The Satara District Central Co.op. Bank Ltd., Satara V. DCIT, Satara Circle, Satara

ITA 2537/PUN/2012

• Counselvise Citation: 253724514 RSA 2012
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 24-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Assessee Lawyers: N K KULKARNI
• Keywords: Capital asset; Depreciation; Business expenditure; Question of law; Bad and doubtful debts; Revenue expenditure
• Section: 43B; 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.2537/PN/2012 (ASSESSMENT YEAR : 2009-10) THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD., POWAI NAKA DISTRICT SATARA .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX SATARACIRCLE, SATARA .... RESPONDENT PERMANENT ACCOUNT NUMBER AAAAT3706H ITA NO.2522/PN/2012 (ASSESSMENT YEAR : 2009-10) ASSTT. COMMISSIONER OF INCOME TAX SATARA CIRCLE, SATARA .. APPELLANT V/S THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD., POWAI NAKA DISTRICT SATARA .... RESPONDENT PERMANENT ACCOUNT NUMBER AAAAT3706H ASSESSEE BY : SHRI N.K. KULKARNI REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 25.11.2014 DATE OF PRONOUNCEMENT : 30.12.2014 ORDER PER SUSHMA CHOWLA THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENU E ARE AGAINST THE ORDER OF THE CIT(A) DATED 30 TH AUGUST 2012, RELATING TO THE ASSESSMENT YEAR 2009-10, AGAINST THE ORDER PASSED U NDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 2 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW LD. CIT(A)-PUNE WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE B Y THE A. 0. OF RS. 31,73,359/- SO CLAIMED AS AMORTIZATION EXPENDITURE ON PURCHASE OF ' GOVT. SECURITIES AND PAID AS PREMIUM DISREGARDING THE CBD T INSTRUCTIONS NO. 17/2008 WHEREIN THE DEPARTMENTAL OFFICERS HAVE BEEN INSTRUCTED TO ALLOW SUCH AMORTIZATION EXPENDITURE CLAIMED FOLLOWING RBI GUIDELINES IN THE MATTER. THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN DISREGARDING THE CBDT INSTRUCTIONS AND RBI GUIDELINES. THE DISALLOWANCE BE DELETED. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE B Y THE A.O. OF RS. 5,00,000/- BEING DONATIONS AND SUBSCRIPTIONS. THE A SSESSEE BANK HAD RIGHTLY CLAIMED THE DEDUCTION AND IT BE ALLOWED TO THE ASSE SSEE. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A)-PUNE WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MA DE BY A.O. OF RS.32,46,181/- SO CLAIMED ON ACCOUNT OF STAFF VOLUN TARY PAYMENTS, T HE RELIANCE OF LD. CIT(A) ON CIRCULAR NO. 200 DT. 23-0 1-2001 IS IS PLACED. THE BOARD CIRCULAR NO.14 OF 2001 CLARIFIES THAT THE PAY MENTS MADE IN ACCORDANCE WITH ANY SCHEME OR SCHEMES OF VRS ARE ONLY COVERED WITHIN THE PURVIEW OF THE SAID SECTION. THE EX-GRATIA PAYMENTS MADE OVER ANDABOVE THE REGULAR TERMINAL BENEFITS THE NORMAL PROVISIONS OF THE ACT WOULD APPLY. THE LD. CIT(A) FAILED TO PROPERLY APPRECIATE THE ARGUMENTS OF THE ASSESSEE. THE DISALLOWANCE CONFIRMED BEING WITHOUT JURISDICTION BE QUASHED. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN REMANDING THE MATTER TO VERIFY WHE THER PAYMENT OF OUTSTANDING BONUS OF RS.4,19,12,834 WAS PAID BEFORE THE DUE DATE OF FILING OF THE RETURN OR NOT AND IF SO, NO DISALLOWANCE WAS CA LLED FOR AND THE ADDITION MADE OF RS. 32,33,7067- SHALL STAND DELETED. THE EN TIRE INFORMATION ON THIS ISSUE WAS AVAILABLE BEFORE HIM. THE LD. CIT(A) HIMS ELF WAS OBLIGED TO VERIFY THE RECORDS AND DECIDE THE MATTER IN ACCORDANCE WIT H PROVISIONS OF LAW. IT BE HELD ACCORDINGLY. 5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) -PUNE WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MA DE BY THE A.O. INVOKING PROVISIONS OF S. 40(A)(I)(A) OF THE ACT AMOUNTING T O RS. 60,78,530/-. THE REASONING ADOPTED BY LD. CIT(A) IN SUSTAINING THE DISALLOWANCE IS CONTRARY TO DECISION PRONOUNCED BY SPL. BENCH OF ITAT-VISHAKHAP ATNAM REPORTED AS MERILYN SHIPPING TRANSPORTS V. ADDL. CIT (2012) 70 DTR (VISAKHA)(SB)(TRIB) 81. THE DISALLOWANCE MADE BY A.O. AND CONFIRMED BY LD. C1T(A) IS CONTRARY TO BINDING PRECEDENT AND SUCH DISALLOWANCE OF RS. 60,78,530/- BE QUASHED. 6) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE B Y THE A.O. OF RS. 75,00,000/- PROVIDED FOR DIRECTOR'S AND STAFF TRAIN ING PROGRAMME. IT WAS NOT A PROVISION FOR UNKNOWN OR UNASCERTAINED LIABILITY. THE CLAIM WAS MADE UNDER SECTION 37(1) OF THE ACT. THE EXPENDITURE BEI NG ALLOWABLE AS 'EXPENDITURE' BE ALLOWED TO THE ASSESSEE-BANK ACCORDINGLY. 7) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF RS. 1,20,384/-MADE BY A. 0. INVOKING THE PROVISIONS OF S. 40(A)(I-A) OF THE ACT . IN VIEW OF THE GROUND NO. 5 ABOVE THE DISALLOWANCE WAS CONTRARY TO LAW AND TH E BINDING PRECEDENT. THE DISALLOWANCE BE DELETED. 3 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. 3. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CA SE. 2. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS. 32,23,706/- MADE IN THE ASSESSMENT ON ACCOUNT OF UNPAID AMOUNT OF BONUS/EX-GRATIA PROVISIONS, INSTEA D OF CONFIRMING SUCH ADDITION. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED ON FACTS AND IN LAW IN FAILING TO APPRECIATE THE PROVISIONS OF THE SECTION 43B AND PROVISO THERETO AND ALLOWED THE WHOLE OF THE OUTSTA NDING AMOUNT OF BONUS/EX-GRATIA INCLUDING THE UNPAID BONUS/EX-GRATI A OF THE EARLIER YEARS EVEN THOUGH THE LIABILITY TO PAY SUCH AMOUNT WAS NOT INCURRED IN THE PREVIOUS YEAR UNDER CONSIDERATION. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS. 38,63,446/- MAD E IN THE ASSESSMENT ON ACCOUNT OF UNPAID AMOUNT OUT OF PROVISIONS, INST EAD OF CONFIRMING SUCH ADDITION AND NOT APPRECIATING THE FACT THAT ME RE PROVISION IS NOT AN ALLOWABLE DEDUCTION. 5. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE COMMISSIONER OF INCOME-TA X (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF THE AP PELLATE PROCEEDINGS BEFORE THE ITAT. 4. THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REV ENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C ONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.2537/PN/2012 ASSESSEES APPEAL 5. THE ISSUE IN GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF RS.31,73,359/-, CLAIMED AS AMORTIZA TION EXPENSES ON PURCHASE OF GOVERNMENT SECURITIES AND PAID AS PREMI UM. 4 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. 6. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEA R UNDER CONSIDERATION, THE ASSESSEE HAD DEBITED A SUM OF RS .31,73,359/-, ON ACCOUNT OF AMORTIZATION OF PREMIUM ON PURCHASE OF G OVERNMENT SECURITIES. THE EXPLANATION OF THE ASSESSEE FOR ALL OWABILITY OF THE CLAIM UNDER SECTION 37(1) OF THE ACT WAS THAT THE SAID IN VESTMENT WAS MADE BY ASSESSEE BANK IN GOVERNMENT SECURITIES IN THE CO URSE OF BANKING AND FOR THE PURPOSE OF BUSINESS OF BANKING. THE ASS ESSEE FURTHER CLAIMED THAT THE SECURITIES HELD BY THE ASSESSEE BA NK UNDER THE BANKING REGULATION ACT OR AS PER THE GUIDELINES OF RBI FORMED PART OF THE BANKING BUSINESS AND WAS THEREFORE, STOCK IN TR ADE IRRESPECTIVE OF THE FACT THAT WHETHER THE INVESTMENTS WERE MADE OUT OF THE CAPITAL SURPLUS FUNDS OR RESERVES. THE ASSESSEE FURTHER CLA IMED THAT THE INVESTMENTS WERE SHIFTED FROM AVAILABLE FOR SALE (A FS) TO HELD TILL MATURITY (HTM), WHICH HAD RESULTED IN DEPRECIATION OF VALUE, WHICH WAS CHARGED TO THE P&L ACCOUNT IN VIEW OF THE INSTRUCTI ONS ISSUED BY THE RBI. THE SECOND PLEA RAISED BY THE ASSESSEE WAS THA T WHERE THE INVESTMENTS WERE SHOWN AS HELD FOR TRADING (HFT) AN D AFS, WHICH HAVE TO BE VALUED AT COST OR MARKET PRICE, THE BOOK VALUE OF INDIVIDUAL SECURITY SHOULD NOT UNDERGO ANY CHANGE EVEN AFTER S UCH SECURITIES WERE MARKED TO MARKET. CONSEQUENTLY, THE REDUCTION IN THE VALUE OF INVESTMENT ARISING ON ACCOUNT OF BEING MARKED TO MA RKET WAS SHOWN AS CHARGE TO P&L ACCOUNT UNDER THE HEAD INVESTMENT DEPRECIATION RESERVES. THE ASSESSING OFFICER NOTED THAT AFS AND HFT SECURITIES WERE IN THE NATURE OF STOCK IN TRADE WHILE THE HTM SECURITIES WERE IN THE NATURE OF CAPITAL ASSET. HENCE, THE VALUATION A T THE YEAR END OF 5 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. AFS / HFT SECURITIES WERE TO BE VALUED AT COST OR M ARKET PRICE, WHICHEVER WAS LESS, WHEREAS THE HTM SECURITIES HAD TO BE VALUED AT COST ONLY. THE ASSESSING OFFICER FURTHER OBSERVED T HAT WHY, IT MAY BE PRUDENT FROM THE BANKING POINT OF VIEW OF AMORTISIN G THE PREMIUM ON HTM, IT IS NOT ALLOWABLE UNDER THE INCOME TAX ACT. IN VIEW THEREOF, THE AMORTIZATION OF PREMIUM ON GOVERNMENT OF INDIA SECURITIES AMOUNTING TO RS.31,73,359/- WAS DISALLOWED AND ADDE D TO THE INCOME OF THE ASSESSEE. 7. THE CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICE R HOLDING THAT THE RBI GUIDELINES COULD NOT OVERRULE THE PERMISSIB LE DEDUCTION OR THEIR EXCLUSION UNDER THE ACT. HENCE, THE EXPENDITU RE ON ACCOUNT OF AMORTIZATION OF PREMIUM PAID ON ACQUISITION OF HTM SECURITIES WAS HELD TO BE NOT ALLOWABLE EXPENDITURE. 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF THE LEARNED CIT(A). THE A.R. POINTED OUT THAT THE ISSUE IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE TRIB UNAL, PUNE BENCH, IN THE CASE OF PUNE DISTRICT CENTRAL CO. OPERATIVE BANK LTD., ITA NO.1796/PN/2013, VIDE ORDER DATED 28 TH NOVEMBER 2014, RELATING TO ASSESSMENT YEAR 2009-10 AND HONBLE BOMBAY HIGH COU RT IN CIT V/S HDFC BANK LTD., 366 ITR 505 (BOM.). 9. THE A.R. FOR THE REVENUE PLACED RELIANCE ON THE ORD ER OF THE CIT(A). 6 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. 10. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS WITH REGARD TO AMORTIZATION OF PREMIUM ON HTM SECURITIES. THE CASE OF THE ASSESSEE WAS THE BANKS WERE GIVEN PERMISSION TO SHIFT SECURITIES FROM AFS TO HTM ON OR BEFORE 31 ST MARCH 2005. FOR THE PURPOSE, YEAR AND VALUATION OF AFS WAS DONE AND PRICE PAID FOR THE HTMS OVER THE FACE VALUE WAS AMORTIZED FOR A PERIOD OF FIVE YEARS AND BOOKED AS EXPENDITURE, AS PER RBI NORMS. THE CASE OF THE REVENUE WAS THAT THE HTM SECURITIES WER E HELD ON CAPITAL ACCOUNT AND THE PREMIUM PAID FORMS INTEGRAL PART OF THE COST OF CAPITAL ASSET AND THE SAME CANNOT BE SEGREGATED FROM THE CO ST AND CLAIMED AS DEDUCTION. IDENTICAL ISSUE AROSE BEFORE THE TRIB UNAL, PUNE BENCH, IN THE CASE OF PUNE DISTRICT CENTRAL CO. OPERATIVE BAN K LTD. (SUPRA), WHEREIN THE TRIBUNAL HELD AS UNDER:- 10. WE FIND THAT A SIMILAR ISSUE OF ALLOWABILITY O R DEDUCTION ON ACCOUNT OF AMORTIZATION OF PREMIUM EXPENDITURE FOR HTM SECURITIES AROSE BEFORE PUNE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1795/PN/2013 RELATING TO ASSESSM ENT YEAR 2008-09 VIDE ORDER DATED 22.09.2014 WHEREIN, IT WAS HELD AS UNDER:- 2.1 THE ONLY ISSUE REMAINS IS WITH REGARD TO DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.2,20,68,302/- CLAIMED BY THE ASSESSEE AS AMORTIZATION OF PREMIUM EXPENDITURE FOR HTM SECURITIES BY PAYMENT OF OVER AND ABOVE THE VALUE O F SUCH SECURITIES. THE LEARNED AUTHORIZED REPRESENTATIVE HAS POINTED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. HDFC BANK LTD. (2014) 366 ITR 505 (BOM), WHEREIN THE HONBLE BOMBAY HIGH COURT ON SIMILAR ISSUE, HEL D AS UNDER: AS FAR AS QUESTION (C) IS CONCERNED, WE FIND THAT AN IDENTICAL QUESTION OF LAW WAS FRAMED AND ANSWERED IN FAVOUR OF THE ASSESSEE BY THIS COURT IN ITS JUDGMENT DATED JULY 4, 2014, IN INCOME TAX APPEAL NO.1079 OF 2012, CIT V. LORD KRISHNA BANK LTD. (NOW 7 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. MERGED WITH HDFC BANK LTD.) (2014) 366 ITR 416 (BOM). MR. SURESH KUMAR FAIRLY STATED THAT QUESTIO N (C) REPRODUCED ABOVE IS COVERED BY THE SAID ORDER. IN VIEW THEREOF, WE ARE OF THE VIEW THAT EVEN QUESTION (C) DOES NOT ARISE ANY SUBSTANTIAL QUESTIO N OF LAW THAT REQUIRES AN ANSWER FROM US. AND A SIMILAR VIEW HAS BEEN TAKEN BY ITAT, PUNE A BENCH IN THE CASE OF DY.CIT VS. KALLAPPANNA AWADE ICHALKARANJI JANATA SAHAKARI BANK LTD. IN ITA NO.449/PN/2012 AND ANOTHER BY OBSERVING AS UNDER: 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF NAHSIK MERCHANT COOPERATIVE BANK LTD. (SUPRA). WE FIND THE TRIBUNAL HAS DISCUSSED THE ISSUE AND DISMISSED THE GROUNDS RAISE D BY THE REVENUE BY HOLDING AS UNDER : 4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD WE FIND THAT WITH THE ADVENT OF SECTION 80P(4) W.E.F. A.Y, 2007-08 HAS CLOSED THE DOORS FOR COOPERATIVE BANKS FOR CLAIMING THE BENEFI T OF DEDUCTION U/S.80P(2)(A)(I) FROM THIS TOTAL INCOM E. HOWEVER, THE COOPERATIVE SOCIETY SHOULD NOW BE ENTITLED TO BE ASSESSED AS NORMAL BANKING COMPANY. THE CLAUSE (4) INSERTED IN SECTION 80P HAS TAKEN AWAY THE BENEFIT OF THE ERSTWHILE DEDUCTION AVAILAB LE TO COOPERATIVE SOCIETY IN CARRYING ON BUSINESS OF BANKING OR PROVIDING CREDIT FACILITY TO ITS MEMBERS . THE NEW CLAUSE (4) INSERTED BY THE FINANCE ACT, 200 6 W.E.F. 01-04-2007 READS AS UNDER: ' THE PROVISION OF THE SECTION WAS NOT IN RELATION TO ANY COOPERATIVE BANK OTHER THAN AGRICULTURAL CREDIT SOCIETY OR PRIMARY COOPERATIVE AGRICULTURAL AND RUR AL DEVELOPMENT BANK'. 5. THE INTENTION OF THE PROVISION MAY BE DERIVED MORE PRECISELY FROM RELEVANT PARA 166 OF THE BUDGET SPEECH WHICH STATED THAT : 'CO-OPERATIVE BANKS, LIK E ANY OTHER BANK, ARE LENDING INSTITUTIONS AND SHOULD PAY TAX ON THEIR PROFITS, PRIMARY AGRICULTURAL CRED IT SOCIETIES (PACS) AND PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK (PCARDB) STAND ON A SPECIAL FOOTING AND WILL CONTINUE TO BE EXEMPT UNDER SECTION 80P OF THE INCOME TAX ACT. HOWEVER, I PROPOSE TO EXCLUDE ALL OTHER CO-OPERATIV E BANKS FROM THE SCOPE OF THAT SECTION'. ACCORDINGLY, SECTION 80P IS TO BE AMENDED TO GIVE EFFECT TO THE ABOVE PROPOSAL. IT IS ALSO PROPOSED TO AMEND SECTIO N 8 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. 2(24) TO PROVIDE THAT PROFITS AND GAINS OF BUSINESS OF BANKING (INCLUDING PROVIDING CREDIT FACILITIES) CAR RIED ON BY A CO-OPERATIVE SOCIETY WITH ITS MEMBERS SHALL BE INCLUDED IN THE DEFINITION OF 'INCOME' (WITH EFF ECT FROM 1ST APRIL, 2007)'. 