M/s Indore Paraspar Sahkari Bank, Indore V. The DCIT, Indore

ITA 331/IND/2010

• Counselvise Citation: 33122714 RSA 2010
• Duration Of Justice: 1 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 26-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KESHAVE SAXENA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Cost of acquisition; Bad and doubtful debts; Notional interest
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAACI7152E I.T.A.NO. 331/IND/2010 A.Y. : 2007-08 M/S. INDORE PARASPAR - SAHKARI BANK, DY. CIT, 1(1), 3/1, SOUTH TUKOGANJ, VS INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S. S. DESHPANDE, C. A. RESPONDENT BY : SHRI KESHAVE SAXENA, CIT DR O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 03.03.2010 FOR THE ASSESSMENT YEAR 2007-08. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - 1. THE LD. CIT(A) HAS ERRED IN MAINTAINING THE ADDITIONS OF RS. 58,75,300/- ON ACCOUNT OF ALLEGED INTEREST ACCRUED ON THE STIKEY LOANS WHERE THERE IS NO RECOVERY. -: 2: - 2 1.1 IT WAS PROVED BEFORE THE LD. AO AND THE LD. CIT(A) THAT THE ASSESSEE HAS MAINTAINED PAPER BOOK OF ACCOUNTS AND ON THE BASIS OF THE CIRCULAR OF THE RBI NO INTEREST ACCRUED TO THE ASSESSEE AND THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF U.CO.BANK IS FULLY APPLICABLE. 1.2 THE ADDITIONS MADE OF RS. 58,75,300/- MAY PLEASE BE DELETED. 2. THE LD. CIT(A) HAS ERRED IN MAINTAINING THE ADDITION OF RS. 8,58,000/- BEING AMORTIZATION OF THE INVESTMENT CLAIMED BY THE ASSESSEE. THE ADDITION MAY PLEASE BE DELETED. 3. THE LD. CIT(A) HAS ERRED IN MAINTAINING THE ADDITION OF RS. 62,665/- BEING THE CONTRIBUTION TO JILA SAHAKARI SANGH. THE PAYMENT BEING STATUTORY SHOULD HAVE BEEN ALLOWED IN FULL. 4. THE LD. CIT(A) SHOULD HAVE ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF DEDUCTION OF RS. 7,12,500/- -: 3: - 3 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A CO- OP. SOCIETY HAVING A LICENSE FROM RESERVE BANK OF INDIA (RBI) AND IS DOING THE BANKING BUSINESS. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO FOUND THAT OVER DUE INTEREST SHO WN IN THE BALANCE SHEET REPRESENTS THE INTEREST WHICH HAS ACC RUED BUT NOT RECEIVED. THE AO ALSO FOUND THAT THE SPECIFIC A DVANCE TO WHICH SUCH INTEREST INCOME PERTAINS HAVING NOT BEEN CLASSIFIED AS NON-PERFORMING ASSETS. IT WAS CLAIMED BY THE ASS ESSEE THAT SUCH INTEREST COULD NOT BE CREDITED TO THE PROFIT A ND LOSS ACCOUNT AS PER THE GUIDELINES OF THE RBI. THE AO HE LD THAT UNDER THE INCOME-TAX ACT, 1961, THE ASSESSEE IS ENT ITLED FOR DEDUCTION U/S 36(1)(VIIA) AND IT IS REQUIRED TO ACC OUNT FOR ALL THE INCOME WHICH IS ACCRUED. ACCORDINGLY, THE AMOUN T OF RS. 58.75 LAKHS WAS BROUGHT TO TAX NET BEING THE INTERE ST DUE ON THE ADVANCES. 5. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED TH E ADDITION AFTER CONSIDERING VARIOUS CASE LAWS CITED BEFORE HIM -: 4: - 4 AND AFTER FOLLOWING THE CIRCULAR OF THE C.B.D.T. DA TED 9.10.1984. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. SHRI S.S.DESHPANDE HAS APPEARED ON BEHALF OF THE ASSESSEE AND VEHEMENTLY ARGUED THAT NO INCOME CAN B E ACCOUNTED FOR IN RESPECT OF INTEREST ON THE ADVANCE WHICH ARE DOUBTFUL. HE FURTHER SUBMITTED THAT THE ASSESSEE IS CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING WHE REIN INTEREST ON DOUBTFUL ADVANCES WERE JUST CREDITED TO THE SUSPENSE ACCOUNT BY HAVING CORRESPONDING DEBIT TO T HE RESPECTIVE CREDITOR AND NO PORTION OF SUCH INTEREST IS CREDITED TO THE P & L ACCOUNT. AS PER LD. AUTHORIZED REPRESE NTATIVE EVEN IN TERMS OF REAL INCOME THEORY, NO SUCH INTERE ST CAN BE BROUGHT TO TAX NET, WHICH IS NEITHER RECEIVED OR CO ULD BE SAID TO HAVE ACCRUED ON DOUBTFUL ADVANCES. HE FURTHER SU BMITTED THAT THE ASSESSEE BANK HAS BEEN FOLLOWING A CONSIST ENT METHOD OF ACCOUNTING OF NOT CHARGING THE INTEREST ON THE N PA ACCOUNTS FOR PAST MANY YEARS. A PROVISION IS MADE ON THE BAS IS OF THE DIRECTIVES OF THE RBI. THE RBI HAS ISSUED THE DIREC TIVES RELATED TO NORMS IN RESPECT OF INCOME RECOGNITION AND PROCE DURE FOR ACCOUNTING FOR ACCRUED INTEREST VIDE CIRCULAR NO.49 /09, -: 5: - 5 140.00/2004-05 DATED 30.05.2005. AS PER THE LD. AUT HORIZED REPRESENTATIVE THE ACCRUED INTEREST IN RESPECT OF N ON PERFORMING ADVANCES IS DEBITED TO INTEREST RECEIVAB LE ACCOUNT AND CORRESPONDING AMOUNT CREDITED TO OVERDUE INTERE ST RESERVE ACCOUNT. THE SAID CIRCULAR FURTHER SAYS THAT THE BA NKS CAN CONSIDER OPENING A SEPARATE COLUMN IN THE INDIVIDUA L LEDGER ACCOUNTS AND INTEREST RECEIVABLE SHOWN THEREIN AND THIS AMOUNT WOULD BE REFLECTED AS INTEREST RECEIVABLE SH OWN THEREIN AND THIS AMOUNT WOULD BE REFLECTED AS INTER EST RECEIVABLE OF NON PERFORMING ADVANCES AND A CORRESP ONDING LIABILITY WOULD BE CREATED AND SHOWN IN THE BALANCE SHEET AS OVERDUE INTEREST RESERVE. THIS CONSISTENT METHOD IS BEING FOLLOWED FOR LAST MANY YEARS BY THE BANK AND BY THE CIRCULAR, THE RBI HAS ISSUED DIRECTIVES TO ALL THE BANKS TO F OLLOW THE ACCOUNTING PRINCIPLE AS SUCH. ACCORDINGLY, THE ASSE SSEE IS FOLLOWING THIS METHOD OF SHOWING THE INTEREST RECEI VABLE ON NPA ACCOUNTS. WHEN ANY RECOVERY IS MADE IN THESE NP A ACCOUNTS, THE INTEREST PORTION IS CREDITED TO THE I NTEREST ACCOUNT AND IS SHOWN IN THE INCOME & EXP.ACCOUNT. T HUS, THE ASSESSEE IS SHOWING THE INCOME CORRECTLY AS PER THE NORMS -: 6: - 6 PRESCRIBED BY THE RBI. ALL THE BANKS ARE REQUIRED T O FOLLOW THE SAME SYSTEM OF ACCOUNTING AS PER THE CIRCULAR OF TH E RBI. WE ARE HEREWITH FILING THE ACCOUNTING NORMS PRESCRIBED BY THE RBI WHICH WILL CLARIFY THE MATTER. THE LD. AO