE VI DE GROUND OF APPEAL NO.2 IS AGAINST THE DISALLOWANCE OF DEPRECIATION ON COMPUTER AND SOFTWARE PURCHASED DURING THE YEAR AMOUNTING TO RS.48,44,760/ - . 12. THE ASSESSING OFFICER NOTED THAT FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DEBITED COMPUTER EXPENSES TO THE TUNE OF RS.51,05,825/ - . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF EXPENDITURE WITH DOCUMENTARY EVIDENCE. THE ASSESSING OFFICER NOTED THAT SUM OF RS.48,44,760/ - PERTAIN S TO EXPENDITURE ON SO FTWARE AND COMPUTER PURCHASES AND INSTALLATION CHARGES THEREOF, WHICH WERE CAPITAL IN NATURE, HENCE, THE SAID EXPENDITURE WAS NOT ALLOWABLE. ON FURTHER VERIFICATION, THE ASSESSING OFFICER ALSO NOTED THAT THE EXPENDITURE DOES NOT PERTAINS TO ASSESSMENT YEAR 2007 - 08 , BUT PERTAINS TO ASSESSMENT YEAR 2008 - 09 . A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE IN THIS REGARD. IN REPLY, THE ASSESSEE EXPLAINED THAT THE EXPENDITURE WAS INCURRED FOR COMPUTER MACHINERY DURING THE YEAR 2006 - 07 AND THE SAME MAY BE AL LOWED. THE ASSESSING OFFICER REJECTING THE EXPLANATION OF THE ASSESSEE, 7 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. DISALLOWED EXPENDITURE OF RS.48,44,760/ - BEING CAPITAL IN NATURE AS WELL AS EXPENDITURE NOT PERTAINING TO THE PRESENT ASSESSMENT YEAR. 13. THE CIT(A) NOTED THE PLEA OF THE ASSESSEE V IDE LETTER DATED 19.08.2010, UNDER WHICH THE ASSESSEE HAD ACCEPTED THAT THE SAID EXPENDITURE WAS CAPITAL EXPENDITURE AND NOT REVENUE EXPENDITURE AND A REQUEST WAS MADE TO ALLOW DEPRECIATION ON THE SAID CAPITAL EXPENDITURE. HOWEVER, IN SUBSEQUENT SUBMISSIO NS DATED 07.12.2010, THE ASSESSEE HAD FURNISHED ADDITIONAL EVIDENCE UNDER RULE 46A OF INCOME TAX RULES, 1962 IN THE FORM OF DELIVERY CHALLANS OF THE RESPECTIVE VENDORS IN SUPPORT OF THE CLAIM OF DELIVERY OF GOODS BEFORE 31.03.2007 AND CLAIMED THAT THE SAME WERE PUT TO USE BEFORE 31.03.2007. THE CIT(A) NOTED THAT THE ASSESSING OFFICER HAD VERIFIED THE CLAIM OF THE ASSESSEE AND SUBMITTED HIS REMAND REPORT AND IT WAS SEEN THAT THE BANK HAD DIRECTED THE VENDORS TO SUPPLY THE MATERIAL WITHIN A WEEKS TIME FROM THE DATE OF THAT LETTER, WHICH IS DATED 30.03.2007. IN OTHER WORDS, THE COMPUTERS, ACCESSORIES AND SOFTWARE HAD BEEN PURCHASED AND PUT TO USE BY NEXT FINANCIAL YEAR, HENCE, THE DEPRECIATION WAS NOT ALLOWABLE IN ASSESSMENT YEAR 2007 - 08. FURTHER, THE CIT(A ) HAS GIVEN A FINDING THAT THE ASSESSEE HAD PURCHASED COMPUTER SOFTWARE, WHICH WAS SYSTEM SOFTWARE AND NOT A PROGRAMME SOFTWARE AS CLAIMED BY THE ASSESSEE IN HIS SUBMISSIONS. REFERENCE WAS MADE TO VARIOUS BILLS IN THIS REGARD AND FURTHER THE ASSESSEE HAD PURCHASED THE SAID GOODS VIDE DIFFERENT BILLS IN THE SUCCEEDING YEAR AND IN VIEW THEREOF, THE ASSESSEE WAS NOT ENTITLED TO THE CLAIM OF DEPRECIATION ON THREE BILLS DATED 28.04.2007 FOR RS.1,40,000/ - , DATED 30.06.2007 FOR RS.28,70,000/ - AND DATED 18 . 04 . 2007 FOR RS.1,94,920/ - . 14. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID NON - ALLOWANCE OF DEPRECIATION ON COMPUTERS, SOFTWARE AND ACCESSORIES PURCHASED BY THE ASSESSEE. 8 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. 15. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE DISA LLOWANCE WAS MADE IN THE HANDS OF ASSESSEE ON ACCOUNT OF TWO COUNTS I.E. THE SAID EXPENDITURE WAS CAPITAL IN NATURE AND FURTHER, WHETHER IT WAS PUT TO USE OR NOT DURING THE YEAR . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE DETAI LS OF EXPENDITURE PLACED AT PAGE 42 OF THE PAPER BOOK AND POINTED OUT THAT ADMITTEDLY CERTAIN EXPENDITURE WAS INCURRED DURING THE SUCCEEDING YEAR AND CERTAIN EXPENDITURE WAS INCURRED ON 30.03.2007. OUR ATTENTION WAS DRAWN TO THE DETAILS PLACED AT PAGE 42 OF THE PAPER BOOK AND THE ASSESSEE ADMITTED THAT IN RESPECT OF ITEM NOS.1 TO 4 AND 11, THE ADDITION HAS TO BE CONFIRMED AS THE ASSESSEE HAS NO EVIDENCE WHEN THE SAME WAS PUT TO USE AND IN RESPECT OF BALANCE ITEMS, THE DEPRECIATION MERITS TO BE ALLOWED. 16 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER OF CIT(A). 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING BEFORE US IS IN RELATION TO THE CLAIM OF DEPRECIATION O N ASSETS PURCHASED BY THE ASSESSEE IN THE FORM OF CERTAIN COMPUTERS, THEIR ACCESSORIES AND SOFTWARE. THE ASSESSEE HAS FURNISHED THE BREAK - UP OF EXPENDITURE TOTALING RS. 48,44,760/ - AT PAGE 42 OF THE PAPER BOOK. THE LEARNED AUTHORIZED REPRESENTATIVE FOR TH E ASSESSEE HAS FAIRLY CONCEDED THAT FOR ITEM NOS.1 TO 4 AND 11, THERE IS NO EVIDENCE OF THE SAID ITEMS BEING PUT TO USE DURING THE INSTANT ASSESSMENT YEAR AND THE ADDITION TO THAT EXTENT MERITS TO BE UPHELD IN THE HANDS OF ASSESSEE BEING CAPITAL IN NATURE. THE DETAILS OF THE EXPENSES ARE AS UNDER: - 9 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. SR. NO. DATE INVOICE NO. NAME OF THE PARTY AMOUNT (RS.) 1 30.06.2007 2007 - 2008/06/017 MAGIC E - MONEY LIMITED 28,70,000 2 28.04.2007 37 CUTE COMPUTERS 1,48,000 3 30.03.2007 35 CUTE COMPUTERS 80,000 4 30.03.2007 717 NIRMAL ENTERPRISES 1,94,920 11 30.03.2007 MAGIC E - MONEY LIMITED 2,72,600 18. IN VIEW OF THE ADMISSION OF THE ASSESSEE AND IN THE ABSENCE OF ANY DETAILS HAVING BEEN FURNISHED AS TO THE DATE WHEN THE SAID ITEMS WERE PUT TO IN USE, WHICH IN TURN WERE PURCHASED ON 30.03.2007, WE UPHOLD THE ORDER OF CIT(A) IN DENYING THE DEDUCTION ON ACCOUNT OF DEPRECIATION ON THE SAID ITEMS OF COMPUTER EXPENSES. FURTHER, TWO OF THE ITEMS HAVE BEEN PURCHASED IN THE SUCCEEDING YEAR I.E. ON 28.04.2007 AND 30. 