6. COOPERATIVE BANK UNLIKE OTHER COMMERCIAL BANKS ARE SUBJECTED TO DUAL CONTROL FROM BOTH RBI A S WELL AS FROM STATE COOPERATIVE DEPARTMENT. THE ACCOUNTING TREATMENT FOR A COOPERATIVE BANK IS THEREFORE A RESULT OF GUIDELINES FROM BOTH THE CONTROLLING AUTHORITIES. ORDINARILY A DEDUCTION IS NOT AVAILABLE TO AN ASSESSEE UNLESS SPECIFICALLY PROVID ED UNDER THE ACT. THIS IS IRRESPECTIVE OF ACCOUNTING TREATMENT PROVIDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. BUT AT THE SAME TIME IT WAS WELL SETTLED THAT DEDUCTION EXPRESSLY MENTIONED UNDER THE ACT ARE NOT EXHAUSTIVE AND PROFIT IS TO BE DERIVED ACCORDING TO ORDINARY COMMERCIAL PRINCIPLES. AS PER THE EXTANT RBI GUIDELINES DATED 01-07-2009 THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER 3 CATEGORIES VIZ., HELD THE MATURI TY HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS). THE VALUE OF EACH KIND OF INVESTMENT IS TO B E DONE IN THE FOLLOWING MANNER: SR.NO. CLASSIFICATION VALUATION NORMS OF INVESTMENT. 1.. 2.. 3.. 7. IN PARA (VII) OF THE CBDT INSTRUCTION NO.17 OF 2008 DATED 26.11.2008, ON 'ASSESSMENT OF BANK - CHECK LIST FOR DEDUCTION, STATES AS UNDER: 'AS PER RBI GUIDELINES..' 8. THE ITAT, MUMBAI BENCH, IN THE CASE OF ACIT VS. THE BANK OF RAJASTHAN LTD. (2011) TIOL-35- ITAT-MUMBAI, HAS HELD THAT IN CASE OF BANKS, THE PREMIUM PAID IN EXCESS OF FACE VALUE OF INVESTMENTS CLASSIFIED UNDER HTM CATEGORY WHICH HAS BEEN AMORTISED OVER THE PERIOD TILL MATURITY IS ALLOWABL E AS REVENUE EXPENDITURE SINCE THE CLAIM IS AS PER RBI GUIDELINES AND CBDT ALSO HAS DIRECTED TO ALLOW SUCH PREMIUM. IT HAS ALSO BEEN HELD IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. ACIT THAT AMORTIZATIO N ON PURCHASE OF GOVERNMENT SECURITIES WAS MADE AS PER PRUDENTIAL NORMS OF THE RBI AND SAME WAS ALLOWABLE DEDUCTION. IN VIEW OF ABOVE, ASSESSEE WA S JUSTIFIED IN CONTENDING FOR AMORTIZATION OF PREMIUM PAID IN EXCESS OF FACE VALUE OF SECURITIES HELD TO MATURITY (HTM) CATEGORY OR PERIOD REMAINING TILL 9 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. MATURITY WAS FOUND REASONABLE BY THE CIT(A). ACCORDINGLY ADDITION OF RS.17,91,659/- MADE BY THE ASSESSING OFFICER BY DISALLOWING AMOUNT TOWARDS AMORTIZATION OF GOVERNMENT SECURITIES (HMT) WAS DELETED. THIS REASONED FACTUAL AND LEGAL FINDING O F THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 9. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 10.1 RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ABOVE CITED DECISION WE FIND NO INFIRMITY IN TH E ORDER OF THE LD.CIT(A) DELETING THE ADDITION. ACCORDINGLY, THE ORDER OF THE LD.CIT(A) IS UPHELD A ND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 2.2 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLEDGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING WE HOLD TH AT IN CASE OF BANKS, THE PREMIUM PAID IN EXCESS OF FAC E VALUE OF INVESTMENTS CLASSIFIED UNDER HTM CATEGORY WHICH HAS BEEN AMORTISED OVER THE PERIOD TILL MATURITY IS ALLOWABLE AS REVENUE EXPENDITURE SINCE THE CLAIM IS AS PER RBI GUIDELINES AND CBDT ALSO HA S DIRECTED TO ALLOW SUCH PREMIUM. IN VIEW OF ABOVE, THE ASSESSEE IS JUSTIFIED IN CONTENDING THAT THE AMORTIZATION OF PREMIUM IN EXCESS OF FACE VALUE SECURITIES AS HTM, PERIOD REMAINING DIFFERENCE WAS FOUND REASONABLE. ACCORDINGLY, THE DISALLOWANCE OF RS.2,20,68,302/- MADE BY THE ASSESSING OFFICER CLAIMED AS AMORTIZATION OF PREMIUM EXPENDITURE FOR HTM SECURITIES BY PAYMENT OF PREMIUM OVER AND ABOVE THE FACE VALUE OF SUCH SECURITIES IS DIRECTED TO BE ALLOWED. 11. THE HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC B ANK (SUPRA) HELD THAT THE ASSESSEE THEREIN WAS ENTITLED TO DEDUCTION WITH RESPECT TO THE DIMINUTION IN THE VALUE OF INVE STMENTS AND AMORTIZATION OF PREMIUM ON INVESTMENTS HELD TO MATU RITY ON THE GROUND OF MANDATE OF THE RBI GUIDELINES. THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE PUNE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 2008-09 AND HONBLE BOMBAY HIGH COURT IN CIT VS. HD FC BANK (SUPRA). WE HOLD THAT AMORTIZATION OF PREMIUM EXPE NDITURE FOR SECURITIES HELD TO MATURITY IN VIEW OF RBI GUIDELIN ES ARE ALLOWABLE BUSINESS EXPENDITURE IN THE CASE OF ASSES SEE. THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 10 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. 11. FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THA T THE ASSESSEE IS ENTITLED TO THE CLAIM OF EXPENDITURE OF RS.31,73,359/-, ON ACCOUNT OF AMORTIZATION OF PREMIUM ON HTM SECURITIE S. THUS, THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS ALL OWED. 12. THE ISSUE IN GROUND NO.2 RELATES TO DISALLOWANCE OF RS.5,00,000/- BEING DONATION AND SUBSCRIPTION. 13. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS NOTED THAT THE ASSESSEE HAD MADE A PROV ISION FOR DONATION AND SUBSCRIPTION TO THE EXTENT OF RS.5,00, 000/-. AS NOTHING WAS INCURRED BY THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE SAID PROVISION MADE BY THE ASSESSEE. 