HAS CONFU SED THE CHARGING OF INTEREST ON NPA ACCOUNTS AND THE PROVIS ION FOR DOUBTFUL DEBTS U/S 36(1)(VIIA). THERE IS NO QUESTIO N OF ANY DOUBLE DEDUCTION. THE BAD DEBTS WOULD NOT BE ALLOWE D TO BE WRITTEN OFF WHEN THERE IS A PROVISION MADE U/S 36(1 )(VIIA). THUS, THERE IS NO RELATION BETWEEN THE PROVISION MA DE TOWARDS THE BAD DEBTS AND THE INTEREST ACCRUED ON NPA ACCOU NTS. IN THIS CONNECTION, WE WOULD LIKE TO DRAW YOUR HONOUR S KIND ATTENTION TO THE JUDGMENT OF THE HON'BLE SUPREME CO URT IN THE CASE OF UCO BANK VS. CIT, REPORTED IN 237 ITR P. 88 9, WHICH LAYS DOWN THE PROPOSITION THAT IN THE CASE OF BANK S AND FINANCIAL INSTITUTIONS, INTEREST ON STICKY ADVANCES NOT TAKEN IN THE P & L ACCOUNT BUT TAKEN TO A SEPARATE SUSPENSE ACCOUNT IS ACCEPTED MODE OF TREATMENT OF NOTIONAL INCOME I N ACCOUNTING PRACTICE. THE CBDT CIRCULAR PERMITTING S UCH INTEREST TO BE EXCLUDED FOR THREE YEARS WHICH IS NO T ACTUALLY RECEIVED IS CORRECT. THE INTEREST WILL BE ADDED AS INCOME ONLY -: 7: - 7 WHEN ACTUALLY RECEIVED. THE HON'BLE. SUPREME COURT DISTINGUISHED THE CASE OF STATE BANK OF TRAVANCORE VS. CIT, REPORTED IN 158 ITR P. 102 AND REMARKED THAT THE CI RCULAR WAS NOT POINTED OUT TO THE COURT AND AS SUCH HELD AT P . 900 THAT THE NOTIONAL INTEREST ON STICKY LOANS WHICH IS TRAN SFERRED TO THE SUSPENSE ACCOUNT ON NPA WOULD NOT BE INCLUDED I N THE INCOME OF THE ASSESSEE. SINCE IN THE INSTANT CASE T HE BANK IS GOVERNED BY THE DIRECTIVES OF THE RBI, THE INTEREST DOES NOT ACCRUED ON AN ACCOUNT BECOMING NPA SINCE THE DEBT I TSELF IS DOUBTFUL. THUS, IN ABSENCE OF ANY ACCRUAL, THE INCO ME CANNOT BE TAXED. THE ASSESSEE IS ALREADY CREDITING TO ITS PROFIT & LOSS ACCOUNT SUCH INTEREST AS AN WHEN IT IS RECEIVED. IN VIEW OF THIS, IT IS HUMBLY PRAYED THAT THE ADDITIONS MADE BY THE LD. AO MAY PLEASE BE DELETED. 7. RELIANCE WAS ALSO PLACED BY THE LD. AUTHORIZED REPRESENTATIVE ON THE DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF UCO BANK, 237 ITR 889, IN SUPPORT OF THE PROPOSITION THAT THE ASSESSEE IS NOT LIABLE TO PAY TAX ON THE INTEREST ALLEGED TO BE ACCRUED ON STIKEY ADVANCE. H E FURTHER RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF -: 8: - 8 MERCANTILE BANK LIMITED, 283 ITR 84, IN SUPPORT OF THE PROPOSITION THAT ACCRUED INTEREST ON DOUBTFUL DEBT KEPT IN SUSPENSE ACCOUNT CANNOT BE BROUGHT TO TAX NET. FURT HER RELIANCE WAS PLACED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF STATE BANK OF INDIA, 262 ITR 662, IN SU PPORT OF THE PROPOSITION THAT THE AMOUNT CREDITED TO THE INTERES T SUSPENSE ACCOUNT IS NOT TAXABLE. HEAVY RELIANCE WAS ALSO PLA CED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F STATE BANK OF INDORE, 257 ITR 463, IN SUPPORT OF THE PROPOSITI ON THAT AFTER CONSIDERING THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF TAMIL NADU INDUSTRIAL INVESTMENT CORPN. LI MITED, 237 ITR 889, HON'BLE HIGH COURT HELD THAT INTEREST ON S TIKEY ADVANCES ARE NOT LIABLE TO BE TAXED FORM ASSESSMENT YEAR 1979-80. 