06.2007. IN VIEW THEREOF, NO DEPRECIATION ON THE SAID ITEMS IS ALLOWABLE IN THE HANDS OF THE ASSESSEE DURING THE INSTANT ASSESSMENT YEAR. 19. NOW, COMING TO THE BALANCE ITEMS PURCHASED BY THE ASSESSEE WHICH WERE 19. NOW, COMING TO THE BALANCE ITEMS PURCHASED BY THE ASSESSEE WHICH WERE HELD TO BE CAPITAL EXPENDITURE BY THE ASSE SSING OFFICER AND THE ADDITION WAS MADE TO THAT EXTENT IN THE HANDS OF ASSESSEE, THE ASSESSEE HAS REVISED ITS CLAIM IN RESPECT OF THE SAME THAT THE DEPRECIATION ON SUCH CAPITAL EXPENDITURE SHOULD BE ALLOWED IN THE HANDS OF ASSESSEE. WE FIND MERIT IN THE P LEA OF THE ASSESSEE IN VIEW OF THE EVIDENCE FURNISHED ON RECORD IN RESPECT OF THE SAID ASSETS BEING PURCHASED IN THE MONTH S OF NOVEMBER, 2006 AND FEBRUARY, 2007 AND ONCE THE ASSET HAS HELD TO BE CAPITAL IN NATURE, DEPRECIATION ON THE SAME AS PER LAW , IS ALLOWABLE. WE FIND MERIT IN THE PLEA OF THE ASSESSEE AND ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON BALANCE ASSET NOS.5 TO 10 TOTALING RS .12,79,240/ - , THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS, PARTLY ALLOWED. 20 . THE ISSUE IN GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS AGAINST NON - ALLOWANCE OF LOSS OF RS.235.66 LAKHS ON SALE OF SECURITIES. 10 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. 2 1 . BRIEFLY, IN THE FACTS RELATING TO THE ISSUE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD DEBITED SUM OF RS.2 ,35,66,000/ - ON ACCOUNT OF LOSS ON SALE OF SECURITIES. THE EXPLANATION WITH REGARD TO THE SAID CLAIM WAS THAT THE BOARD OF DIRECTORS OF THE BANK HAD RESOLVED TO SHIFT THE SECURITIES FROM PERMANENT NATURE TO AVAILABLE FOR SALE ON 14.12.2006 AND THEREAFTER, THE SECURITIES WERE SOLD AND THE ASSESSEE HAD INCURRED LOSS OF RS.235.66 LAKHS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE BEING A COOPERATIVE BANK WAS GOVERNED BY THE BANKING REGULATION ACT, 1949, FOR WHICH THE RESERVE BANK OF INDIA HAD ISSUED GUI DELINES WHICH WERE TERMED AS PRUDENTIAL NORMS. REFERENCE WAS MADE TO THE GUIDELINES ISSUED BY THE RBI, UNDER WHICH THE COOPERATIVE BANKS WERE REQUIRED TO CLASSIFY THEIR ENTIRE INVESTMENT PORTFOLIO UNDER THREE CATEGORIES I.E. (1) HELD TO MATURITY (HTM), (2 ) AVAILABLE FOR SALE (AFS) AND (3) HELD FOR TRADE (HFT) . THE CATEGORIZATION OF INVESTMENTS WAS TO BE DECIDED AT THE TIME OF ACQUISITION. FURTHER, THE INVESTMENTS COULD BE SHIFTED TO / FROM HELD TO MATURITY CATEGORY WITH THE APPROVAL OF THE BOARD OF DIRECTORS ONCE IN A YEAR AT THE BEGINNING OF ACCOUNTING YEAR AND FURTHER SHIFTING COULD NOT BE ALLOWED DURING THE REMAINING PART OF ACCOUNTING YEAR. FURTHER, THE BANKS COULD SHIFT THE INVESTMENTS FROM AFS CATEGORY TO HFT CATEGORY WITH THE APPROVAL OF T HE BOARD OF DIRECTORS. FURTHER, THE INVESTMENTS HELD AS HFT CATEGORY COULD NOT BE SHIFTED TO AFS CATEGORY. HOWEVER, ONLY UNDER EXCEPTIONAL CIRCUMSTANCES, THE SAME COULD BE SHIFTED WITH THE APPROVAL OF THE BOARD OF DIRECTORS. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SHIFTED THE CATEGORY OF INVESTMENTS FROM HELD TO MATURITY TO AVAILABLE FOR SALE CATEGORY, WHICH WAS NOT ALLOWABLE SINCE THE SAME WAS ALLOWABLE ONLY AT THE BEGINNING OF THE YEAR AND NOT AT THE END OF THE YEAR I.E. BY WAY OF GENERAL MEE TING ON 14.12.2006. FURTHER, THE ASSESSEE HAD SHIFTED ITS INVESTMENTS FROM HTM CATEGORY TO AFS, WHICH WAS ONLY AVAILABLE UNDER EXCEPTIONAL CIRCUMSTANCES AS PER 11 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. THE RBI GUIDELINES, HENCE, THE LOSS INCURRED DUE TO SALE OF SECURITIES AT RS. 235.66 LAKHS WAS D ENIED TO THE ASSESSEE. 2 2 . THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER, IN VIEW OF DELAY OF ABOUT 9 MONTHS IN SHIFTING THE CATEGORY OF SECURITY FROM HTM TO AFS. THE CIT(A) WAS OF THE VIEW THAT THE SECURITIES HELD UNDER THE CATEGORY HTM WERE IN THE N ATURE OF CAPITAL ASSETS AND LOSS INCURRED ON SALE OF THE SAME WAS CAPITAL LOSS, WHICH COULD NOT BE SET OFF AGAINST THE INCOME FROM BUSINESS OF THE APPELLANT BANK. 2 3 . THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 2 4 . THE LEARNED AUTHORIZED REPRE SENTATIVE FOR THE ASSESSEE POINTED OUT THAT ADMITTEDLY, THE ASSESSEE HAD SOLD HTM SECURITIES WHICH WERE FIRST CONVERTED INTO AFS SECURITIES AND THEN SOLD IN THE OPEN MARKET. FURTHER, THE CONTENTION OF THE ASSESSEE IN THIS REGARD WAS THAT ALL THE SECURITIE S HELD BY THE BANK WERE STOCK - IN - ASSESSEE IN THIS REGARD WAS THAT ALL THE SECURITIE S HELD BY THE BANK WERE STOCK - IN - TRADE AND SO THE LOSS ON ITS SALE WAS TO BE ALLOWED AS BUSINESS LOSS. EVEN IF THE SECURITIES SOLD BY THE ASSESSEE WERE IN THE CATEGORY OF HTM ITSELF , T HE LOSS WAS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. RELIANCE IN THIS REGARD WAS PLACED ON THE RATIO S LAID DOWN BY PUNE BENCH OF TRIBUNAL IN LATUR URBAN CO - OP BANK LTD. VS. DCIT & ACIT VS. LATUR URBAN CO - OP BANK LTD. IN ITA NOS.778/PN/2011 & 792/PN/2011 , RESPECTIVELY, RELATING TO ASSESSMENT YEAR 2007 - 08, ORDER DATED 31. 