14. BEFORE THE CIT(A), THE PLEA OF THE ASSESSEE WAS THA T THE BOARD OF THE BANK HAD PASSED RESOLUTION NO.4, DATED 11 TH MAY 2009, FOR INCURRING THE SAID EXPENDITURE ON DONATION AND SUBS CRIPTION AND THUS PROVISION WAS MADE IN THE BOOKS OF ACCOUNT. THE CIT (A) IN THE ABSENCE OF ANY EXPENDITURE HAVING BEEN INCURRED BY THE ASSESSEE UPHELD THE SAID DISALLOWANCE OF RS.5,00,000/-. 15. WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE, WHER E ONLY A PROVISION FOR DONATION AND SUBSCRIPTION TO THE EXTE NT OF RS.5,00,000/- HAD BEEN MADE IN THE BOOKS OF ACCOUNT AND NO ACTUAL EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE. MERELY BECAUSE THE B OARD OF THE A- BANK HAD PASSED A RESOLUTION FOR INCURRING THE SAID EXPENDITURE, DOES NOT ENTITLE THE ASSESSEE TO THE SAID CLAIM IN THE A BSENCE OF HAVING 11 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. INCURRED ANY EXPENDITURE ON DONATION AND SUBSCRIPTI ON. THUS, GROUND NO.2, RAISED BY THE ASSESSEE IS DISMISSED. 16. THE GROUND NO.3, RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF RS.32,46,181/-, ON ACCOUNT OF STAFF VOLUNTARY PAYMENT. 17. THE BRIEF FACTS OF THE ISSUE ARE THAT FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.32,46,180/-, UNDER THE HEAD STAFF VOLUNTARY PAYM ENT. BEFORE THE ASSESSING OFFICER, THE ASSESSEE EXPLAINED THAT THE SAID EXPENDITURE PERTAINED TO THE EX-GRATIA PAYMENT MADE TO EMPLOYEE S OF THE BANK WHO HAD RESIGNED FROM THEIR SERVICE. THE SAID PAYME NT WAS MADE IN RECOGNITION OF THEIR MERITORIOUS SERVICE. IT WAS AL SO CLARIFIED BEFORE THE ASSESSING OFFICER THAT THE SAID PAYMENTS WERE NOT M ADE IN TERMS OF ANY SCHEME FORMULATED UNDER SECTION 35DDA OF THE AC T, BUT WERE IN THE NATURE OF PROFIT IN LIEU OF SALARY ON WHICH DUE TDS WAS DEDUCTED. THE ASSESSING OFFICER NOTED THAT THE EMPLOYEES TO W HOM THE PAYMENTS WERE MADE, WERE NOT IN TERMS OF ANY SCHEME FORMULATED UNDER SECTION 35DDA, DISALLOWED THE SAID CLAIM OF T HE ASSESSEE. 18. BEFORE THE CIT(A), THE ASSESSEE CLAIMED THAT THE SA ID EXPENDITURE WAS NOT BEING CLAIMED UNDER SECTION 35D DA OF THE ACT, BUT AS A BUSINESS EXPENDITURE. THE CIT(A) OBSERVED THAT THE QUESTION WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE WA S REVENUE OR CAPITAL IN NATURE DEPENDED UPON THE FINDING AS TO W HETHER THE ASSESSEE HAD CREATED ANY FIXED ASSET OR NOT. WHERE AN ASSET HAD BEEN CREATED, THE EXPENDITURE WOULD BE CAPITAL IN NATURE AND WHERE THE 12 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. EXPENDITURE WAS INCURRED FOR ACHIEVING THE BENEFIT OF ENDURING NATURE, THEN THE SAME WOULD ALSO BE CAPITAL IN NATURE. AS I N THE CASE OF THE ASSESSEE, THE PURPOSE OF VOLUNTARY PAYMENT WAS TO R EDUCE THE STAFF STRENGTH AND ACHIEVE THE VIABILITY AND PROFITABILIT Y OF THE BUSINESS, THE VOLUNTARY RESIGNATION OF EMPLOYEES WOULD GIVE LONG TERM BENEFIT TO THE ASSESSEE AS PER THE CIT(A). ACCORDINGLY, THE CIT(A) HELD THAT THE STAFF VOLUNTARY PAYMENTS WERE NOTHING BUT CAPITAL EXPENDI TURE AND THE SAME WAS NOT ALLOWABLE UNDER SECTION 37(I) OF THE A CT. THE DISALLOWANCE OF RS. 32,46,180 / - , MADE BY THE ASSESSING OFFICER WAS THUS UPHELD. 19. THE A.R. AFTER TAKING US THROUGH THE FACTS OF THE C ASE, POINTED OUT THAT THE SAID PAYMENTS WERE ALLOWABLE UNDER SEC TION 37(1). RELIANCE IN THIS REGARD WAS PLACED UPON THE RATIO L AID DOWN IN CIT V/S GEORGE OAKES LTD., 197 ITR 288 (MAD.). 20. THE D.R. PLACING RELIANCE ON THE ORDER OF THE CIT(A ), POINTED OUT THE EXPENDITURE WAS CAPITAL AND CONSEQUENTLY, EXPEN DITURE WAS NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE. 21. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE RECORD. THE ASSESSEE HAD DEBITED A SUM OF RS.32,46,100/- UNDER THE HEAD STAFF VOLUNTARY PAYMENTS. THE ASSESSEE CLAIMED TO HAVE MA DE CERTAIN EX- GRATIA PAYMENTS TO ITS RETIRING EMPLOYEES IN RECOGN ITION OF THEIR SERVICE TO THE ASSESSEE BANK. THE SAID PAYMENTS WER E NOT UNDER ANY SCHEME OF VOLUNTARY RETIREMENT FORMULATED ITS ASSES SEE BUT WERE PURELY EX-GRATIA PAYMENTS MADE IN RECOGNITION OF ME RITORIOUS SERVICE 13 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. GIVEN BY THE RETIRING EMPLOYEES. THE ASSESSEE CLAIM ED THE SAID EXPENDITURE TO BE ALLOWABLE UNDER SECTION 37(1). TH E ASSESSING OFFICER ON VERIFICATION OF THE DETAILS NOTED THAT THE AMOUN T WAS PAID TO 9 EMPLOYEES OF THE BANK WHO RETIRED FROM THE SERVICE DUE TO ILLNESS AND CONSEQUENTLY, THE SAME WAS DISALLOWED BY THE ASSESS ING OFFICER. THE CIT(A) ON THE OTHER HAND TREATED THE SAID EXPENDITU RE TO BE CAPITAL IN NATURE AS THE SERVICES OF THE SAID EMPLOYEES RESULT ED IN LONG TERM BENEFIT TO THE ASSESSEE AND HENCE WAS NOT ALLOWABLE AS REVENUE EXPENDITURE UNDER SECTION 37(1). 22. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHERE T HE ASSESSEE IN RECOGNITION OF THE SERVICES PROVIDED TO ITS RETI RING EMPLOYEES MAKE CERTAIN EX-GRATIA PAYMENTS IN RECOGNITION OF THEIR SERVICES, WHICH ARE NOT BASED ON ANY SCHEME OR INSTRUCTION FORMULATED B Y THE EMPLOYER ASSESSEE, THEN THE SAME PARTAKES THE NATURE OF PROF IT IN LIEU OF SALARY. THE RELATIONSHIP BETWEEN THE ASSESSEE AND RETIRING EMPLOYEES WAS ADMITTEDLY AS OF EMPLOYER AND EMPLOYEE AND THE REMU NERATION PAID TO SUCH EMPLOYEES IS PART OF THE SALARY DUE TO THE SAI D EMPLOYEE. EVEN THE EX-GRATIA PAYMENT MADE BY THE ASSESSEE OVER AND ABOVE THE REMUNERATION DUE TO THE EMPLOYEES PARTAKES THE CHAR ACTER OF PROFITS IN LIEU OF SALARY TO SUCH EMPLOYEE AND IS DULY ALLO WABLE AS AN EXPENDITURE IN THE HANDS OF THE ASSESSEE UNDER SECT ION 37(1) OF THE ACT. WE FIND NO MERIT IN THE STAND OF THE CIT(A) TH AT SUCH EXPENDITURE IS CAPITAL IN NATURE. REVERSING THE ORDER OF THE CI T(A), WE DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE OF RS.32 ,46,180/-. THE GROUND NO.3, IS THUS ALLOWED. 14 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. 23. THE GROUND OF APPEAL NO.4, IS NOT PRESSED AS ON THE DIRECTION OF THE CIT(A), CONSEQUENT RELIEF HAS BEEN ALLOWED BY T HE ASSESSING OFFICER VIDE ORDER PASSED GIVING EFFECT TO THE ORDE R OF THE CIT(A)-III, PUNE, DATED 26 TH MARCH 2014. CONSEQUENTLY, GROUND OF APPEAL NO.4, RAISED BY THE ASSESSEE IS DISMISSED. 24. THE GROUND OF APPEAL NO.5, IS AGAINST THE DISALLOWA NCE OF RS.60,78,530/-, MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 25. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD DEBITED THE EXPENDITURE OF RS.60,78,530/- ON STUDY TOUR PROGRAMME OF DIRECTORS. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD FAILED TO DEDUCT TDS OUT OF THE SAID EXPENDITURE AND INVOK ING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT, THE SAID SUM OF RS . 60,78,530 / - WAS DISALLOWED BY THE ASSESSING OFFICER. 26. BEFORE THE CIT(A), THE ASSESSEE OBJECTED TO THE DIS ALLOWANCE ON THE GROUND THAT THE PROVISIONS UNDER SECTION 40(A)( IA) OF THE ACT WERE NOT APPLICABLE TO THE IMPUGNED PAYMENT AS THE EXPEN DITURE WAS CLAIMED UNDER SECTION 28 TO 29 AND NOT UNDER SECTIO N 30 TO 43 OF THE ACT. 27. THE CIT(A), HOWEVER, AFTER ELABORATING UPON THE ISS UE AND REFERRING TO VARIOUS CASE LAWS INCLUDING THE DECISI ON OF THE TRIBUNAL, VIZAG, IN MERILYIN SHIPPING AND TRANSPORT V/S ACIT, 136 ITD 23 (SB) (VIZAG.) AND ALSO THE RATIO LAID DOWN BY THE KERALA HIGH COURT IN RAJA 15 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. AND CO., 335 ITR 381 (KAR.) AND THE RATIO LAID DOWN BY THE PUNE BENCH OF THE TRIBUNAL IN SERUM INTERNATIONAL LTD., ITA NO.290- 292/PN/2001, ORDER DATED 29 TH SEPTEMBER 2011, AND THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT V/S VA LRON DYNE BLECHING AND PRINTING WORKS, 2010-TIOL-710-HC-MUM-S C, HELD THAT THE PROVISION OF SECTION 40(A)(IA) WERE APPLICABLE AND THE DISALLOWANCE OF RS.60,78,530/- WAS UPHELD BY THE CIT(A). 28. THE LD. A.R. FOR THE ASSESSEE POINTED OUT THAT THE NATURE OF EXPENDITURE HAD NOT BEEN GONE INTO BY THE CIT(A) AN D ONLY ISSUE LOOKED INTO WAS WHETHER THE EXPENDITURE WAS PAID / PAYABLE. THE A.R. ALSO POINTED OUT THAT SINCE THE HONBLE SUPREME COU RT HAS DISMISSED THE SLP, FILED AGAINST THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN CIT V/S VECTOR SHIPPING SERVICES PVT. LTD. 357 I TR 642 (ALL.), THE RATIO LAID DOWN BY THE HONBLE ALLAHABAD HIGH COURT STANDS AND THE QUESTION OF PAID AND PAYABLE OF EXPENDITURE IS TO B E DECIDED IN FAVOUR OF THE ASSESSEE. 29. THE LD. D.R. PLACED RELIANCE ON THE ORDER OF THE CI T(A) AND ON THE RATIO LAID DOWN BY THE PUNE BENCH OF THE TRIBUN AL IN SERUM INTERNATIONAL LTD. (SUPRA). 30. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT GROUND OF APPEAL IS AG AINST THE DISALLOWANCE OF EXPENDITURE INCURRED ON DIRECTORS A ND EMPLOYEES ON STUDY TOUR. THE LD. A.R. FOR THE ASSESSEE DURING TH E COURSE OF HEARING HAD FURNISHED ON RECORD THE DETAILS OF THE SAID EXP ENDITURE AND IT WAS 16 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. POINTED OUT BY THE LD. A.R. THAT LOOKING INTO THE N ATURE OF EXPENDITURE, THERE WAS NO NECESSITY TO DEDUCT TAX AT COURSE OUT OF SUCH AMOUNT. HOWEVER, BY AN ERROR, TDS WAS DEDUCTED AND DEPOSITE D WITH THE DEPARTMENT IN THE SUCCEEDING YEAR AND BECAUSE OF TH IS ACT OF THE ASSESSEE, THE EXPENDITURE WAS DISALLOWED BY THE ASS ESSING OFFICER IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ON THE PERUSAL OF THE ORDER OF THE CIT(A), WE FIND THAT EVEN BEFOR E THE CIT(A), THE AMBIT OF THE PROVISION OF SECTION 40(A)(IA) OF THE ACT WAS GONE INTO WITHOUT LOOKING INTO THE ALLOWABILITY OF THE SAID E XPENDITURE PER-SE. WE ARE OF THE VIEW