8. ON THE OTHER HAND, THE LD. CIT DR, SHRI KEAHAVE SAXENA PLACED ON RECORD THE C.B.D.T. CIRCULAR WITH REGARD TO CHARGING OF INTEREST ON THE ADVANCES GIVEN BY THE B ANKING COMPANY IN RESPECT OF THE STIKEY ADVANCE. HE FURTHE R SUBMITTED THAT THE CIRCULARS CITED LD. AUTHORIZED REPRESENTATIVE IN THE VARIOUS ORDERS REFERRED BY HI M PERTAINS -: 9: - 9 TO THE ASSESSMENT YEAR PRIOR TO ASSESSMENT YEAR 197 9-80, WHEREIN AS PER CIRCULAR NO. 41/4-6/D OF 1952 DATED 6 TH OCTOBER, 1952, INTEREST ON STIKEY ADVANCE WAS HELD TO BE NOT LIABLE TO TAX. HE FURTHER DREW OUR ATTENTION TO THE CBDT INSTRUCTION NO.1186 OF 1978, WHEREIN EARLIER CIRCUL AR DATED 6 TH OCTOBER, 1952, WAS WITHDRAWN WITH IMMEDIATE EFFECT AND IT WAS CLARIFIED THAT INTEREST ON DOUBTFUL DEBTS CREDI TED TO A SUSPENSE ACCOUNT BY THE BANKING COMPANIES IS INCLUD IBLE IN THE TAXABLE INCOME. IT WAS FURTHER STRESSED THAT AL L PENDING ASSESSMENTS MAY BE COMPLETED KEEPING IN VIEW THE SA ID INSTRUCTIONS AND AN IMMEDIATE REVIEW BE UNDERTAKEN AND REMEDIAL ACTION BY WAY OF INITIATION OF PROCEEDING U/S 147(B) OR SECTION 263 BE TAKEN IN RESPECT OF ASSESSMENTS WHIC H HAVE BEEN COMPLETED BY NOT INCLUDING SUCH INTEREST IN TH E TAXABLE INCOME IN ACCORDANCE WITH THE BOARDS EARLIER INSTR UCTIONS. IN VIEW OF THESE CIRCULARS, WHICH HAVE ALSO BEEN QUOTE D BY THE HON'BLE SUPREME COURT IN THE CASE OF UCO BANK (SUPR A), CONTENTION OF THE LD. CIT DR WAS THAT EVEN IN RESPE CT OF INTEREST ON STIKEY ADVANCES, WHICH ACCRUED TO THE A SSESSEE IS LIABLE TO TAX IN THE INITIAL THREE YEARS AND AFTER THREE YEARS ONLY -: 10: - 10 THE ACTUAL AMOUNT OF INTEREST RECEIVED IS LIABLE TO TAX. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE SINCE THE RELEV ANT ASSESSMENT YEAR UNDER CONSIDERATION IS 2007-08, C.B .D.T. CIRCULAR DATED 9.10.1984 WILL BE APPLICABLE AND THE INTEREST ACCRUED EVEN ON THE STIKEY ADVANCES ARE LIABLE TO T AX IN THE INITIAL THREE YEARS. ACCORDINGLY, HE JUSTIFIED THE ORDER OF LOWER AUTHORITIES. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D ALSO DELIBERATED ON VARIOUS DECISIONS CITED BY THE LD. A UTHORIZED REPRESENTATIVE AND THE LD. CIT D.R. DURING THE COUR SE OF HEARING BEFORE US. IT WAS CATEGORICALLY HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF UCO BANK (SUPRA) THAT C.B.D.T. HAVE ISSUED ANOTHER CIRCULAR DATED 9 TH OCTOBER, 1984, UNDER WHICH INTEREST IN RESPECT OF DOUBTFUL DEBTS CREDITE D TO THE SUSPENSE ACCOUNT BY THE BANKING COMPANIES WILL BE S UBJECTED TO TAX, BUT INTEREST CHARGED IN AN ACCOUNT, WHERE T HERE HAS BEEN NO RECOVERY OF INTEREST