08.2012 AND JANATA SAHAKARI BANK LTD. VS. ITO IN ITA NO.21/PN/2014 , RELATING TO ASSESSMENT YEAR 2005 - 06 & ORS., CONSOLIDATED ORDER DATED 25.02.2015 . 2 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT(A). 12 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. 2 6 . W E HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE WAS A COOPERATIVE BANK AND AS PER THE GUIDELINES OF RBI, HAD MADE INVESTMENT IN VARIOUS SECURITIES. THE SECURITIES WERE HELD I N DIFFERENT CATEGORIES I.E. HTM, AFS AND HFT. DURING TH E YEAR UNDER CONSIDERATION, THE SECURITIES HELD UNDER THE CATEGORY OF HTM WERE CONVERTED BY THE ASSESSEE INTO AFS CATEGORY BY WAY OF BOARDS RESOLUTION DATED 14.12.2006. THEREAFTER, THE SAID SECURITIES WERE SOLD AND LOSS OF RS. 235.66 LAKHS WAS BOOKED AS BUSINESS LOSS. THE CASE OF THE AUTHORITIES BELOW WAS THAT THE SECURITIES HELD IN THE CATEGORY OF HTM WERE IN THE NATURE OF CAPITAL ASSETS AND THE LOSS INCURRED ON THE SALE OF THE SAME WAS CAPITAL LOSS. THE CONTENTION OF THE ASSESSEE THAT IT HAD CONVERTED THE SAID CATEGORY FROM HTM TO AFS WAS ALSO NOT ACCEPTED BY THE AUTHORITIES BELOW SINCE AS PER THE RBI GUIDELINES, IN CASE ANY SHIFTING IN THE CATEGORY OF SECURITIES IS TO BE CARRIED OUT, THEN THE SAME IS TO BE CARRIED OUT AT THE BEGINNING OF THE YEAR , WHEREAS, IN THE CASE OF THE ASSESSEE, THE SAID SHIFT ING WAS AS PER THE BOARDS RESOLUTION DATED 14.12.2006 I.E. TOWARDS THE END OF ACCOUNTING PERIOD. THE CASE OF THE ASSESSEE BEFORE US IS THAT IRRESPECTIVE OF THE CATEGORY UNDER WHICH THE SECURI TIES ARE BEING HELD, THE SAME ARE IN THE NATURE OF STOCK - IN - TRADE AND ONCE THE SAME ARE SOLD IN THE OPEN MARKET, THE LOSS ARISING THEREOF, IS BUSINESS LOSS. WE ARE IN CONFORMITY WITH THE ABOVE SAID PLEA OF THE ASSESSEE, IN VIEW OF THE RATIO LAID DOWN BY T HE HONBLE KERALA HIGH COURT IN CIT VS. NEDUNGADI BANK LTD. (2003) 264 ITR 545 (KER) , WHICH HAS BEEN RELIED UPON BY THE PUNE BENCH OF TRIBUNAL IN LATUR URBAN CO - OP BANK LTD. VS. DCIT (SUPRA) TO DECIDE THE IDENTICAL ISSUE OF LOSS ARISING ON SALE OF SECURITI ES HELD AS HTM. THE TRIBUNAL IN TURN, FOLLOWING THE RATIO LAID DOWN BY THE HONBLE KERALA HIGH COURT IN CIT VS. NEDUNGADI BANK LTD. ( SUPRA) , HELD THAT THE SECURITIES HELD BY THE BANK ARE IN THE NATURE OF STOCK - IN - TRADE . T HE NOMENCLATURE OF THE HEAD UNDER WHICH THE SECURITIES ARE HELD ARE NOT DECISIVE FOR THE ASSESSEE BANK, HENCE, THE LOSS ARISING ON SALE OF SECURITIES WAS REVENUE IN NATURE AND THE 13 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. SAME WAS ALLOWABLE. WE FIND MERIT IN THE RELIANCE PLACED UPON BY THE LEARNE D AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AND THE ISSUE ARISING BEFORE US IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE TRIBUNAL IN LATUR URBAN CO - OP BANK LTD. VS. DCIT (SUPRA). FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT LOSS OF RS. 235.66 LAKHS IS ALLOWABLE IN THE HANDS OF THE ASSESSEE. 2 7 . NOW, COMING TO THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE AGAINST THE DISALLOWANCE MADE ON ACCOUNT OF COMMISSION PAID TO PIGMY DEPOSIT AGENTS AMOUNTING TO RS.17,09,767/ - UNDER SECTION 40(A)(IA) O F THE ACT. 2 8 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US FAIRLY ADMITTED THAT THE ISSUE OF APPLICATION OF SECTION 40(A)(IA) OF THE ACT IS AGAINST THE ASSESSEE. HOWEVER, IN VIEW OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE AC T, WHERE THE PAYEE HAS PAID THE TAXES, THE ISSUE MAY BE SENT BACK TO THE ASSESSING OFFICER FOR CONFIRMATION. OFFICER FOR CONFIRMATION. 2 9 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, POINTED OUT THAT THE CIT(A) HAS NOT ADJUDICATED THE SAID ISSUE, HENCE, NO MERIT IN THE PRESENT GROUND OF APPEAL FILED BY THE ASSESSEE. 30 . THE PERUSAL OF ORDER OF THE CIT(A) REFLECTS THAT AT PAGE 2, ADDITIONS MADE BY THE ASSESSING OFFICER HAVE BEEN TABULATED AND THEREAFTER, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE HAVE BEEN REPRODUCED UNDER PARA 4. FURTHER, AT PAGE 3, THE CIT(A) HAS NOTED THAT OUT OF SIX ADDITIONS MADE BY THE ASSESSING OFFICER, THE ASSESSEE HAD CHALLENGED ONLY THREE ADDITIONS I.E. ADDITION OF RS. 17,82,000/ - , ADDITION OF RS.48,44,760/ - AND ADDITION OF RS.2,35,66,000/ - . WE HAVE ALREADY ADJUDICATED THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN RESPECT OF ABOVE SAID THREE ADDITIONS IN THE PARAS HEREINABOVE. THE PRESENT GROUND OF APPEAL RAISED BY 14 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. THE ASSESSEE IS NOT AN ADDITIONAL GROUND OF APPEAL RAISED BEFORE US. THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND OF APPEAL ON A DIFFERENT ISSUE. IN VIEW THEREOF, WHERE THE ADDITION HAS BEEN ACCEPTED