THAT THE FIRST STEP TO BE TAKEN INT O CONSIDERATION IS WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IS RELATABLE TO THE BUSINESS CARRIED ON BY THE ASSESSEE AND AFTER VERIF YING THE NATURE OF THE EXPENDITURE, THE SECOND STEP IS WHETHER THE SAI D EXPENDITURE IS SUBJECT TO DEDUCTION OF TAX AT SOURCE. MERELY BECAU SE THE ASSESSEE ON ITS OWN MOTION HAD DEDUCTED TAX AT SOURCE, THOUGH I N SUCCEEDING YEAR, DOES NOT WARRANT THE DISALLOWANCE OF SAID EXP ENDITURE IN THE CAPTIONED ASSESSMENT YEAR. AFTER GOING THROUGH THE DETAILS FURNISHED BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE PLEA O F THE ASSESSEE IN THIS REGARD NEEDS TO BE LOOKED INTO I.E., THE ASSES SING OFFICER SHOULD FIRST EXAMINE THE NATURE OF THE EXPENDITURE AND ITS ALLOWABILITY I.E., BEING INCURRED FOR THE PURPOSE OF CARRYING OF THE B USINESS AND THEREAFTER ADJUDICATE WHETHER THE SAME SHOULD BE SU BJECT TO TAX DEDUCTION AT SOURCE. IN VIEW THEREOF, WE SET ASIDE THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO RE-ADJUDICATE THE SAME IN ACCORDANCE WITH LAW AND AFTER AFFORDING REASONABLE OPPORTUNITY OF 17 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. HEARING TO THE ASSESSEE. THE GROUND OF APPEAL NO.5, RAISED BY THE ASSESSEE IS THUS ALLOWED FOR STATISTICAL PURPOSES. 31. THE ISSUE IN GROUND OF APPEAL NO.6, RAISED BY THE A SSESSEE IS AGAINST THE DISALLOWANCE OF RS.75 LAKHS PROVIDED FO R DIRECTORS AND STAFF FOR TRAINING PROGRAMME. 32. THE ASSESSING OFFICER HAD MADE THE SAID DISALLOWANC E AS IT WAS ONLY A PROVISION OF UNASCERTAINED LIABILITY WHICH W AS UPHELD BY THE CIT(A). 33. IN LINE WITH OUR DECISION IN PARA-17 HEREIN ABOVE W ITH REGARD TO THE PROVISIONS MADE FOR DONATION, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE IN THIS REGARD. WHERE THE EXPENDITURE HAS NOT BEEN IDENTIFIED THEN THE PROVISION MADE FOR DIRECTORS AND STAFF TRA INING PROGRAMME, EVEN IN CASES WHERE THE ASSESSEE WAS FOLLOWING MERC ANTILE SYSTEM OF ACCOUNTING, THE SAME BEING UNASCERTAINED LIABILITY, IS NOT ALLOWABLE UNDER SECTION 37(1). UPHOLDING THE ORDER OF THE LD. CIT(A), WE DISMISS THE GROUND NO.6, RAISED BY THE ASSESSEE. 34. THE ISSUE IN GROUND OF APPEAL NO.7, IS SIMILAR TO T HE ISSUE RAISED VIDE GROUND NO.5 AND FOLLOWING THE SAME PARITY OF R EASONING, THIS ISSUE IS REMITTED BEFORE THE ASSESSING OFFICER AND GROUND OF APPEAL IS THUS ALLOWED FOR STATISTICAL PURPOSES. 35. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. 18 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. ITA NO.2522/PN/2012 REVENUES APPEAL 36. THE GROUND OF APPEAL NO.1 RAISED BY THE REVENUE BEI NG GENERAL, IS DISMISSED. 37. THE ISSUE IN GROUND OF APPEAL NO.2 AND 3 IS WITH RE GARD TO THE UNPAID AMOUNT OF BONUS AND EXGRATIA PAYMENTS. 38. THE CIT(A) HAD RESTORED THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AND THE ISSUE RA ISED IS LINKED TO THE GROUND NO.4, RAISED BY THE ASSESSEE. 39. IN VIEW OF THE ASSESSING OFFICER GIVING EFFECT TO T HE ORDER OF THE CIT(A) BY PASSING THE ORDER DATED 26 TH MARCH 2014, WE FIND NO MERIT IN GROUND NO.2 AND 3 RAISED BY THE REVENUE. THUS, T HESE GROUNDS OF APPEAL ARE DISMISSED. 40. THE ISSUE IN GROUND NO.4, RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.38,63,446/-, MADE ON ACC OUNT OF UNPAID AMOUNT OUT OF PROVISIONS. 41. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD M ADE A PROVISION OF RS.11,18,44,652/-, UNDER VARIOUS HEADS OF RECOVERIES AGAINST WHICH THE ASSESSEE HAD INCURRED ONLY A SUM OF RS.10,79,81,206/-, AS ACTUAL EXPENDITURE ON VARIOUS ACCOUNTS. THE BALANCE SUM OF RS.38,63,446/-, BEING A MERE PROVISI ON WAS DISALLOWED BY THE ASSESSING OFFICER. 19 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. 42. THE CIT(A) VIDE PARA-8 OBSERVED AS UNDER:- 8.1 IN THIS REGARD, IT WAS SEEN BY THE ASSESSING OF FICER THAT AN AMOUNT OF RS.38,63,446, REMAINED OUT OF THE PROVISI ON MADE OF RS.11,18,44,652 UNDER VARIOUS HEADS OF RECOVERY. TH E ASSESSING OFFICER, NOTING THAT THE APPELLANT HAD INCURRED ONL Y AN AMOUNT OF RS.10,79,81,206 AS ACTUAL EXPENDITURE ON VARIOUS CO UNTS, DISALLOWED THE REMAINING AMOUNT OF RS.38,63,446 CIT ING THAT THE AMOUNT WAS A MERE PROVISION. 8.2 DURING THE APPELLATE PROCEEDINGS, THE LEARNED C OUNSEL FOR THE APPELLANT CONTENDED THAT THE AMOUNT IN QUESTION PER TAINED TO DEBT WAIVER SCHEME FORMULATED BY THE STATE GOVT, WH ICH WAS IN THE NATURE OF SOCIAL LEGISLATION WHICH THE BANKS WE RE BOUND TO FOLLOW. HE SUBMITTED THAT IT WAS BROUGHT TO THE NOT ICE OF THE ASSESSING OFFICER THAT THE BAD DEBT WAIVERS OF RS.3 8,63,446/- WERE NOT OUT OF THOSE RURAL BRANCHES FOR WHICH PROV ISION IS CREATED UNDER SEC.36(L)(VIIA) OF THE I.T. ACT. HE C LAIMED THAT ASSESSING OFFICER HAS DISALLOWED THE AMOUNT WITHOUT PROPERLY APPRECIATING THE PROVISIONS OF LAW AND CONTRARY TO THE VERDICT OF THE HON'BLE SUPREME COURT IN THE CASE OF CATHOLIC S YRIAN BANK LTD. VS. CIT (343 UR 270) WHEREIN THE COURT HELD TH AT IF THE AMOUNT OF BAD DEBT(S) ACTUALLY WRITTEN OFF IN THE A CCOUNTS OF THE BANK REPRESENT ONLY DEBTS ARISING OUT OF URBAN ADVA NCES, THE ALLOWANCE THEREOF IN THE ASSESSMENT IS NOT AFFECTED , CONTROLLED OR LIMITED IN ANY WAY BY THE PROVISION TO CLAUSE (VII) OF SEC.36(L). IN THIS REGARD, FURTHER RELIANCE ON THE DECISION OF TH E DELHI HIGH COURT IN THE CASE OF ALL GROW FINANCE & INVESTMENTS (P) LTD. VS. CIT (66 DTR 131), THE APPELLANT CONTENDED THAT THE DEBTS IN QUESTION HAVING BEEN UNDISPUTEDLY ADVANCED IN ASSES SEE'S ORDINARY COURSE OF MONEY LENDING BUSINESS, THE SAME WAS CLEARLY ALLOWABLE AS BAD DEBTS UNDER SEC.36(L)(VII) R.W.S. THE SECOND LIMB OF SUB-SEC.(2) OF SEC.36. THE LEARNED A.R. SO UGHT TO HIGHLIGHT THAT THE ASSESSING OFFICER HAS MERELY REL IED ON HIS PRESUMPTION THAT RBI GUIDELINES ARE NOT BINDING ON THE I.T. DEPARTMENT TO MAKE THE DISALLOWANCES WHILE NOWHERE HE HAS OBSERVED THAT THE DEDUCTIONS CLAIMED ARE NOT ACCORD ING TO LAW, EVEN NOT ALLOWABLE SO UNDER THE INCOME TAX ACT. THE LEARNED A.R. PLEADED THAT THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER BE DELETED. 8.3 THE SUBMISSIONS OF THE APPELLANT ARE CAREFULLY EXAMINED WITH REFERENCE TO THE FACTS OF THE CASE AND THE NATURE O F THE PROVISIONS MADE BY THE APPELLANT. ON PERUSAL OF THE INCOME & EXPENDITURE A/C FOR THE RELEVANT YEAR AND THE DETAI LS ON RECORD, IT IS FOUND THAT THE APPELLANT HAS MADE THE FOLLOWING PROVISIONS:- 20 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. I) OPENING BALANCE OF PROVISION 1,02,44,652.14 II) SOCIETY BORROWER MEMBERS' INTEREST REBATE (AGRL. LOAN PROVISION) 3,05,00,000.00 III) SOCIETY BORROWER MEMBERS RECOVERY INCENTIVE FOR MT & IT LOANS (PROVISION) 3,71,00,000.00 IV) INCENTIVE TO NON - BENEFICIARIES OF CENTRAL &STATE GOVT. DEBT WAIVER SCHEME (PROVISION) 3,40,00,000.00 TOTAL 11,18,44,652.14 AS AGAINST THE ABOVE OPENING BALANCE AND THE PROVIS IONS MADE DURING THE YEAR, THE APPELLANT CLAIMED TO HAVE MADE THE FOLLOWING PAYMENTS: I) SOCIETY BORROWER MEMBERS INTEREST REBATE (AGRL. LOAN PROVISION) AND SOCIETY BORROWER MEMBERS RECOVERY INCENTIVE FOR MT & IT LOANS (PROVISION) PAID ON 15/09/2009 5,54,46,913.00 II) INCENTIVE GRANTED TO NON - BENEFICIARIES OF CENTRAL & STATE GOVT. DEBT WAIVER SCHEME (PROVISION) BY WAY OF FERTILIZERS ETC. FOR AGRICULTURAL PRODUCTION 2,75,34,293.00 III) AMOUNT PAID BY WAY OF DD TO THE ORIENTAL INSURANCE CO. LTD. TOWARDS PREMIUM FOR AGRICULTURAL GROUP MEDICAL INSURANCE ON 26/08/2009 2,50,00,000 .00 TOTAL 10,79,81,206.00 THE CLOSING BALANCE AS ON 30 TH SEPT., 2009 WAS STATED TO BE RS.38,63,446.14 (RS.11,18,44,652.14 - 10,79,81,206. 00) WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROU ND THAT IT WAS A MERE PROVISION MADE IN THE BOOKS OF ACCOUNTS WHICH CANNOT BE ALLOWED AS DEDUCTION UNDER THE I.T. ACT. BUT THE BALANCE PROVISION WAS OUTSTANDING AS ON 30 TH SEPT., 2009 IN THE SUCCEEDING YEAR AND NOT AS ON 31/03/2009. IF THE LO GIC OF THE ASSESSING OFFICER THAT IT WAS A MERE PROVISION IS C ORRECT, THE ENTIRE PROVISION OF RS. 11,18,44,652.14 MADE DURING THE YEAR MINUS OPENING BALANCE OUGHT TO HAVE BEEN DISALLOWED BY THE ASSESSING OFFICER, INSTEAD OF DISALLOWING THE BALAN CE PROVISION AS ON 30 TH SEPT., 2009. THE VERY FACT THAT OUT OF THE PROVISI ON MADE DURING THE YEAR, SUBSTANTIAL AMOUNT WAS NOT A CONTI NGENT OR AN UNASCERTAINED LIABILITY. AS THE APPELLANT HAS BEEN FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE PROVISION WAS MADE IN THE BOOKS OF ACCOUNT FOR SUCH RECOVERY INCENTIVES AND T HE SUBSTANTIAL PORTION OF WHICH WAS UTILIZED IN THE IM MEDIATELY SUCCEEDING YEAR. THEREFORE, THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF BALANCE PROVISION O F RS.38,63,446 CANNOT BE HELD TO BE JUSTIFIED AND THE ADDITION MADE ON THIS GROUND IS DELETED. 21 THE SATARA DISTRICT CENTRAL CO. OP. BANK LTD. 43. THE LD. D.R., HOWEVER, HAS FAILED TO CONTROVERT THE FINDING OF THE CIT(A) EXCEPT FOR STATING THAT THE PROVISION MADE C ANNOT BE ALLOWED AS DEDUCTION. WE FIND NO MERIT IN THE PLEA OF THE R EVENUE IN THIS REGARD AND UPHOLD THE ORDER OF THE CIT(A). CONSEQUE NTLY, THE GROUND NO.4, RAISED BY THE REVENUE IS DISMISSED. 44. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF DECEMBER 2014. SD/ - (G.S. PANNU) ACCOUNTANT MEMBER SD/ - (SUSHMA CHOWLA) JUDICIAL MEMBER PUNE, DATED: 30 TH DECEMBER 2014 PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, PUNE CITY CONCERNED; (5) THE DR, ITAT, PUNE; (6) GUARD FILE. TRUE COPY BY ORDER (ASSTT. REGISTRAR) ITAT, PUNE