FOR THE THREE CONSECUT IVE ACCOUNTING YEARS WILL NOT BE SUBJECTED TO TAX IN TH E FOURTH YEAR AND ONWARDS. HOWEVER, IF THERE IS ANY RECOVERY IN T HE FOURTH -: 11: - 11 YEAR OR LATER, THE ACTUAL AMOUNT ONLY WILL BE SUBJE CTED TO TAX IN THE RESPECTIVE YEARS. HON'BLE SUPREME COURT HAS FUR THER CLARIFIED THAT THIS PROCEDURE WILL APPLY TO ASSESSM ENT YEAR 1979-80 AND ONWARDS. THE BOARDS INSTRUCTION NO. 11 86 DATED JUNE 20, 1978, HAS MODIFIED TO THIS EXTENT. THE SAM E CIRCULAR HAS ALSO FURTHER CLARIFIED THAT UP TO THE ASSESSMEN T YEAR 1978- 79 THE TAXABILITY OF INTEREST ON DOUBTFUL DEBTS CRE DITED TO SUSPENSE ACCOUNT WILL BE DECIDED IN THE LIGHT OF TH E BOARDS EARLIER CIRCULAR DATED OCTOBER 6, 1952, AS THE SAID CIRCULAR WAS WITHDRAWN ONLY IN JUNE, 1978. THE NEW PROCEDURE UND ER THE CIRCULAR OF OCTOBER 9, 1984,WILL BE APPLICABLE FOR AND FROM THE ASSESSMENT YEAR 1979-80. ALL PENDING DISPUTES ON TH E ISSUE SHOULD BE SETTLED IN THE LIGHT OF THESE INSTRUCTION S. THEREFORE, UP TO THE ASSESSMENT YEAR 1978-79, THE CBDTS CIRCU LAR OF OCTOBER 6, 1952, WOULD BE APPLICABLE ; WHILE FROM T HE ASSESSMENT YEAR 1979-80, THE CBDTS CIRCULAR OF OCT OBER 9, 1984, IS MADE APPLICABLE. FURTHERMORE, RBI INSTRUCT IONS FOR ACCOUNTING OF INTEREST ACCRUED ON DOUBTFUL ADVANCES AND PROVISION TO BE MADE FOR SUCH ADVANCES ARE NOT OVER RIDING THE PROVISIONS OF INCOME-TAX ACT, 1961,, THEREFORE, UND ER INCOME- -: 12: - 12 TAX ACT, 1961, INCOME IS TO BE COMPUTED AS PER PROV ISIONS OF INCOME-TAX ACT AND NOT AS PER GUIDELINES ISSUED BY RBI FOR INCOME RECOGNITION AND CLASSIFICATION OF ADVANCES A S BAD AND DOUBTFUL DEBTS. 10. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINED TO AGREE WITH THE LD. CIT DR THAT AFTER COMING INTO BO ARDS CIRCULAR DATED 20TH JUNE, 1978, W.E.F. ASSESSMENT Y EAR 1978- 79, INTEREST ON DOUBTFUL DEBTS IS LIABLE TO BE TAXE D AND THAT NEW PROCEDURE HAS ALSO BEEN LAID DOWN VIDE CIRCULAR OF OCTOBER 9, 1984, EVEN W.E.F. ASSESSMENT YEAR 1979-8 0. IN THE INSTANT CASE BEFORE US, THE RELEVANT ASSESSMENT YEA R UNDER CONSIDERATION IS 2007-08 TO WHICH LATEST CIRCULAR D ATED 9 TH OCTOBER, 1984, IS APPLICABLE, THEREFORE, INTEREST A CCRUED TO THE ASSESSEES BANK IN RESPECT OF DOUBTFUL ADVANCES EVE N THOUGH NOT CREDITED TO PROFIT AND LOSS ACCOUNT ARE LIABLE TO BE BROUGHT TO TAX NET IF IT PERTAINS TO THE INITIAL THREE YEAR S OF THE ADVANCES AND IF THERE IS ANY ACTUAL RECEIPT AFTER T HREE YEARS THAT PORTION IS ALSO LIABLE TO TAX. 11. IN THE RESULT, THIS GROUND OF THE ASSESSEES APPEAL IS DISMISSED. -: 13: - 13 12. NEXT GRIEVANCE RELATES TO ADDITION OF RS. 8,58,000/ - ON ACCOUNT OF AMOUNT DEBITED TO PROFIT AND LOSS ACCOUN T ON ACCOUNT AMORTIZATION OF INVESTMENT. WE FOUND THAT T HE ASSESSEE BANK IS INVESTING IN THE SECURITIES, AT TH E TIME OF PURCHASES OF THE GOVERNMENT SECURITIES, THE SAME AR E PURCHASED AT ITS MARKET VALUE AND ARE HELD IN THE C OURSE OF BUSINESS TILL THE DATE OF MATURITY. THE PREMIUM PAI D ON SUCH PURCHASES ARE CHARGED BY ASSESSEE EQUALLY TO THE PR OFIT AND LOSS ACCOUNT TILL THE MATURITY OF THE SECURITY. WE FOUND THAT THE ASSESSEE BANK HAS PURCHASED THE SECURITIES AS A N INVESTMENT, WHATEVER PREMIUM HAS BEEN PAID ON SUCH PURCHASES HAVE ALREADY BEEN DEBITED TO THE PURCHASE ACCOUNT. NO PART OF COST OF ACQUISITION OF THESE SECURITIES CAN BE DEBITED TO PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAS CLAIME D THE AMORTIZATION OF THE PREMIUM PAID ON ACQUISITION OF INVESTMENT WHICH HELD TO BE MATURITY. THERE IS NO PROVISION IN THE INCOME-TAX ACT, 1961, FOR ALLOWING PART OF COST OF INVESTMENT AS EXPENSES. ONLY WHEN SUCH SECURITIES HAVE BEEN MATURED/SOLD, PROFIT OR GAIN ARISING OUT OF SUCH SA LE/MATURITY ARE TO BE TAXED UNDER THE HEAD CAPITAL GAINS. THE SE -: 14: - 14 SECURITIES ARE NOT HELD BY THE ASSESSEE AS STOCK IN TRADE, WHICH IS TO BE VALUED AS PER COST OR MARKET PRICE AS PER END OF THE YEAR. MERE INSTRUCTION OF RBI FOR ACCOUNTING TREATM ENT IN RESPECT OF SUCH PREMIUM WILL NOT ENTITLE THE ASSESS EE TO CLAIM BENEFIT UNDER THE INCOME-TAX ACT, 1961, WHILE COMPU TING ITS INCOME. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE LOWER AUTHORITIES FOR NOT ALLOWING AMORTIZAT ION OF ANY PREMIUM PAID ON PURCHASE OF SECURITIES, WHICH ARE T REATED BY THE ASSESSEE ITSELF AS ITS INVESTMENT. 13. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO RS. 62,6 65/- BEING CONTRIBUTION TO ZILA SAHKARI SANGH. 14. WE FOUND THAT THE AO HAS APPLIED THE PROVISIONS OF SECTION 40(II) EXPLANATION AND DECLINED CLAIM OF DE DUCTION. THE SAID PROVISIONS ARE NOT APPLICABLE TO THE INSTA NT CASE AND IT SPEAKS ABOUT THE TAX LEVIED ON THE PROFIT AND GA INS OF BUSINESS. SINCE THE ASSESSEE HAS MADE THE STATUTORY PAYMENTS, WHICH IT IS REQUIRED TO MAKE U/S 43(2B) O F M.P. COOP. SOCIETIES ACT. SINCE IT IS STATUTORY PAYMENT, THE SAME IS ALLOWABLE AS DEDUCTION. AGREEING WITH THE LD. AUTHO RIZED REPRESENTATIVE, WE DIRECT THE AO TO ALLOW THE SAME. THE ISSUE -: 15: - 15 IS ALSO COVERED BY THE DECISION OF THE COORDINATE B ENCH IN THE CASE OF BURHANPUR MANDI SAMITI, 12 ITJ 12, WHEREIN STATUTORY PAYMENT TO THE BOARD HAS BEEN HELD TO BE AN ALLOWAB LE DEDUCTION. 15. WITH RESPECT TO ALLOWING DEDUCTION OF RS. 7,12,500/ -, LD. AUTHORIZED REPRESENTATIVE FAIRLY CONCEDED THAT THE DIRECTIONS HAVE ALREADY BEEN GIVEN BY THE LD. CIT(A ) TO THIS EFFECT. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART IN TERMS CONTAINED HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH MAY, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH MAY, 2011. CPU* 26275