BY NOT FILING ANY GROUND OF APPEAL BEFORE THE CIT(A), THE ASSESSEE IS BARRED FROM RAISING ANY GROUND OF APPEAL BY WAY OF REGULAR GROUNDS OF APPEAL AGAINST THE ORDER OF CIT(A). IN CASE, THE ASSESSEE WAS AGGRIEVED , HE COULD HAVE RAISED AN ADDITIONAL GROUND OF APPEAL. HOWEVER, IN THE ABSENCE OF THE SAME, WE DI SMISS THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE. 3 1 . NOW, COMING TO THE ADDITIONAL GROUND OF APPEAL I.E. THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT. 3 2 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN RE SPECT OF THE PROVISION FOR BAD AND DOUBTFUL DEBTS TO BE ALLOWED UNDER SECTION 36(1)(VIIA) OF THE ACT @ 10% OR 7 % OF ADVANCES, AS THE CASE MAY BE, NO ISSUE 36(1)(VIIA) OF THE ACT @ 10% OR 7 % OF ADVANCES, AS THE CASE MAY BE, NO ISSUE WAS ADMITTEDLY RAISED BEFORE THE ASSESSING OFFICER OR THE CIT(A). HOWEVER, THE DEDUCTION WAS CLAIM ED AS PER THE FORMULA, WHICH IS HIGHER THAN THE PROVISION . THE ASSESSEE HAD MADE PROVISION TO THE EXTENT OF RS.17,85,60,000/ - , WHICH HAS BEEN ALLOWED BY THE ASSESSING OFFICER. HOWEVER, NOW THE ASSESSEE WANTS THAT THE SAME DEDUCTION TO BE ALLOWED AT RS. 18,03,42,000/ - . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE ISSUE WAS ADMITTEDLY, DECIDED AGAINST THE ASSESSEE BY THE PUNE BENCH OF TRIBUNAL IN SHRI MAHALAXMI CO - OP. BANK LTD. VS. ITO (SUPRA). 3 3 . THE LEARNED DEPAR TMENTAL REPRESENTATIVE FOR THE REVENUE FAIRLY AGREED THAT THE ISSUE WAS DECIDED AGAINST THE ASSESSEE. 15 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. 3 4 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ADDITIONAL GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IN RESPECT OF CLAIM OF DEDUC TION UNDER SECTION 36(1)(VIIA) OF THE ACT . IN THE FACTS RELATING TO THE ISSUE, THE ASSESSEE HAD MADE A PROVISION FOR CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT I.E. PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE EXTENT OF RS.17,85,60,000/ - IN IT S BOOKS OF ACCOUNT. THE SAID CLAIM OF THE ASSESSEE HAS ADMITTEDLY BEEN ALLOWED TO THE ASSESSEE. HOWEVER, NOW, THE ASSESSEE HAS RE - WORKED THE DEDUCTION TO BE ALLOWED TO IT AT RS.18,03,42,000/ - , WHICH ADMITTEDLY IS NOT ALLOWABLE IN THE HANDS OF THE ASSESSE E , SINCE NO PROVISION TO THAT EXTENT WAS MADE. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN SHRI MAHALAXMI CO - OP. BANK LTD. VS. ITO (SUPRA) AND IN VIEW OF THE CONCESSION OF BOTH THE AUTHORIZED REPRESENTATIVES BEFORE US, WE DISMISS THE ADDITIONAL GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE. THE ADDITIONAL GROUND OF APPEAL NO.2 WAS NOT PRESSED, HENCE, THE SAME IS DISMISSED AS NOT PRESSED. TH E GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 3 5 . T HE ASSESSEE IN ITA NO.1109/PN/2011 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IT MAY PLEASE BE HELD THAT THE STATUTORY RE SERVE AMOUNTING T O RS. 7,43,75,000.00 IS AN ALLOWABLE DEDUCTION WHILE COMPUTING THE BUSINESS INCOME OF THE APPELLANT. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IT MAY PLEASE BE HELD THAT PROVISION FOR OVER DUE INTEREST AMOUNTING TO RS. 19,10,80,000.00 IS ACTUALLY AN OVER DUE INTEREST ON NON PERFORMING ASSETS WHICH IS NOT LIABLE TO BE CONSIDERED WHILE CALCULATING THE BUSINESS INCOME OF THE APPELLANT ON THE PRINCIPLE AND THEORY OF REAL INCOME AND HENCE THE DEDUCTION FOR THE SAME MAY PLEASE BE ALLOWED TO THE APPELLANT. 3. THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE PROVISION OF RS. 4,18,000.00 MADE BY THE APPELLANT ON STANDARD ASSETS IS A PROVISION FOR BAD AND DOUBTFUL DEBTS WHICH QUALIFIES, FOR DEDUCTION U /S 36 [1 ][ VIIA ] OF THE I.T. ACT 1961. IN THE CIRCUMSTANCES THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED THE DEDUCTION OF THE SAID PROVISION U /S 36[1 ] [ VIIA ] OF THE I. T. ACT 1961. THE SAID DEDUCTION MAY PLEASE BE ALLOWED TO THE APPELLANT. 16 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. 4. THE LEARNED CIT(A) HAS ERRED IN SUSTAININ G THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER IN RESPECT OF COMMISSION PAID BY THE APPELLANT TO PIGMY DEPOSIT AGENTS AMOUNTING TO RS. 16,89,806.00 U/S 40[A][IA] OF THE I. T. ACT 1961. THE SAID DISALLOWANCE BEING PATENTLY ILLEGAL, BAD IN LAW AND VOID AB INITIO THE SAME MAY PLEASE BE DELETED. 5. THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER IN RESPECT OF LEGAL CHARGES PAID BY THE APPELLANT AMOUNTING TO RS. 2,68,598.00 U/S 40[A ][IA ] OF THE I.T. ACT 1961. THE SAID DISALLOWANCE BEING PATENTLY ILLEGAL, BAD IN LAW AND VOID AB INITIO THE SAME MAY PLEASE BE DELETED. 6. THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER IN RESPECT OF PROFESSIONAL FEES PAID BY THE APPELLANT AMOUNTING TO RS. 22,000.00 U/S. 40 [A][IA] OF THE I.T. ACT 1961 BEING PATENTLY ILLEGAL, BAD IN LAW AND VOID AB INITIO THE SAME MAY PLEASE BE DELETED AND THE DEDUCTION OF THE SAME MAY PLEASE BE ALLOWED BY HOLDING THAT THERE IS NO ESTOPPEL IN TAXATION AND FURTHER THE APPELLAN T CANNOT BE DENIED ANY LAWFUL DEDUCTION ON THE GROUND OF HIS INADVERTENT FAILURE TO RAISE THE NECESSARY GROUND OF APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 7. THE APPELLANT CRAVES THE PERMISSION TO ADD, AMEND, MODIFY, ALTER, REVISE, SUBSTITUTE, DELETE ANY OR ALL GROUNDS NECESSARY AT THE TIME OF HEARING OF THE APPEAL 3 6 . THE ISSUE IN GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS NOT PRESSED, HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 3 7 . THE ISSUE IN GROUND OF APPEAL NO.2 IS WITH REGARD TO THE RECOGNITION OF INTEREST ACCRUED ON NPAS TOTALING RS. 19,10,8 0 ,000/ - . 3 8 . BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS A COOPERATIVE BANK AND HAD DERIVED INCOME FROM BANKING BUSINESS AND HAD MAINTAINED BOOKS OF ACCOUNT ON MERCANTILE BASIS. TH E ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD NOT CREDITED THE INTEREST RECEIVABLE OR ACCRUED ON NON - PERFORMING ASSETS (REFERRED TO AS NPAS) TO ITS PROFIT & LOSS ACCOUNT FOR THE CAPTIONED ASSESSMENT YEAR. THE CLAIM OF THE ASSESSEE IN THIS REGARD WAS THAT IN VIEW OF RBI GUIDELINES, THE SAID INTEREST INCOME ON NPAS WAS TO BE RECOGNIZED, BUT NOT TO BE OFFERED TO TAX. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT WHERE THE ASSESSEE WAS FOLLOWING MERCANTILE S YSTEM OF 17 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. ACCOUNTING, THE INTEREST ACCRUED ON NPAS IS TO BE ADDED IN THE HANDS OF ASSESSEE AND ADDITION TO THE EXTENT OF RS. 19 , 10,80,000 / - WAS MADE IN THE HANDS OF ASSESSEE. 3 9 . THE CIT(A) HAS UPHELD THE ORDER OF ASSESSING OFFICER. 40 . THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 4 1 . WE FIND THAT SIMILAR ISSUE AS BEFORE US AROSE IN ITO VS. KOLHAPUR MAHILA SAHAKARI BANK LTD. IN ITA NO.01/PN/2013, RELATING TO ASSESSMENT YEAR 2009 - 10, VIDE ORDER DATED 29.01.2014. THE TRIBUNAL IN TURN FOLLOWING THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN ACIT VS. OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN/2011, ORDER DATED 31. 08.2012, HELD AS UNDER: - 2. THE ASSESSEE IS A CO - OPERATIVE BANK ENGAGED IN THE BUSINESS OF ACCEPTING DEPOSITS FROM MEMBERS AND GIVING LOANS TO MEMBERS. IT HAS FILED ITS RETURN OF INCOME ON 11.09.2009 FOR THE YEAR UNDER CONSIDERATION DECLARING TOTAL INCOME AT 14,57,840/ - . IN THE SC RUTINY ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD NOT CREDITED INTEREST RECEIVABLE OR ACCRUED ON NON - PERFORMING ASSETS (HEREINAFTER REFERRED TO AS NPA) TO ITS PROFIT AND LOSS ACCOUNT FOR FINANCIAL YEAR 2008 - 09. THE ASSESSING OFFICER A FTER REJECTING THE VARIOUS CONTENTIONS OF THE ASSESSEE HAS HELD THAT THE RBI GUIDELINES ARE NOT INTENDED TO REGULATE THE INCOME TAX LAW AND THE ASSESSEE WAS LIABLE TO BE ASSESSED ON ACCRUAL BASIS U/S.5 OF I.T. ACT FOR THE REASONS (I) BENEFITS EXTENDED TO S CHEDULE BANK, PUBLIC FINANCIAL INSTITUTIONS, PUBLIC COMPANIES FOR THE PURPOSE OF SECTION 43D WERE NOT EXTENDED TO A CO - OPERATIVE BANK AND (II) THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND NOT CASH SYSTEM. ULTIMATELY THE ASSESSING OFFICER TAXED ON ACCRUED INTEREST OF 25,20,022/ - ADVANCE CLAIMED TO BE NPA ACCOUNT. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN, FOLLOWING THE OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN/2011, THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE. 2.1 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT IN OSMANABAD JANTA SAHAKARI BANK LTD. (SUPRA) THE TRIBUNAL HAS DECIDED THE ISSUE IN F AVOUR OF ASSESSEE BY OBSERVING AS UNDER: 7. IN THE CASE BEFORE US, ADMITTEDLY, ASSESSEE HAS DIRECTLY TAKEN THE INTEREST TO THE BALANCE SHEET AND IT IS NOT ROUTED THROUGH THE PROFIT & LOSS ACCOUNT. MOREOVER, THE ISSUE OF THE TAXABILITY OF THE INTEREST O N THE STICKY LOSSES/ADVANCES, IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCHES IN THE CASE OF THE DURGA COOPERATIVE URBAN BANK LTD., VIJAYAWADA (SUPRA) AND KARNAVATI COOPERATIVE BANK LTD. (SUPRA). WE FIND NO REASON TO INTERFE RE WITH THE REASONED ORDER OF THE LD. CIT(A) AND ACCORDINGLY THE SAME IS CONFIRMED. IN THE RESULT, THE REVENUES GROUND IS DISMISSED. THE ABOVE DECISION HAS BEEN FOLLOWED IN (I) ACIT, CIRCLE - 3, NANDED V/S BHAGYALAXMI MAHILA SAHAKAR BANK LTD. ITA NO.793/ PN/2011, (II) ACIT, CIRCLE - 3 V/S 18 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. SIDHESHWAR SAHAKARI BANK LTD. ITA NO.794/PN/2011, (III) ACIT (CENTRAL) V/S LATUR URBAN CO - OPERATIVE BANK LTD. ITA NO.792/PN/2011 AND (IV) ASST. CIT, CIRCLE - 1 V/S DEOGIRI NAGARI SAHAKARI BANK LTD. ITA NO.817 & 1114/PN/2011. 4 2 . THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. DEOGIRI NAGARI SAHAKARI BANK LTD. IN INCOME TAX APPEAL NO.53 OF 2014 & ORS. HAS LAID DOWN THE PROPOSITION THAT THE INTEREST ACCRUED ON NPAS IS NOT TAXABLE IN THE HANDS OF ASSESSEE, IN VIEW OF THE GUIDELIN ES ISSUED BY THE RBI. 4 3 . THE ISSUE IN GROUND OF APPEAL NO. 2 ARISING BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE HONBLE BOMBAY HIGH COURT IN CIT VS. M/S. DEOGIRI NAGARI SAHAKARI BANK LTD. (SUPRA) AND TRIBUNAL IN ITO VS. KOLHAPUR MAHILA SAHAKARI BANK LTD. (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT NO ADDITION IS WARRANTED ON ACCOUNT OF INTEREST ACCRUED ON NPAS. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 19,10,80,000 / - . THE GROUND OF APPEAL NO. 2 RAISED BY THE ASSESSEE IS THUS, ALLOWED. NO. 2 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 4 4 . THE ISSUE IN GROUND OF APPEAL NO.3 IS AGAINST THE DISALLOWANCE OF PROVISION MADE ON ACCOUNT OF STANDARD ASSETS UNDER SECTION 36(1)(VIIA) OF THE ACT. 4 5 . THE ISSUE RAISED VIDE GROUND OF APPEAL NO.3 IS IDENTICAL TO THE ISSUE RAISED VIDE GROUND OF APPEAL NO.1 IN ASSESSMENT YEAR 2007 - 08 . FOLLOWING THE SAME PARITY OF REASONING, WE UPHOLD THE ORDERS OF AUTHORITIES BELOW AND DISMISS THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE. 4 6 . THE ISSUE IN GROUND O F APPEAL NO.4 RAISED BY THE ASSESSEE IS IN RESPECT OF COMMISSION PAID TO PIGMY DEPOSIT AGENTS AMOUNTING TO RS. 16,89,806/ - , IN GROUND OF APPEAL NO.5 IS IN RESPECT OF LEGAL CHARGES OF RS. 2,68,598/ - AND IN GROUND OF APPEAL NO.6 IS IN RESPECT OF PROFESSIONAL F EES OF RS.22,000/ - . 19 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. 4 7 . THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER, IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TAX AT SOURCE OUT OF ABOVE SAID EXPENDITURE INCURRED BY THE ASSESSEE. 4 8 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY ADMITTED THAT THE TDS WAS REQUIRED TO BE DEDUCTED. HOWEVER, WHERE THE PAYEE HAS PAID TAXES, THEN NO DISALLOWANCE IS TO BE MADE IN THE HANDS OF ASSESSEE, IN VIEW OF THE RATIO LAID DOWN BY THE PUNE B ENCH OF TRIBUNAL IN ITO VS. M/S. GAURIMAL MAHAJAN & SONS IN ITA NO.1852/PN/2012, RELATING TO ASSESSMENT YEAR 2008 - 09, ORDER DATED 06.01.2014, CONSEQUENT TO THE AMENDMENT IN THE ACT. 4 9 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE RELIED ON THE ORDERS OF AUTHORITIES BELOW. 50 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE ARISING IN THE GROUNDS OF APPEAL NO.4 TO 6 IS WHETHER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE ATTRACTED TO AN EXPENDITURE, WHICH WAS NOT PAYABLE AT THE CLOSE OF THE YEAR. THE PUNE BENCHES OF TRIBUNAL HAVE CONSISTENTLY TAKEN VIEW THAT THE SAID PROVISIONS ARE ATTRACTED IRRESPECTIVE OF TH E EXPENDITURE BEING PAID DURING THE YEAR AND NOTHING BEING PAYABLE AT THE CLOSE OF THE YEAR. HENCE, WHERE THE ASSESSEE HAD MADE PAYMENT ON ACCOUNT OF INTEREST EXPENDITURE TO WHICH THE PROVISIONS OF SECTION 194A OF THE ACT ARE APPLICABLE, THE ONUS WAS UPON THE ASSESSEE TO DEDUCT TDS AND IN ABSENCE OF THE SAME, THE SAID EXPENDITURE IS LIABLE TO THE DISALLOWED IN THE HANDS OF ASSESSEE, IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. WE UPHOLD THE ORDER OF CIT(A) IN THIS REGARD. 20 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. 5 1. NOW, COMING TO THE SECOND ASPECT OF THE ISSUE I.E. NEW LEGAL PLEA RAISED BY THE ASSESSEE IN VIEW OF SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, WHICH WAS INSERTED BY THE FINANCE ACT, 2012. THE TRIBUNAL IN ACIT VS. BHAVOOK CHANDRAPRAKASH TRIPATHI (2015) 43 CCH 292 ( PUNE - TRIB) WHILE ADJUDICATING SIMILAR ISSUE HAD OBSERVED AS UNDER: - 4. FOLLOWING THE AFORESAID PRECEDENT, WE HEREBY REVERSE THE DECISION OF THE CIT(A). HOWEVER, AT THE TIME OF HEARING, THE LD. REPRESENTATIVE FOR THE RESPONDENT - ASSESSEE MADE A NEW LEGAL A RGUMENT THAT SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT WAS INSERTED BY FINANCE ACT, 2012 W.E.F. 01.04.2013, WHEREBY IT IS PROVIDED THAT THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT WOULD NOT BE MADE IF THE ASSESSEE IS NOT DEEMED TO BE AN ASSESSEE IN DEFA ULT UNDER THE FIRST PROVISO TO SECTION 201(1) OF THE ACT. THE STAND OF THE ASSESSEE IS THAT THE SAID PROVISO SHOULD BE UNDERSTOOD AS RETROSPECTIVE IN NATURE AS IT HAS BEEN INTRODUCED TO ELIMINATE UNINTENDED CONSEQUENCES WHICH MAY CAUSE UNDUE HARDSHIPS TO T HE TAX PAYERS. IT WAS POINTED OUT THAT IN SIMILAR CIRCUMSTANCES, THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S GAURIMAL MAHAJAN & SONS VIDE ITA NO.1852/PN/2012 DATED 06.01.2014 FOLLOWING THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL IN THE C ASE OF ANTONY D. MUNDACKAL VS. ACIT VIDE ITA NO.38/COCH/2013 DATED 29.11 .2013 HAS RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. IN THE PRECEDENT DATED 06.01.2014 (SUPRA), THE TRIBUNAL NOTED THAT SUCH A PLEA WAS RAISED FOR THE FIRST TIME B EFORE THE TRIBUNAL AND THE CORRECTNESS OR PLEA WAS RAISED FOR THE FIRST TIME B EFORE THE TRIBUNAL AND THE CORRECTNESS OR OTHERWISE OF THE CONTENTIONS RAISED WAS NOT EXAMINED BY THE LOWER AUTHORITIES. THEREFORE, THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINATION AFRESH, FOLLOWING THE DECISION O F THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ANTONY D. MUNDACKAL (SUPRA) IN A SIMILAR CIRCUM STANCE. THE LD. REPRESENTATIVE SUBMITTED THAT THE MATTER BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER IN THE LIGHT OF THE ORDER OF THE TRIBUNAL DATED 06,01.2014 (SUPRA). THE AFORESAID PLEA OF THE RESPONDENT - ASSESSEE HAS NOT BEEN SERIOUSLY OPPOSED BY THE LD. DEPARTMENTAL REPRESENTATIVE APPEARING FOR THE REVENUE. 5. FOLLOWING THE AFORESAID PRECEDENT, WE THEREFORE DEEM IT FIT AND PROPER TO RESTORE THE MA TTER BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL CONSIDER THE PLEA OF THE ASSESSEE BASED ON THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT INSERTED BY THE FINANCE ACT W.E.F. 01.04.2013 IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL CONTAINED IN ITS ORDER DATED 06.01.2014 (SUPRA). NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE PASSING AN ORDER AFRESH ON THIS ASPECT AS PER LAW. 52 . THE ISSUE RAISED IN THE PRESENT APPEALS IS SQUAREL Y COVERED BY THE ORDER OF TRIBUNAL (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE DEEM IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER, WHO SHALL CONSIDER THE PLEA OF THE 21 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. ASSESSEE BASED ON THE PROVISIONS OF THE ACT INSERTED BY TH E FINANCE ACT, 2012 W.E.F. 01.04.2013 AND IN LINE WITH EARLIER ORDER OF THE TRIBUNAL DATED 06.01.2014 (SUPRA), THE ASSESSING OFFICER IS DIRECTED TO ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSE E. 5 3 . THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND S OF APPEAL, WHICH READ AS UNDER: - 1. IT MAY PLEASE BE HELD THAT THE APPELLANT IS ENTITLED TO CLAIM THE DEDUCTION U/S 36[1][VIIA] OF THE I.T. ACT, 1961 AS PER THE FORMULA PRESCRIBED IN THE SAID SECTION IRRESPECTIVE OF THE AMOUNT ACTUALLY DEBITED TO PROFIT AND LOSS ACCOUNT AND THE LEARNED ASSES SING OFFICER MAY PLEASE BE ACCORDINGLY DIRECTED TO ALLOW SUCH DEDUCTION AS PER THE FORMULA PRESCRIBED IN THE SAID SECTION AS AGAINST THE AMOUNT OF DEDUCTION OF RS. 70 , 39 , 0 00.00 [RS.66,21,000.00 PLUS RS.4,18,000.00] ERRONEOUSLY CLAIMED BY THE APPELLANT BANK IN ITS RETURN OF INCOME. 2. THE LEARNED ASSESSING OFFICER MAY PLEASE BE DIRECTED TO ALLOW DEPRECIATION ON RS.48,44,760/ - BEING THE CAPITAL EXPENDITURE ON COMPUTERS AND SOFTWARES PURCHASED IN EARLIER YEAR AS PER HIS FINDINGS IN ASSESSMENT ORDER FOR A.Y. 20 07 - 08 . 5 4 . THE PLEA OF THE ASSESSEE WAS THAT THE ADDITIONAL GROUND S OF APPEAL W ERE BOTH PURELY LEGAL IN NATURE AND COMPLETE FACTS WERE AVAILABLE ON RECORD, HENCE, THE SAME MAY BE ADMITTED AND DECIDED. IN RESPECT OF ADDITIONAL GROUND OF APPEAL NO.1, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ISSUE WAS IDENTICAL TO THE ISSUE RAISED VIDE ADDITIONAL GROUND OF APPEAL NO.1 IN ASSESSMENT YEAR 2007 - 08 AND THE SAME IS TO BE DECIDED AGAINST THE ASSESSEE. FOLLOWING THE SAME PARITY OF REASONING AS IN THE PARAS HEREINABOVE, WE DISMISS THE ADDITIONAL GROUND OF APPEAL NO.1 AFTER ADMITTING THE SAME TO BE A LEGAL ISSUE. 5 5 . FURTHER, VIDE ADDITIONAL GROUND OF APPEAL NO.2, TH E ISSUE RAISED IS CONSEQUENTIAL I.E. WHERE THE EXPENDITURE INCURR ED ON COMPUTERS AND SOFTWARE PURCHASED IN EARLIER YEARS WAS CAPITALIZED IN THE HANDS OF ASSESSEE, DEPRECIATION IS TO BE ALLOWED ON THE SAID CAPITAL ASSETS . WE FIND MERIT IN THE PLEA OF THE ASSESSEE, 22 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. IN VIEW OF THE ORDER PASSED IN ASSESSMENT YEAR 2007 - 08, WHEREIN, CERTAIN EXPENDITURE INCURRED BY THE ASSESSEE WAS CAPITALIZED. THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEPRECIATION ON THE ITEMS CAPITALIZED IN ASSESSMENT YEAR 2007 - 08 ON WHICH DIRECTI ONS HAVE BEEN GIVEN TO ALLOW THE DEPRECIATION. THE ADDITIONAL GROUND OF APPEAL NO.2 IS THUS, ALLOWED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 5 6 . THE ASSESSEE IN ITA NO.2330/PN/2012 HAS RAISED THE FOLLOWING GROUNDS OF APPE AL: - 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND M LAW THE LEARNED CIT(A) HAS ERRED IN REJECTING THE CLAIM OF DEDUCTION OF RS.28,65,71,088.00 MADE BY THE APPELLANT BANK U /S 36[1][VIIA ] OF THE I. T. ACT 1961 ON THE GROUND THAT SINCE THE SAID AMOUNT OF PROVISION WAS NOT DEBITED BY THE APPELLANT BANK TO ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION, THE SAID DEDUCTION WAS NOT ALLOWABLE TO THE APPELLANT ASSESSEE. THE SAID FINDING BEING ARBITRARY, PERVERSE, PATENTLY ILLEGAL AND BEING BAD IN LAW, THE SAME MAY PLEASE BE VACATED AND THE DEDUCTION AS CLAIMED BY THE APPELLANT BE ALLOWED. 2. IT M AY PLEASE BE HELD THAT FOR CLAIMING THE DEDUCTION U /S 36[1 ] [VIIA] OF THE I. T. ACT 1961, IT IS NOT NECESSARY THAT THE PROVISION SHOULD BE DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE RELEVANT PREVIOUS YEAR, AND THE CLAIM CAN BE MADE IN COMPUTATION OF INCOME BY MAKING A CLAIM IN TAX BOOK. IN THE CIRCUMSTANCES THE DEDUCTION U /S 36[1][VIIA] OF THE I. T. ACT 1961 MAY PLEASE BE ALLOWED TO THE APPELLANT ASSESSE E AS PER THE FORMULA PRESCRIBED IN THE SAID SECTION. 3. WITHOUT PREJUDICE TO ABOVE BOTH THE GROUNDS OF APPEAL AND BY WAY OF AN ALTERNATE SUBMISSION THE APPELLANT SUBMITS THAT THE DEDUCTION U/S 36[1][VIIA] OF THE I. T. ACT 1961 MAY PLEASE BE ALLOWED TO THE APPELLANT BANK TO THE EXTENT OF AMOUNT OF RS.47,40, 000 . 00 BEING THE PROVISION ON STANDARD ASSETS DEBITED TO THE PROFIT AND LOSS ACCOUNT WHICH CONSTITUTES PROVISION FOR BAD AND DOUBTFUL DEBTS. 4. THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER IN RESPECT OF AUDIT FEES PAID BY THE APPELLANT ASSESSEE AMOUNTING TO RS.4,61,878.00 U /S 40[A][IA] OF THE I. T. ACT 1961 BEING PATENTLY ILLEGAL, BAD IN LAW AND VOID AB INITIO THE SAME MAY PLEASE BE DELETED BY HOLDING THAT THERE IS NO ESTOPPEL IN TAXATION AND TH EREFORE THE APPELLANT CANNOT BE DENIED ANY LAWFUL DEDUCTION ON THE GROUND OF HIS INADVERTENT FAILURE TO RAISE THE NECESSARY GROUND OF APPEAL BEFORE THE LEARNED CIT(A). 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IT M AY PLEASE BE HELD THAT T HE STATUTORY RESERVE AMOUNTING TO RS.8,80,00,000.00 IS AN ALLOWABLE DEDUCTION WHILE COMPUTING THE BUSINESS INCOME OF THE APPELLANT EVEN THOUGH THE APPELLANT HAD NOT CLAIMED THE SAME EITHER IN HIS RETURN OF INCOME OR IN THE APPEAL BEFORE THE LEARNED CIT(A) . IT M AY PLEASE BE HELD THAT SINCE THERE IS NO ESTOPPEL IN MAY TAXATION, AND THE APPELLANT CANNOT BE DENIED ANY 23 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. LAWFUL DEDUCTION ON THE GROUND OF HIS INADVERTENT FAILURE TO MAKE HIS CLAIM BEFORE THE LOWER AUTHORITIES. 6. THE APPELLANT CRAVES THE PERMISSION TO ADD, AM END, MODIFY, ALTER, REVISE, SUBSTITUTE, DELETE ANY OR ALL GROUNDS OF APPEAL, IF DEEMED NECESSARY AT THE TIME OF HEARING OF THE APPEAL. 5 7 . THE ISSUE IN GROUNDS OF APPEAL NO.1 AND 2 RAISED IS AGAINST THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT, WHICH IS IDENTICAL TO THE ADDITIONAL GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2007 - 08 . 5 8 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FAIRLY ADMITTED THA T THE ISSUE IS COVERED AGAINST THE ASSESSEE BY WAY OF DECISION OF PUNE BENCH OF TRIBUNAL AND FOLLOWING THE SAME PARITY OF REASONING AS WHILE DECIDING THE ADDITIONAL GROUND OF APPEAL NO.1 IN ASSESSMENT YEAR 2007 - 08 , WE DISMISS THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE. 5 9 . NOW, COMING TO THE ALTERNATE PLEA RAISED BY WAY OF GROUND OF APPEAL NO.3, WHICH IS THE DEDUCTION ON ACCOUNT OF PROVISION ON STANDARD ASSETS DEBITED TO THE PROFIT & LOSS ACCOUNT. THE SAID ISSUE IS ALSO IDENTICAL TO THE ISSUE RAISED VIDE GROUND OF APPEAL NO. 1 IN ASSESSMENT YEAR 2007 - 08 AND FOLLOWING THE SAME PARITY OF REASONING, WE DISMISS THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE. 60 . THE BALANCE ISSUE RAISED VIDE GROUND OF APPEAL NO.4 IS IN RELATION TO THE DISALLOWAN CE MADE UNDER SECTION 40(A)(IA) OF THE ACT. WE HAVE ALSO DEALT WITH THE SAME ISSUE BY WAY OF GROUNDS OF APPEAL NO.4 TO 6 IN ASSESSMENT YEAR 2008 - 09 AND FOLLOWING THE SAME, WE REMIT THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. 24 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. 61. THE GROUND OF APPEAL NO.5 IS NOT PRESSED, HENCE, THE SAME IS DISMISSED AS NOT PRESSED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 62 . THE REVENUE IN ITA NO.2329/PN/2012 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS), AURANGABAD HAS RIGHTLY DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF PROVISIONS FOR NON - OVERDUE INTEREST, IN VIEW OF THE VARIOUS DECISIONS RELIED BY HIM. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AFTER SUBSTITUTION OF SECTION 43D OF THE INCOME TAX ACT, 1961 WITH EFFECT FROM 01/04/2000 IN THE CASE OF ASSESSEE BANK INTEREST ON BAD AND DOUBTFUL DEBTS IS ASSESSABLE TO TAX ON RECEIPT BASIS. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, ASSESSEE BANKS INTEREST ON BAD AND DOUBTFUL DEBTS IS ASSESSABLE TO TAX ON RECEIPT BASIS WHEREAS ASSESSEE BANK IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. 4. THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS), AURANGABAD MAY BE VACATED AND THE ORDER OF THE AO MAY BE RESTORED. 5. ON THE FACTS AND CIRCUMSTANCES THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY GROUNDS OF APPEAL. 6 3 . THE ONLY ISSUE RAISED BY THE REVENUE IS AGAINST THE ASSESSABILITY OF INTEREST ON NPAS. 6 4 . THE ASSESSEE HAD MADE PROVISION ON ACCOUNT OF INTEREST ON THE NPAS WHICH WERE NOT DUE, BUT THE SAME WAS RECOGNIZED, IN VIEW OF MERCANTILE SYSTEM OF ACCOUNTING BEING FOLLOWED BY THE ASSESSEE AND THE AMOUNT WAS DEBITED TO THE PROFIT & LOSS ACCOUNT AS PER THE RBI GUIDELINES. 6 5 . THE ISSUE IS IDENTICAL TO THE ISSUE IN GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 20 08 - 09. FOLLOWING THE SAME PARITY OF REASONING, WE 25 ITA NO S . 1108 & 1109 /PN/201 1 ITA NO S . 2329 & 2330 /PN/201 2 THE BEED DIST. CENTRAL COOP. BANK LTD. DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 6 6 . IN THE RESULT, APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND THE APPEAL OF THE R EVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 31 ST DAY OF DECEMBER , 2015. SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 31 ST DECEMBER , 2015 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. ( ) / THE CIT(A), AURANGABAD ; 4. / THE CIT , AURANGABAD ; 5. , , / DR B , ITAT, PUNE ; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE