The Dy. Commr. Income Tax, Circle,-1, RAJKOT-GUJARAT V. Gondal Nagrik Sahakari Bank Ltd., GONDAL

ITA 542/RJT/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2372 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-01-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 22-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S ANJARIA
• Assessee Lawyers: MJ RANPURA
• Keywords: Depreciation; Earning of tax free income; Proportionate interest; Cost of acquisition; Bad and doubtful debts
• Section: 14A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] (BEFORE SHRI S. S. GODARA, J.M. & SHRI MANISH BORA D, A.M.) ITA. NOS. 540, 541, 558, 559 & 542/RJT/2014 (ASSESSMENT YEARS:2007-08 TO 2011-12) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, RAJKOT ROOM NO.508, AAYAKAR BHAVAN, RACE COURSE RING ROAD, RAJKOT 360 001 APPELLANT VS. GONDAL NAGRIK SAHAKARI BANK LTD., SAMARPAN, MANDVI CHOWK, GONDAL, DIST: RAJKOT RESPONDENT & C.O. NO.5/RJT/2015 ( IN ITA NO.559/RJT/2014 ) (ASSESSMENT YEAR: 201 0-11) GONDAL NAGRIK SAHAKARI BANK LTD., SAMARPAN, MANDVI CHOWK, GONDAL, DIST: RAJKOT APPELLANT VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, RAJKOT ROOM NO.508, AAYAKAR BHAVAN, RACE COURSE RING ROAD, RAJKOT 360 001 RESPONDENT PAN: AAAAG4131H ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 2 - / BY REVENUE : SHRI C. S. ANJARIA, D.R. / BY ASSESSEE : SHRI M. J. RANPURA, A.R. /DATE OF HEARING : 05.01.2016 /DATE OF PRONOUNCEMENT : 20.01.2016 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ONE IS A BATCH OF SIX CASES. THE REVENUE HAS FILED ITA NOS. 540, 541, 558, 559 & 542/RJT/2014 FOR A.Y. 200 7-08 TO 2011-12 AGAINST DIFFERENT ORDERS OF CIT(A)-I, RAJKO T DATED 08.07.2014 AND 22.07.14 PASSED IN CASE NOS. CIT(A)- I/RJT/0028/13-14, CIT(A)-I/RJT/0029/13-14, CIT(A) /JAM/249/11-12, CIT(A)/JAM/158/12-13 & CIT(A)- I/RJT/0239/13-14, RESPECTIVELY. THE ASSESSEE HAS P REFERRED CROSS OBJECTIONS IN A.Y. 2010-11. THE RELEVANT PROC EEDINGS U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, HEREAFTER THE ACT. WE PROCEED ASSESSMENT YEAR WISE FOR THE SAKE OF CONVENIENCE AND BREVITY. A.Y. 2007-08 REVENUES APPEAL ITA NO. 540/RJT/2014 2. THE REVENUE RAISES TWO SUBSTANTIVE GROUNDS IN TH E INSTANT APPEAL IN CHALLENGING LOWER APPELLATE FINDINGS INTE R ALIA DELETING ADDITION OF ACCRUED INTEREST ON NPA ACCOUNTS OF RS. 1,36,09,737/- AND DISALLOWANCE OF RS.23,13,907/- MADE U/S.14A R.W .R 8D OF THE INCOME TAX RULES; AS MADE IN THE COURSE OF RE-A SSESSMENT ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 3 - FRAMED ON 11.03.2013. WE COME TO FORMER GROUND. T HE ASSESSEE IS A CO-OPERATIVE BANK. IT HAD NOT OFFERED THE IMP UGNED INTEREST AMOUNT ACCRUED ON NPAS AS ITS INCOME FOR TAXATION. IT FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING EXCEPT FOR THE IMPU GNED SUM. THE ASSESSING OFFICER SOUGHT TO REJECT THIS HYBRID SYSTEM OF ACCOUNTING. THE ASSESSEE INTER ALIA PLEADED THAT T HE ABOVE STATED SUM HAD BEEN SHOWN ON THE ASSET SIDE OF THE BALANCE SHEET WITHOUT CREDITING IT IN P&L ACCOUNT, THE BANK HAD N OT CREDITED ANY AMOUNT TO THIS RESERVE ACCOUNT BY CORRESPONDING LY DEBITING ANY INCOME ACCOUNT, THE IMPUGNED FIGURE HAD BEEN TA KEN FROM ITEM NO.10 UNDER THE HEAD OVER DUE INTEREST RESERV E ACCOUNT APPEARING IN CORPUS AND LIABILITY SIDE OF THE BALAN CE SHEET AS ON 31.03.2007 AND IN FACT OPENING BALANCE OF THE ABOVE STATED RESERVE ACCOUNT WAS RS.4,49,24,071/- AS REDUCED TO RS.1,36,09,737/- IN QUESTION WITHOUT HAVING ANY IMP ACT ON CURRENT YEARS INTEREST, THE ABOVE STATED INTEREST RESERVE HAD BEEN CARRIED FORWARD FROM F.Y. 2001-02 FROM RS.3.51 CROR ES AS REDUCED TO RS.1.36CRORES AT THE END OF THE RELEVANT ACCOUNTING PERIOD AND NOTHING WAS CREDITED IN THIS ACCOUNT DUR ING THE RELEVANT PREVIOUS YEAR THEREBY IMPLYING THAT NO COR RESPONDING DEBIT WAS GIVEN TO INTEREST RECEIVED ON ADVANCES IN COME, IT FOLLOWED RBI POLICY APPLICABLE ON CO-OPERATIVE BANK S NOTWITHSTANDING SECTION 145 OF THE ACT BEING ISSUED BY THE SAID REGULATOR, QUOTED CBDT CIRCULAR NO.201/21 OF 1984 A S HELD GOOD IN CASE OF UCO BANK VS. CIT 237 ITR 889 (SC) AND TH AT INCOME ON NON PERFORMING ASSETS WOULD NOT BE RECOGNIZED ON ACCRUAL BASIS BUT ONLY WHEN ACTUALLY REALIZED AND RECEIVED. ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 4 - 3. IT IS TO BE SEEN FROM THE ASSESSING OFFICERS OR DER THAT HE REFERRED TO SECTION 145(1) R.W.S. 5 OF THE ACT DEFI NING SCOPE OF TOTAL INCOME. HE OBSERVED THAT SECTION 43D PROVIDI NG FOR AN EXCEPTION CLAUSE THERETO DID NOT APPLY IN CASE OF A CO-OPERATIVE BANK SINCE THE SAME IS NOWHERE INCLUDED THEREIN. A LL THIS REASONING RESULTED IN THE IMPUGNED ADDITION. 4. THE CIT(A) REVERSES ASSESSING OFFICERS FINDINGS AS FOLLOWS: 8.1 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MAD E BY THE A.O. AND THE ASSESSMENT ORDER. THIS ISSUE HAS BEEN WIDELY DISCUS SED AND DEBATED. THE DETAILED LEGAL POSITION-WHICH EMERGES ON THIS ISSUE IS AS UNDER:- 1. THAT CBDT CIRCULAR DT. 9/10/1984 IS IN RESPECT O F BAD AND DOUBTFUL DEBTS / IRRECOVERABLE LOANS AND SUSPENSE ACCOUNT MA INTAINED FOR THE PURPOSE OF INTEREST THEREON. HOWEVER, THIS IS IN RESPECT OF BANKING COMPANIES. 2. S.43D HAS BEEN SPECIFICALLY INSERTED IN THE ACT W.E.F. 1/4/1991. S.43D LAYS DOWN THE PRINCIPLE THAT INCOME BY WAY OF INTEREST IN RESPECT OF SCHEDULED HANK IN RELATION TO SUCH CATEGORIES OF BA D OR DOUBTFUL DEBTS AS MAY BE PRESCRIBED HAVING REGARD TO THE GUIDELINES ISSUE D BY RB1 IN RELATION TO SUCH DEBTS SHALL BE CHRGEABLE TO TAX IN THE YEAR IN WHICH IT IS CREDITED BY THE BANK TO ITS P&L ACCOUNT OR THE YEAR IN WHICH IT IS ACTUALLY RECEIVED, WHICHEVER IS EARLIER. 8.2 IT IS NOW NECESSARY TO CONSIDER THE APPLICABILI TY OF THESE SECTIONS TO THE APPELLANT WHICH IS A CO-OPERATIVE BANK. SCHEDULED H ANK HAS BEEN DEFINED IN THE EXPLANATION TO S.43D AS HAVING MEANING ASSIGNED LO IT IN CLAUSE (II) OF EXPLANATION 2 TO S.36(L)(VIIA). AS PER THIS CLAUSE, CO-OPERATIVE BANKS ARC NUT COVERED IN THIS DEFINITION. THE APPELLANT BEING A CO-OPERATIVE BANK IS NOT EXPRESSLY COVERED BY THE S.43D. HOWEVER, CBDT CIRCU LAR DT. 9/10/1984 REFERS TO BANKING COMPANIES. THIS PHRASE HAS BEEN SPECIFIC ALLY DEFINED IN EXPLANATION (C) TO S.36(1)(VIII). IT IS SEEN FROM T HIS DEFINITION THAT CO-OPERATIVE BANKS ARE NOT INCLUDED IN THIS DEFINITION. IN OTHER WORDS, NEITHER THIS CIRCULAR NOR S.43D SEEM TO BE APPLICABLE LO CO-OPERATIVE BAN KS. HOWEVER, THE BASIC PRINCIPLES REGARDING INTEREST ON NON-PERFORMING ASS ETS HAVE BEEN BROUGHT ABOUT BY THE CIRCULAR AS WELL AS S.43D. IT WOULD TH EREFORE BE NECESSARY TO LOOK AT THE LEGISLATIVE INTENT BEHIND ENACTMENT OF S.43D . IN THE NOTES TO ACCOUNT TO FINANCE ACT NO,2 OF 1991, IT HAS BEEN MENTIONED AS UNDER:- 'FINANCE (NO.2) ACT, 1991 :- CHARGEABILITY OF INCOME FROM BAD OR DOUBTFUL DEBTS IN THE CASE OF FINANCIAL INSTITUTIONS AND BANKS. 22. THE RESERVE BANK OF INDIA HAS CLASSIFIED ADVANC ES GIVEN BY BANKS INTO EIGHT CATEGORIES CALLED HEALTH CODES1 TO 8. STICKV ADVANCES ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 5 - WHICH ARE DOUBTFUL OF REALISATION FALL UNDER HEALTH CODES 4 TO T 8. THE BANKS AND FINANCIAL INSTITUTIONS NORMALLY CREDIT IN TEREST FROM SUCH STICKV ADVANCES TO THE 'INTEREST SUSPENSE ACCOUNT' AND NOT TO THE 'PROFIT AND LOSS ACCOUNT'. THE ISSUE WHETHER INTEREST ON SU CH BAD AND DOUBTFUL ADVANCES SHOULD BE TAXED IN THE YEAR OF AC CRUAL OR OF RECEIPT HAS BEEN A MATTER OF CONTROVERSY FOR A LONG TIME. FINANCE (NO.2) ACT, 1991 :- 22.1 IN VIEW OF THE FACT THAT INTEREST FROM BAD AND DOUBTFUL DEBTS IN THE CASE OF BANKS AND FINANCIAL INSTITUTIONS ARE NORMALLY VERY DIFFICULT TO RECOVER, TAXING SUCH INCOME ON A CCRUAL BASIS REDUCES THE LIQUIDITY OF THE BANK WITHOUT ANY ACTUAL GENERATION OF INCOME. FINANCE (NO.2) ACT. 1991 22.2 WITH A VIEW TO IMPROVING THE VIABILITY OF BANK S PUBLIC FINANCIAL INSTITUTIONS. STATE FINANCIAL CORPORATION S AND STATE, INDUSTRIAL INVESTMENT CORPORATIONS, THE INCOME-TAX ACT HAS BEE N AMENDED BY INSERTING A NEW SECTION -43D, SO AS TO PROVIDE THAT INTEREST ON STICKY LOANS SHALL BE CHARGED TO TAX ONLY IN THE YEAR IN WHICH THE INTEREST IS ACTUALLY RECEIVED OR IS CREDITED TO THE 'PROFITS AN D LOSS ACCOUNT', WHICHEVER IS EARLIER. THE CATEGORY OF BAD AND DOUBT FUL DEBT IN RESPECT OF WHICH THE INTEREST WILL QUALIFY FOR THIS EXEMPTION, WILL BE PRESCRIBED BY THE CENTRAL BOARD OF DIRECT TAXES. KEEPING IN VIEW THE GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA IN RELATION TO SUCH DE BTS. ' 8.3 SIMILARLY, CIRCULAR NO.621 OF CBDT DT. 19/12/1 991 CLEARLY STATES THAT S.43D WAS INSERTED WITH A VIEW TO IMPROVING THE VIA BILITY OF BANKS SO AS TO PROVIDE THAT THE INTEREST ON NON-PERFORMING, ASSETS OR STICKY LOANS WOULD BE CHARGED TO TAX ONLY IN THE YEAR IN WHICH THE I MERE ST IS ACTUALLY RECEIVED OR CREDITED TO THE P&L ACCOUNT. IT IS THEREFORE HELD T HAT THE PROVISIONS OF S.43D OVERRIDES THE CIRCULAR OF CBDT DT. 9/10/1984. 8.4 THIS FINDING IS ALSO SUPPORTED BY VARIOUS J UDICIAL PRONOUNCEMENTS GIVEN BY VARIOUS TRIBUNALS. THE SAME HAVE ALREADY BEEN ME NTIONED IN THE SUBMISSION OF THE APPELLANT. THE HON'BLE DELHI HIGH COURT IN EASE OF VASHISTHA VYAPAR LTD. (2011) 330 ITR 440. WHILE DECIDING ON THE ISSUE IN RESPECT OF INTEREST ON NPAS OF NBFCS, HAS HELD AS UNDER:- 'IN THIS SCENARIO, WE HAVE TO EXAMINE THE STRENGTH IN THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE THAT WHETHER IT CAN STILL B E HELD THAT INCOME IN THE FORM OF INTEREST THOUGH NOT RECEIVED HAD STILL ACCR UED TO THE ASSESSEE UNDER THE PROVISIONS OF INCOME-TAX ACT AND WAS, THEREFORE , EXIGIBLE TO TAX OUR ANSWER IS IN THE NEGATIVE AND WE GIVE THE FOLLOWING REASON S IN SUPPORT : - (1) FIRST OF ALL WE WOULD DISCUSS THE MATTER IN THE LIGHT OF THE PROVISIONS OF INCOME-TAX ACT AND TO EXAMINE AS TO WHETHER IN THE GIVEN CIRCUMSTANCES, INTEREST INCOME HAS ACCRUED TO THE A SSESSEE. IT IS STATED AT THE COST OF REPETITION THAT ADMITTED POSI TION IS THAT THE ASSESSEE HAD NOT RECEIVED ANY INTEREST ON THE SAID ICD PLACED WITH SHAW WALLACE SINCE THE ASSESSMENT YEAR 1996-97 AS I T HAD BECOME NPAS IN ACCORDANCE WITH THE PRUDENTIAL NORMS WHICH WAS ENTERED IN THE BOOKS OF ACCOUNT AS WELL. THE ASSESSEE HAS FURT HER SUCCESSFULLY DEMONSTRATED THAT EVEN IN THE SUCCEEDING ASSESSMENT YEARS, NO ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 6 - INTEREST WAS RECEIVED AND THE POSITION REMAINED THE SAME UNTIL THE ASSESSMENT YEAR 2006-07. REASON WAS ADVERSE FINANCI AL CIRCUMSTANCES AND THE FINANCIAL CRUNCH FACED BY SHA W WALLACE. SO MUCH SO. IT WAS FACING WINDING UP PETITIONS WHICH W ERE FILED BY MANY CREDITORS. THESE CIRCUMSTANCES, LED TO AN UNCERTAIN TY INSOFAR AS RECOVERY OF INTEREST WAS CONCERNED, AS A RESULT OF THE AFORESAID PRECARIOUS FINANCIAL POSITION OF SHAW WALLACE. WHAT TO TALK OF INTEREST, EVEN THE PRINCIPAL AMOUNT ITSELF HAD BECOME DOUBTFU L TO RECOVER. IN THIS SCENARIO IT WAS LEGITIMATE MOVE TO INFER THAT INTER EST INCOME THEREUPON HAS NOT 'ACCRUED'. WE ARE IN AGREEMENT WITH THE SUB MISSION OF MR. VOHRA ON THIS COUNT, SUPPORTED BY VARIOUS DECISIONS OF DIFFERENT HIGH COURTS INCLUDING THIS COURT WHICH HAS ALREADY BEEN REFERRED TO ABOVE. (2) LN THE INSTANT CASE, THE ASSESSEE COMPANY BEING NBFC IS GOVERNED BY THE PROVISIONS OF RBI ACT. IN SUCH A CASE, INTEREST INCOME CANNOT BE SAID TO HAVE ACCRUED TO THE ASSESSEE HAVING REGARD TO TH E PROVISIONS OF SECTION 45Q OF THE RBI AND PRUDENTIAL NORMS ISSUED BY THE RBI IN EXERCISE OF ITS STATUTORY POWERS. AS PER THESE NORM S THE ICD HAD BECOME NPA AND ON SUCH NPA WHERE THE INTEREST WAS N OT RECEIVED AND POSSIBILITY OF RECOVERY WAS ALMOST NIL, IT COULD NO T BE TREATED TO HAVE BEEN ACCRUED IN FAVOUR OF THE ASSESSEE. ' 8.5 THE HON'BLE ITAT, AHMEDABAD BENCH 'D' (17 T AXMAN 239) HAS DISCUSSED THE RELEVANT DECISIONS IN DETAIL AND HAS STATED AS UNDER :- 'WE CAN THEREFORE SAFELY DRAW A CONCLUSION THAT BY THE INSERTION OF A SPECIAL PROVISION TO TAX INTEREST INCOME IN THE CAS E OF PUBLIC FINANCIAL INSTITUTION, ETC. SECTION 43-D HAS TO BE APPLIED IN ITS LETTER AND SPIRIT. IT IS PERTINENT TO MENTION THAT INTER ON, IN THE CASE OF CIT V. BANK OF AMERICA N. T. & S. A. [2003] 262 ITR 504/ 133 TAXMA N 648 (BOM.) THE QUESTION OF INTEREST ON STICKY LOANS WAS DECIDED IN FAVOUR OF THE ASSESSEE AND HELD THAT THE QUESTION IS TO BE ANSWER ED IN FAVOUR OF THE ASSESSEE FOLLOWING THE DECISION OF UCO BANK (SURA), UNITED COMMERCIAL BANK V. CIT [199] 240 ITR 355/ 106 TAXMAN 601 (SC). LIKEWISE, IN AN ANOTHER CASE OF CIT V. STATE BANK OF INDIA [2003] 2 62 ITR 662/ 129 TAXMAN 409 (BOM.) AGAIN IT WAS HELD THAT THE AMOUNT CREDITED TO THE INTEREST SUSPENSE ACCOUNT WAS NOT TAXABLE FOLLOWING THE DECISION PRONOUNCED IN THE CASE OF UCO BANK (SUPRA). V) JUDGEMENT IN FAVOUR OF REVENUE : FROM THE SIDE OF THE REVENUE AN ORDER OF THE TRIBUN AL HAS BEEN VEHEMENTLY RELIED UPON AND THIS IS THE BASIC REASON OF THE ELABORATE DISCUSSION MADE HEREINABOVE SO AS TO UNFOLD THE CON TROVERSY. IN THE SAID DECISION OF THE TRIBUNAL, VIZ. JT.CIT V. INDIA EQUIPMENT LEASING LTD. [2008] 111 ITD 37 (CHENNAI), THE RESPECTED COORDINATE BENCH HAS EXPRESSED THAT QUOTE 'PRIOR TO INSERTION OF SECTION 43D WITH EFFECT FROM 1-4-1991, RECOGNITION OF INCOME WAS ON THE BAS IS OF CIRCULAR OF 9- 10-1984. IT SAID THAT FOR FIRST THREE YEARS THE IN COME MAY BE TAKEN ON ACCRUAL BASIS AND FROM 4TH YEAR ONWARDS, THE IN COME IN RESPECT OF DOUBTFUL DEBTS WAS TO BE RECOGNIZED ON RECEIPT B ASIS. SINCE THE INCOME WAS TO BE ASSESSED FOR FIRST THREE YEARS ON ACCRUAL BASIS, PROVISIONS OF SECTION 43D WERE INSERTED IN THE ACT. CIRCULAR NO.621, DATED 19-12-1991 GIVES THE LEGISLATIVE INTENTION, S TATING THAT SECTION 43D WAS INSERTED WITH A VIEW TO IMPROVING THE VIABILITY OF ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 7 - BANKS, PUBLIC FINANCIAL INSTITUTIONS ETC.. SO A S TO PROVIDE THAT INTEREST ON STICKY LOANS SHALL BE CHARGED TO TAX ONLY IN THE YEAR IN WHICH THE INTEREST IS ACTUALLY RECEIVED OR CREDITED TO THE PR OFIT AND LOSS ACCOUNT. THIS BENEFIT WAS EXTENDED WITH EFFECT FROM 1-4-2000 IN THE CASE OF PUBLIC COMPANIES ENGAGED IN LONG-TERM FINANCING OF HOUSING PROJECTS APPROVED BY NATIONAL HOUSING BANKS. THE LEGISLATURE IN THEIR WISDOM DID NOT EXTEND THE SAME BENEFIT TO NBFCS WHICH HAS BEEN GIVEN TO SCHEDULED BANKS, PUBLIC FINANCIAL INSTITUTIONS ETC. THE PROVISIONS OF SECTION 43D AS STOOD AT RELEVANT TIME CONTAINED AN EXPRESSION THE INCOME BY WAY OF INTEREST IN RELATION TO SUCH CATEG ORIES OF BAD OR DOUBTFUL DEBTS AS MAY BE PRESCRIBED HAVING REGARD TO THE GUIDELINES ISSUED BY THE RBI IN RELATION TO SUCH DEBTS'. THIS EXPRESSION CONTINUES TO EXIST IN THE NEWLY SUBSTITUTED SECTION 43D APPLICABLE WITH EFFECT FROM 1-4-2000. THIS SHOWS THAT THE RBI GUI DELINES IN RESPECT OF SCHEDULED BANKS, PUBLIC FINANCIAL INSTITUTIONS ET C., WERE NOT SUFFICIENT FOR RECOGNITION OF INCOME ON CASH BASIS FOR THE PUR POSES OF INCOME-TAX. THE INCOME OF SUCH ASSESSEES WAS DETERMINED AS PER CIRCULAR DATED 9- 10-1984. BECAUSE OF THIS REASON, SECTION 43D WAS IN SERTED IN THE STATUTE. RBI GUIDELINES IN CASE OF NBFC ARE FOR THE PURPOSE OF CONTROL AND SUPERVISION WITH RESPECT TO PUBLIC INTEREST AND VIABILITY OF THE NBFC. THE GUIDELINES NEVER INTENDED FOR TAKING THE INTEREST INCOME ACCRUED AS PER SECTION 5 OUT OF THE SCOPE OF THE AC T. IF THE CONTENTION OF ASSESSEE WAS ACCEPTED, IT WOULD AMOUNT TO INSERTION OF 'NBFC' IN SECTION 43D, THAT TOO BY A GUIDELINE ISSUED FOR DIF FERENT PURPOSES BY AN AUTHORITY OTHER THAN THE PARLIAMENT IN OTHER WORDS, THE DOCTRINE OF CASUS OMISSUS WILL DEEM TO HAVE BEEN APPLIED WHIC H IS CONTRARY TO LAW OF LAND. UNQUOTE. THE BASIC REASON FOR DIRECTI NG TO ASSESS THE ACCRUED INTEREST ON NPA WAS THE RBI GUIDELINES ISSU ED ONLY FOR SCHEDULED BANKS, PUBLIC FINANCIAL INSTITUTIONS AND NOT FOR NBFC. THE OBSERVATION OF THE RESPECTED TRIBUNAL WAS THAT IF T HE CONTENTION OF THE ASSESSEE WAS TO BE ACCEPTED, THEN IT WOULD AMOUNT T O INSERTION OF NBFC IN SECTION 43-D OF THE I.T.ACT. AS AGAINST T HAT, AS FAR AS THE ASSESSEE IS CONCERNED, IT IS AN ACCEPTED FACT THAT THE ASSESSEE IS A CO- OPERATIVE BANK AND NOT A NON-BANKING FINANCIAL COMP ANY AND THIS NOTEWORTHY DISTINCTION HAS ALREADY BEEN APPRECIATED BY US IN ONE OF THE PARAGRAPHS ABOVE. THERE IS ONE MORE DECISION OF THE HONBLE APEX COUR T WHICH IS YET TO BE MENTIONED WHILE DISCUSSING THE ARGUMENTS RAISED FRO M THE SIDE OF THE REVENUE. A DECISION IN THE CASE OF SOUTHERN TECHNOL OGIES LTD. VS. JT. CIT 320 ITR 577 (SC) HAS BEEN CITED BUT THE FUNDAME NTAL DIFFERENCE IS THAT THE ISSUE BEFORE THE HONBLE COURT WAS IN RESP ECT OF PROVISION FOR NPA AND DEBITED TO P&L ACCOUNT BY A NBFC. THE SAID PROVISION WAS UNDISPUTEDLY MADE BY THE SAID NBFC AS PER THE PRUDE NTIAL NORMS MADE BY THE RESERVE BANK. THEREFORE WE WANT TO MAKE IT CLEAR THAT THE QUESTION FOR CONSIDERATION BEFORE THE HONBLE COURT WAS THAT IF A PROVISION FOR DOUBTFUL DEBT IS MADE THEN WHAT WILL BE THE LEGAL POSITION OF THE APPLICABILITY OF EXPLANATION TO SECTION 36(1 )(VII) OF THE I.T. ACT. FOR THE SAKE OF READY REFERENCE, RELEVANT PARAGRAPH FRO M THE HELD PORTION IS REPRODUCED BELOW:- THE INCOME-TAX IS A TAX ON REAL INCOME, I.E., TH E PROFITS ARRIVED AT ON COMMERCIAL PRINCIPLES SUBJECT TO THE PROVISIO NS OF THE ACT. THEREFORE, IF BY THE EXPLANATION TO SECTION 36(1)(V II) A PROVISION ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 8 - FOR DOUBTFUL DEBT IS KEPT OUT OF THE AMBIT OF BAD D EBT WHICH IS WRITTEN OFF, THEN ONE HAS TO TAKE INTO ACCOUNT THE EXPLANATION IN COMPUTING THE TOTAL INCOME UNDER THE INCOME-TAX ACT FAILING WHICH ONE CANNOT ASCERTAIN THE REAL PROFITS. THE PR OVISION FOR NON-PERFORMING ASSETS DEBITED IN THE PROFIT AND LOS S ACCOUNT UNDER THE RESERVE BANK DIRECTIONS OF 1998 IS ONLY A NOTIONAL EXPENSE AND, THEREFORE, THERE WOULD BE ADD BACK TO THAT EXTENT IN THE COMPUTATION OF TOTAL INCOME UNDER THE INCOME -TAX ACT. THEREFORE THE DISTINCTION CAN EASILY BE DRAWN THAT IN THE APPEAL BEFORE US THE QUESTION IS ACCRUAL OF INTEREST INCOME ON ST ICK Y LOAN BUT IN THIS CITED DECISION THE QUESTION BEFORE HE APEX COURT WA S ABOUT THE ADMISSIBILITY OF PROVISION MADE IN RESPECT OF DOUBT FUL DEBTS. ( VI ) CONCEPT OF REAL INCOME APPROVED IN THE CASE OF BANKING BUSINESS: BEFORE US, THE THEORY OF REAL INCOME HAS ALSO BEE N ARGUED AND IN SUPPORT A DECISION OF HON'BLE COURT PRONOUNCED IN T HE CASE OF CIT VS. GODHRA ELECTRICITY CO. 225 ITR 746 (SC). IN SHORT, THE VIEW EXPRESSED WAS THAT IF INCOME DOES NOT RESULT AT ALL, THERE CA NNOT BE ANY TAX AND THAT IF AN INCOME HAS NOT MATERIALIZED, THEN MERELY AN ENTRY MADE ABOUT A HYPOTHETICAL INCOME BY FOLLOWING BOOK KEEPI NG METHODS, THE LIABILITY TO TAX CANNOT BE ATTRACTED. NOW AT PRESENT THE SITUATION IS THAT THE HON'BLE MA DRAS HIGH COURT IN THE CASE OF CIT VS. ELGI FINANCE LTD. 293 ITR 357 ( MAD.) HAS TAKEN A VIEW THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF LEASE, FINANCE AND HIRE PURCHASE AND THAT THE PRINCIPLE OF ACCRUAL COMES INTO PLAY WITHOUT INCOME WAS RECOGNIZED AND THAT THE ASS ESSEE HAD CLASSIFIED ITS ASSETS ON THE BASIS OF NOTIFICATION ISSUED BY R.B.I. AND FOUND THAT CERTAIN ASSETS CAME UNDER THE CATEGORY O F NPA AND THAT FROM SUCH NPA THE ASSESSEE HAD NOT RECOGNIZED ANY INCOME IN CONSONANCE WITH THE NOTIFICATION ISSUED BY RBI AND AS-9 ISSUED BY ICAI AND THAT THE ASSESSEE WAS JUSTIFIED IN NOT RECOGNIZING SUCH INCOME. THE COURT HAD FURTHER EXPRESSED THAT THERE WAS NO OCCASION TO CONSIDER WHETHER THE PRINCIPLE OF ACCRUAL WOULD ARISE OR NOT, NEVERT HELESS, THE INTEREST FROM SUCH NPA WOULD BE TAXED IN THE APPROPRIATE ASS ESSMENT YEAR ON THE BASIS OF ACTUAL RECEIPT. IT IS WORTH TO MENTION THAT FOR THIS DECISION, THE HON'BLE MADRAS HIGH COURT HAS RELIED UPON AN AN OTHER DECISION OF THE SAME HIGH COURT PRONOUNCED IN THE CASE OF CIT V S. INDIA EQUIPMENT LEASING LTD. [2007] 293 ITR 350. (MAD.). TO CONCLUDE THE ISSUE, WE DEEM IT IMPORTANT TO DISC USS THE DECISION OF INDIA EQUIPMENT LEASING LTD. (293 ITR 350) FOR THE SAKE OF COMPLETENESS OF OUR JUDGEMENT. IN THAT APPEAL, THE ASSESSEE WAS DOING THE BUSINESS OF HIRE PURCHASE TRANSACTION AND LEASI NG OF PLANT & MACHINERY. THE INTEREST ON STICKY LOANS NOT BEING BROUGHT INTO THE PROFIT & LOSS ACCOUNT BUT BEING TAKEN TO THE SUSPEN SE ACCOUNT WAS HELD BY THE COURT AS AN ACCEPTED MODE OF TREATMENT OF NO TIONAL INCOME IN ACCOUNTING PRACTICE. THE COURT HAS SAID THAT THE CI RCULAR-9 OF OCTOBER- 1984 SERVE A PRACTICAL PURPOSE OF LAYING DOWN A UNI FORM TEST FOR THE ASSESSING AUTHORITY TO DECIDE WHETHER THE INTEREST INCOME WHICH IS TRANSFERRED TO SUSPENSE ACCOUNT IS, IN FACT, ARISIN G IN RESPECT OF A DOUBTFUL OR STICKY LOAN. THIS WAS DONE BY PROVIDING THAT NON-RECEIPT OF ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 9 - INTEREST FOR THE FIRST THREE YEARS WILL NOT BE TREA TED AS INTEREST ON A DOUBTFUL LOAN, BUT IF AFTER THREE YEARS THE PAYMENT OF INTEREST IS NOT RECEIVED, FROM THE 4 TH YEAR ONWARDS IT WILL BE TREATED AS INTEREST ON A DOUBTFUL LOAN AND WILL BE ADDED TO THE INCOME ONLY WHEN IT IS ACTUALLY RECEIVED. FOLLOWING THE UCO BANK (SUPRA), THE SAID APPEAL OF THE REVENUE WAS DISMISSED. 8.6 IT IS ALSO SEEN THAT THIS ISSUE HAS BEEN DECIDE D BY THE HONBLE ITAT, RAJKOT BENCH IN THE CASE OF JAMNAGAR DISTRICT CO-OP. BANK VS. ADDL. CIT, JAMNAGAR IN ITA NO.481/RJT/2011 FOR A.Y. 08-09. WHILE DECIDI NG THE SAME ISSUE, THE HON'BLE 1TAT HAS HELD AS UNDER:- 22.WITH REGARD TO GROUND NO.3, WE HAVE HEARD BOTH SIDES. THE AO DISALLOWED THE OVERDUE INTEREST RESERVE AMOUNTING T O RS.1,15,00,000/- ON THE GROUND THAT ASSESSEE MADE THE PROVISION OF T HIS AMOUNT. BEFORE US, THE ASSESSEE SUBMITTED THAT THE AO HAS NOT CONS IDERED THAT IT IS CREDITED INTO PROFIT AND LOSS ACCOUNT AND DEBITED B ACK AS PER RB1 GUIDELINES ACCOUNTING POLICY OF THE BANK ADOPTED CO NSISTENTLY. THUS, THERE IS NO REAL INCOME AND THE AMOUNT DOES NOT REM AIN CREDITED IN P/L A/C. AS REQUIRED U/S..43D. IN SUPPORT OF THIS, REL IANCE IS PLACED ON THE DECISION OF ITAT AHMEDABAD BENCH IN THE CASE OF KAR NAVATI CO-OP. BANK LTD. V. DCIT [2012] 134 1TD 486 (AHD.). THE LD . D.R. APPEARED FOR THE REVENUE COULD NOT CONTROVERT THE SAME. 23. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW IT IS PERTINENT TO NOTE THAT AO HAS NOT CONSIDERED THE FACT THAT OVERDUE INTEREST AMOUNTING TO RS. 1,15,00,000/- WHICH IS CREDITED INTO PROFIT AND LOS S ACCOUNT WAS DEBITED AS PER RBI GUIDELINES AND THERE IS NO ULTIM ATE CREDIT IN P/L A/C IN THIS RESPECT. THUS, THERE IS NO INCOME ACCRUED A ND NO ADDITION ON THIS ACCOUNT CAN BE MADE. THIS VIEW IS SUPPORTED BY THE DECISION OF ITAT AHMEDABAD IN THE CASE OF KARNAVATI CO-OP. BANK LTD. (SUPRA). IN THIS CASE, THE TRIBUNAL HAS FOLLOWED THE JUDGMENT OF HON 'BLE APEX COURT RENDERED IN THE CASE OF UCO BANK VS. CIT AS REPORTE D IN 237 ITR 889. WE, THEREFORE, FOLLOWING THE DECISION OF ITAT AHMED ABAD BENCH IN THE CASE OF KARNAVATI CO-OP BANK LTD (SUPRA) DELETE THE DISALLOWANCE OF RS. 1,15,00,000/- MADE BY AO. THIS GROUND OF APPEAL IS ALLOWED. ' RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, I HOLD THAT THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADDITION ON THE ISSUE OF IN TEREST ON NPAS. THIS ADDITION IS DIRECTED LO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. WE HAVE HEARD RIVAL CONTENTIONS. RELEVANT FACTS NARRATED IN THE PRECEDING PARAGRAPHS ARE NOT REPEATED TO AVOID REPETITION. THERE IS NO DISPUTE THAT THE ASSESSEE/CO-OPERATIVE BANK HAS NOT RECOGNIZED THE IMPUGNED ACCRUED INTEREST OF RS.1.36 CRORES OVERDUE ON NON PERFORMING ASSETS AS ITS INCOME BY F OLLOWING REAL INCOME PRINCIPAL. LD. CO-ORDINATE BENCH OF THE TRI BUNAL (SUPRA) ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 10 - ALREADY HOLDS IN CASE OF A SIMILAR CO-OPERATIVE BAN K THAT NO INCOME ACCRUES IN AN INSTANCE OF CREDITING OF OVERD UE INTEREST FROM NPAS TO P&L ACCOUNT AND DEBITED AS PER RBI GUI DELINES, SINCE THERE IS NO ULTIMATE CREDIT IN P&L ACCOUNT. THE REVENUE IS UNABLE TO POINT OUT ANY DISTINCTION ON FACTS OR LAW AFTER BEING GRANTED ADEQUATE OPPORTUNITY. WE CONFIRM CIT(A)S APPEALS FINDINGS ACCORDINGLY DELETING THE IMPUGNED ADDITION OF RS.1,36,09,737/- ON ACCOUNT OF ACCRUED INTEREST ON NPA ACCOUNTS. THIS FIRST GROUND STANDS REJECTED. 6. THE REVENUES SECOND SUBSTANTIVE GROUND CHALLENG ES THE CIT(A)S ORDER DELETING SECTION 14A R.W.R. 8D DISAL LOWANCE OF RS.23,13,907/- MADE BY THE ASSESSING OFFICER. WE F IND THAT THE ASSESSEE HAD RECEIVED DIVIDEND INCOME OF RS.90,94,4 21/- COMPRISING OF RS.87,18,670/- AS EXEMPT U/S.10(34) O F THE ACT. THE ASSESSING OFFICER INVOKED SECTION 14A R.W.R. 8D FOR COMPUTING THE IMPUGNED DISALLOWANCE OF RS.23,13,907 /-. THE ASSESSEE SUBMITTED IN THE COURSE OF LOWER APPELLATE PROCEEDINGS THAT IT HAD RECEIVED INTEREST INCOME OF RS.8.59 CRO RES TURNING OUT TO BE MUCH MORE THAN INTEREST EXPENDITURE OF RS.6.9 8CRORES. IT HIGHLIGHTED THE FACT THAT ITS CAPITAL AND RESERVES OF RS.13.54CRORES EXCEEDED THE IMPUGNED TAX FREE INVES TMENTS IN UTI MNC FUNDS OF RS.3.24CRORES. THE CIT(A) QUOTES HONBLE JURISDICTIONAL HIGH COURTS DECISION IN CIT VS. GUJ ARAT STATE FERTILIZER & CHEMICAL LTD. 217 TAXMAN 343 AND HOLDS THAT THE ASSESSEE HAD SUFFICIENT FUNDS AT ITS DISPOSAL AND T HE ASSESSING OFFICER DID NOT MAKE OUT A CASE OF UTILIZATION OF B ORROWED FUNDS FOR THE PURPOSE OF THE IMPUGNED TAX FREE INVESTMENT S. THEREAFTER, HE REFERS TO CIT VS. HERO CYCLE LTD. 323 ITR 518 ( P&H) THAT THE ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 11 - IMPUGNED DISALLOWANCE IS NOT TO BE MADE SINCE NO EX PENDITURE HAS BEEN INCURRED FOR EARNING THE DIVIDEND INCOME I N QUESTION. THIS LEAVES THE REVENUE AGGRIEVED. 7. HEARD BOTH SIDES. CASE FILE PERUSED. THERE IS NO DISPUTE THAT THE ASSESSING OFFICER INVOKED RULE 8D FOR COMP UTING THE IMPUGNED DISALLOWANCE. APPLICABILITY OF THIS RULE IS NO MORE RES INTEGRA SINCE THE HONBLE BOMBAY HIGH COURT IN GODR EJ BOYCE MFG. COMPANY LIMITED VS. DCIT 328 ITR 81 HOLDS THAT THE SAME APPLIES W.E.F. A.Y. 2008-09 ONLY. THIS COURSE OF A CTION ADOPTED IS ACCORDINGLY HELD AS NOT SUSTAINABLE. WE COME TO CI T(A)S FINDINGS THAT THE ASSESSEES INTEREST FREE FUNDS AS WELL AS INTEREST INCOME (SUPRA) EXCEEDS ITS INTEREST EXPENDITURE (NOT UTILI ZED IN TAX FREE INVESTMENT IN QUESTION) AND THE TAX FREE INVESTMENT S AS WELL. THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) AS WELL A S BOMBAY HIGH COURT IN CIT VS. RELIANCE UTILITIES AND POWER LTD. (2009) 313 ITR 340 (BOM) HOLD THAT A PRESUMPTION CAN BE DRAWN IN S UCH CASES THAT THE ASSESSEE HAS UTILIZED ITS INTEREST FREE FU NDS ONLY. THE REVENUE FAILS TO QUOTE ANY CASE LAW TO THE CONTRARY . WE UPHOLD THE CIT(A)S ACTION. THE SECOND GROUND IS ALSO DEC LINED. REVENUES APPEAL IN ITA NO.540/RJT/2014 IS DISMISSE D. A.Y. 2008-09 REVENUES APPEAL ITA NO.541/RJT/2014 8. THE REVENUES FIRST SUBSTANTIVE GROUND SEEKS TO RESTORE ADDITION OF ACCRUED INTEREST ON NPA ACCOUNTS OF RS. 1,20,22,806/-. BOTH PARTIES CLARIFY AT THE OUTSET THAT OUR CORRESPONDING FINDING HEREINABOVE IN PRECEDING ASSE SSMENT YEAR ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 12 - DECIDE THIS ISSUE IN ASSESSEES FAVOUR. WE FOLLOW THE VERY COURSE OF ACTION AND REJECT THIS FIRST GROUND. 9. THE REVENUES NEXT SUBSTANTIVE GROUND CHALLENGES THE LOWER APPELLATE ORDER DELETING DISALLOWANCE OF BAD DEBTS WRITTEN OFF OF RS.25,93,280/- U/S.36(1)(VIIA) OUT OF TOTAL CLAIM O F RS.38,55,000/-. THIS ISSUE APPEARS TO BE MORE OF I NTERPRETATION OF THE ABOVE STATED STATUTORY PROVISION. THE LOWER APPELLATE FINDINGS DECIDE THE ISSUE AS FOLLOWS: GROUND NO.5 : THE LD. AO GRIEVOUSLY ERRED ON FACTS AS A/SO IN LAW IN DISALLOWING CLAIM OF BAD DEBT OF RS.25,93,280/- OUT OF TOTAL BAD DEBT OF RS.38,55,000/- CLAIMED BY THE APPELLANT ON THE ALLE GED GROUND OF EXCESS CLAIM OF BAD DEBT AS PER THE PROVISION OF SE CTION 36(1)(VIIA) OF THE ACT. IT WAS NOTICED BY THE A.O. THAT THE BAD DEBT BALANC E AS ON 31/3/2008 WAS RS.2,54,34,400/-. THUS, AS PER PROVISIONS OF S. 36(1)(VIIA) 5% OF THE BAD DEBTS AMOUNTING TO RS.12,61,720/- COULD BE WRITTEN OFF. HOWEVER, THE BANK HAD CLAIMED WRITE OFF OF RS.38,55,000/- WHICH EXCEE DED THE ALLOWABLE LIMIT BY RS.25,93,280/-. THE EXCESS WRITE OFF CLAIMED BY THE APPELLANT TO THIS EXTENT WAS DISALLOWED BY THE A.O. DURING THE COURSE OF ASSESSMENT AS WELL AS APPELLAT E PROCEEDINGS, THE APPELLANT HAS CONTENDED AS UNDER:- 1. DURING THE YEAR, THE TOTAL BAD AND DOUBTFUL DEBT S WERE RS.771 LAKHS AND 5% OF THE SAME AMOUNTING TO RS.38,55,000/- WAS CLAIMED AS A DEDUCTION U/S.36(1)(VIIA). 2. THE A.O. HAS TAKEN THE DIFFERENCE OF CLOSING BAL ANCE OF BAD AND DOUBTFUL DEBTS OF RS.715.91 LAKHS AND CLOSING BALAN CE OF BAD DEBTS RESERVES OF RS.463.56 LAKHS AND ARRIVED AT A FIGURE OF RS.25 2.35 LAKHS FOR CALCULATING THE MAXIMUM ALLOWABLE WRITE OFF TO THE EXTENT OF RS .12,61,720/-. IT WAS THEREFORE REQUESTED THAT THE DISALLOWANCE MA Y BE DELETED. I HAVE CAREFULLY CONSIDERED THE APPELLANT'S CONTENT ION AND THE ASSESSMENT ORDER. WHAT THE A.O. HAS DONE IS REDUCED THE AMOUNT OF RESERVE FOR BAD DEBTS FROM THE TOTAL HAD DEBTS AS ON THE LA ST DAY OF THE PREVIOUS YEAR. ON CAREFUL PERUSAL OF S. 36(1)(VIIA), IT IS SEEN TH AT THE SCHEDULED BANK WILL BE ALLOWED DEDUCTION IN RESPECT OF ANY PROVISION MADE BY IT FOR ANY ASSET CLASSIFIED BY THE RBI AS DOUBTFUL ASSETS, FOR AN AM OUNT NOT EXCEEDING 5% OF AMOUNT OF SUCH ASSETS SHOWN IN THE BOOKS OF ACCOUNT S OF THE BANK ON THE LAST DAY OF THE PREVIOUS YEAR. FROM PLAIN READING OF THE ACT, IT IS CLEAR THAT IT ALLOWS ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 13 - A DEDUCTION OF 5% OF THE BAD DEBT FIGURE AS ON THE LAST DAY OF THE PREVIOUS YEAR AND DOES NOT TALK OF THE NET FIGURE ARRIVED AT BY REDUCING THE RESERVE FOR BAD DEBTS FROM THE SAME. THERE IS NO DISPUTE ABOUT THE BAD DEBTS ON THE LAST DAY OF THE PREVIOUS YEAR TO BE RS.771 LAKHS. THE A. O. HAS REDUCED RS.463.56 LAKHS FROM THE SAME AND ALLOWED 5% ON THE BALANCE O F RS.252.34 LAKHS. IN MY CONSIDERED OPINION, THE APPELLANT 'IS ENTITLED T O DEDUCTION OF 5% ON THE AMOUNT OF BAD DEBT AS ON THE LAST DAY OF THE YEAR A ND NOT THE NET FIGURE AS ARRIVED AT BY THE A.O. THE DISALLOWANCE COMPUTED BY THE A.O. IS NOT AS PER THE FIRST PROVISO OF S. 36(1)(VIIA). THE SAME IS DIREC TED TO BE DELETED. THIS GROUND OF APPEAL IS ALLOWED. 10. THE CIT(A) CONSTRUES SECTION 36(1)(VIIA) AS TO ENVISAGE 5% ENTITLEMENT OF BAD DEBTS DEDUCTION AS ON LAST DAY O F THE YEAR AND NOT THE NET FIGURE AS TAKEN BY THE ASSESSING OFFICE R. THERE CAN BE NO DISPUTE THAT THIS ONE IS A DEDUCTION PROVISION. THE REVENUE FAILS TO TAKE US TO A DIFFERENT CONSTRUCTION THEREO F IN THE COURSE OF ARGUMENTS THAT THE NET FIGURE HAS TO BE ADOPTED INS TEAD OF THE ONE APPEARING ON LAST DAY OF YEAR. WE FIND NO REAS ON TO INTERFERE WITH CIT(A) FINDINGS ACCORDINGLY. THIS GROUND IS R EJECTED. REVENUES APPEAL ITA NO.541/RJT/2014 IS DISMISSED. A.Y. 2009-10 REVENUES APPEAL ITA NO.558/RJT/2014 11. THE REVENUES FIRST SUBSTANTIVE GROUND ASSAILS CORRECTNESS OF THE CIT(A)S ORDER IN DELETING ADDITION OF RS.5, 92,429/- ON ACCOUNT OF AMORTIZATION OF PREMIUM PAID ON INVESTME NTS. THESE FINDINGS UNDER CHALLENGE SUMMARIZE ASSESSING OFFICE RS OBSERVATION AS WELL AS ASSESSEES ARGUMENTS AS UNDE R: 5.2.1 THE AO VIDE PARA 5.3 OF THE ASSESSMENT O RDER HELD THAT THE SECURITIES HELD UNDER HTM (HELD TO MATURITY) ARE NOT MEANT TO EARN PROFIT AND HENCE DISALLOWED. THIS FINDING OF THE AO IS BASED ON THE DECISION OF THE HON. SUPREME COURT REPORTED IN 320 ITR 577 (SC) WHEREIN IT WAS STATED THAT THE RBI DIRECTIVES HAVE NOTHING TO DO WITH THE TAXABILI TY OF THE ENTITIES GOVERNED AND TAXABLE INCOME OF THE ASSESSEE IS REQUIRED TO B E DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF INCOME TAX ACT, 1961. HE ACC ORDINGLY HELD THAT THE ITEMS IN QUESTION ARE 'HELD TO MATURITY [HTM] ARE INVEST MENT AND PREMIUM PAID IS ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 14 - BASICALLY 'COST OF INVESTMENT'. THE LD. AR OF THE A PPELLANT PLEADED THAT, ON ONE HAND THE AO STATES THAT THE RBI'S DIRECTIONS ARE NO T BINDING TO THE AO TO DETERMINE THE TAXABILITY UNDER THE ACT WHEREAS VIDE PARA 5.3 OF THE ASSESSMENT ORDER THE AO HAD HELD THAT THE GUIDELINE S OF THE RBI VERY CLEARLY SHOW THAT THE SECURITIES HELD UNDER HTM ARE NOT MEA NT TO EARN PROFIT BUT ARE REQUIRED TO BE KEPT AS THEY ARE TILL MATURITY. THE ABSENCE OF PURPOSE OF EARNING PROFIT AT THE TIME OF PURCHASE OF SUCH SECURITIES I S A STRONG INDICATOR OF THE FACT THAT THE INVESTMENT IN SECURITIES UNDER HTM IS A CA PITAL INVESTMENT. MOREOVER, IF ASSESSEE RESORTS TO FREQUENT SALE AND TRANSFERS FROM HTM SECURITIES THEN THE DIFFERENCE IN MARKET VALUE AND BOOK VALUE OF SUCH S ECURITIES ARE ALSO REQUIRED TO BE INDICATED. IT MAY IN FACT WIPE OUT THE DIFFER ENCE BETWEEN BOOK VALUE AND MATURITY VALUE IF THE MARKET CONDITIONS ARE FAVOURA BLE. IN VIEW OF THE ABOVE IT IS CLEAR THAT NO AMORTIZATION PREMIUM PAID ON GOVT. SECURITIES CAN BE ALLOWED. THUS, ACCORDING TO THE LD. AR, THE AO WAS 'MISDIREC TED IN FOLLOWING THE RBI'S GUIDELINES; IN PROPER PERSPECTIVE. IT IS THE CONTENTION OF THE LEARNED AR OF THE APPELLANT THAT AOS ARE BOUND TO FOLLOW THE PROVISIONS OF THE ACT AND THE INSTRUCTIONS OF THE BOARD ISSUED FROM T IME TO TIME TO AVOID HARD SHIP TO THE TAX PAYER PUBLIC AT LARGE. ACCORDI NG TO THE LD. AR, THE CBDT VIDE INSTRUCTION NO. 17 OF 2008 HAS SPECIFICAL LY ISSUED GUIDELINES TO THE AO FOR THE PURPOSE OF ASSESSMENT OF BANKS, W HICH READS AS UNDER: '(VII) AS PER RBI GUIDELINES DATED 16TH OCTOBER, 20 00, THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATURITY (HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SALE (AFS). INVESTM ENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND ARE CARRIED AT ACQUISITION COST UNLESS THESE AR E MORE THAN THE FACE VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. IN THE CASE OF HFT AND AFS SECURITIES FORMING STOCK-IN-TRADE OF THE BANK, THE DEPRECIATION/APPRECIATION IS TO BE AGGREGATED SCRIP -WISE AND ONLY NET DEPRECIATION, IF ANY, IS REQUIRED TO BE PR OVIDED FOR IN THE ACCOUNTS. THE LATEST GUIDELINES OF THE RBI MAY BE REFERRED TO FOR ALLOWING ANY SUCH CLAIMS.' 5.2.2 ACCORDING TO THE LD. AR, IN VIEW OF THE A BOVE, THE ISSUE BECAME VERY CLEAR THAT THE PREMIUM ON HTM IS TO BE AMORTIZED OV ER THE PERIOD OF MATURITY AND THAT, THE AO MAY NOT BE BOUND TO FOLLOW THE GUI DELINES OF THE RBI OR THE PRINCIPLE OF RES JUDICATA BUT HAS TO DEFINITELY FOL LOW THE INSTRUCTIONS ISSUED BY THE CBDT. THE LD. AR ALSO RELIED UPON THE DECISION OF THE HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS. RAJKOT DISTRICT CO-OPE RATIVE BANK LTD IN TAX APPEAL NO.56 OF 2013 WHEREIN HON'BLE HIGH COURT HAS HELD T HAT; 'THE CIRCULAR NO. 17 OF 2008 DATED 26.11.2008 CLEARLY PROVIDE FOR AMORTI ZATION OF PREMIUM PAID ON ACQUISITION, OF SECURITIES WHEN THE SAME ARE ACQUIR ED AT THE RATE HIGHER THAN THE FACE VALUE. SUCH AMORTIZATION WOULD HAVE TO BE FOR THE REMAINING PERIOD OF MATURITY. THIS PRECISELY THE TRIBUNAL HAD DIRECTE D IN THE IMPUGNED ORDER. THOUGH CONTENDED, NO CONTRARY INSTRUCTIONS OF CBDT ARE BROUGHT TO OUR NOTICE. THE INSTRUCTION IN QUESTION HAVING BEEN ISSUED U/S. 119(2) OF THE INCOME TAX ACT, 1961, WOULD BIND THE REVENUE, NO QUESTION OF L AW, THEREFORE ARISES. RESULTANTLY, THE TAX APPEAL IS DISMISSED.' ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 15 - 5.2.3 THE LD. AR ALSO RELIED UPON VARIOUS OTHER J UDICIAL PRONOUNCEMENTS, WHICH ARE REPRODUCED SUPRA AND HENCE, N OT REPEATED HERE. THESE JUDICIAL PRONOUNCEMENTS HAVE BEEN CAREFULLY PERUSED . I HAVE ALSO PERUSED THE WRITTEN SUBMISSION OF THE LD. AR. THE LATEST GUIDEL INE FROM THE RBI GIVEN TO THE BANKS IN THE-MASTER CIRCULAR RBI/2012-13/51 UBD.BPD (PCB).MC NO 12/16.20.000 / 2012-13 DATED 2.7.2012 IN POINT NO 1 6 FOR VALUATION OF INVESTMENT AND VALUATION STANDARDS, HAS HELD THAT, 'INVESTMENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND WILL BE CARRIED AT ACQUISITION COST UNLESS IT IS MORE THAN THE FACE VA LUE. IN SUCH A CASE, THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINI NG TO MATURITY. NOW, IN THE INSTRUCTION NO 17 FROM THE CBDT (REPRODUCED SUP RA), THE AOS ARE SPECIFICALLY GUIDED TO FOLLOW RBI'S GUIDELINES FOR ALLOWING (A) AMORTIZATION OF PREMIUM PAID ON INVESTMENTS UNDER HTM CATEGORY AND (B) PROVISION FOR DEPRECIATION IN INVESTMENT UNDER AFS / HFT CATEGORY . THUS, FROM THE ABOVE TWO CIRCULARS, IT IS VERY CLEAR THAT, FOR HIM CATEG ORY IF THE SCRIP IS PURCHASED AT PREMIUM (WHERE THE PURCHASE PRICE IS MORE THAN THE FACE VALUE) THE PREMIUM HAS TO BE AMORTIZED DURING THE REMAINING PERIOD OF RESIDUAL MATURITY. THIS AMORTIZATION OF PREMIUM IS DONE BY CHARGING PROPORTIONAL AMOUNT OF PREMIUM TO P&L ACCOUNT, WHIC H THE APPELLANT HAD DONE. THEREFORE, LOOKING TO THE ABOVE TWO CIRCULAR S OF THE BOARD AND THE RBI AND ALSO RESPECTFULLY FOLLOWING THE JUDICIAL PRINCI PLES LAID DOWN BY VARIOUS HIGHER JUDICIAL AUTHORITIES, THE DISALLOWANCE MADE BY THE AO OF RS.5,92,429/- BEING AMOUNT CHARGED ON ACCOUNT OF AMORTIZATION OF PREMIUM OF GOVT. SECURITIES HELD UNDER HTM CATEGORY (WHICH AGAIN IS TO MAINTAIN SLR), IS DIRECTED TO BE DELETED. THEREFORE THE APPELLANT GE TS RELIEF ON THIS GROUND OF APPEAL. 12. THERE IS HARDLY ANY DISPUTE ABOUT THE FACT THAT THE ASSESSEE HAS HELD THE SECURITIES IN QUESTION, PAID PREMIUM A MOUNTS AND AMORTIZE THE SAME IN THE MANNERS STATED HEREINABOVE . HONBLE JURISDICTION HIGH COURT IN A RECENT DECISION OF CIT VS. RAJKOT DISTRICT CENTRAL CO-OPERATIVE BANK LTD. TAX APPEAL NO. 56 OF 2013 DECIDED ON 10.02.2014 HAS ALLOWED A SIMILAR AM ORTIZATION CLAIM PERTAINING TO HELD TO MATURITY CATEGORY SEC URITIES PREMIUM BY TAKING INTO ACCOUNT PARAGRAPH VII OF THE CBDTS CIRCULAR NO.17 OF 2008 DATED 26.11.2008 CLARIFYING THAT INVESTMENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND ARE CARRIED AT ACQUISITION COST UNLES S THESE ARE MORE THAN THE FACE VALUE IN WHICH THE PREMIUM SHOUL D BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. T HE REVENUE ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 16 - FAILS IN POINTING OUT ANY DISTINCTION ON FACTS OR L AW THERETO. WE AFFIRM CIT(A)S ACTIONS. THIS SUBSTANTIVE GROUND I S REJECTED. 13. THE REVENUES SECOND SUBSTANTIVE GROUND SEEKS T O REVIVE INTEREST OF RS.5,32,375/- ON ACCOUNT OF ACCRUED INT EREST ON NPA ACCOUNTS IS FOUND TO BE COVERED BY OUR CORRESPONDIN G FINDINGS IN A.Y. 2007-08 DECIDED HEREINABOVE. THE SAME ACCORDI NGLY FAILS. 14. THE REVENUES THIRD SUBSTANTIVE GROUND CHALLENG ES THE LOWER APPELLATE ORDER DELETING DISALLOWANCE OF DEPR ECIATION ON INVESTMENT OF RS.1,07,50,000/-. THE CIT(A) DECIDES THE ISSUE IN ASSESSEES FAVOUR AS UNDER: 7.2 I HAVE PERUSED THE ASSESSMENT ORDER AND THE W RITTEN SUBMISSION FILED BY THE LD. A.R. OF THE APPELLANT. 7.2.1. DURING THE ASSESSMENT YEAR UNDER CONSIDERATI ON, THE APPELLANT HAS CLAIMED DEPRECIATION OF RS.1,07,50,000/- BEING THE DIFFERENCE BETWEEN THE COST OF ACQUISITION AND MARKET VALUE (NAV) OF THE M UTUAL FUNDS UNITS HELD UNDER THE CATEGORY OF NON-SLR SECURITIES, HELD FOR TRADING [HFT] AND AVAILABLE FOR SALE [AFS]. THE APPELLANT VALUES ITS INVESTMENT IN MUTUAL FUND UNITE AT THE MARKET VALUE, I.E., NET ASSET VALUE [NAV] AT THE EN D OF EACH YEAR AND DEPRECIATION IN THE VALUE, IF ANY, WERE DEBITED TO THE FREE RESERVE WITH CORRESPONDING CREDITS TO THE ANOTHER RESERVE NAMELY 'DEPRECIATION FLUCTUATION FUND', HOWEVER, IN THE AUDITED FINANCIAL STATEMENT, INVESTMENTS, IN MUTUAL FUNDS UNITS WERE STATED AT COST ON THE ASSET SIDE A ND DEPRECIATION IN THE VALUE OF INVESTMENTS WAS SHOWN UNDER THE DEPR ECIATION FLUCTUATION FUND ON THE LIABILITY SIDE. THEREFORE, BY NETTIN G-OFF THE INVESTMENT VALUE WITH THE DEPRECIATION FLUCTUATION FUND| AT THE END OF TH E YEAR, MARKET VALUE OF THE INVESTMENT, I.E, NAV CAN BE WORKED OUT. THIS IS SEE N FROM THE AUDITED BALANCE SHEET THAT, INVESTMENT IN MUTUAL FUNDS ARE STATED A T COST, I.E, RS. 399.89 LACS AGAINST WHICH DEPRECIATION IN THE VALUE OF INVESTME NT AT RS. 127.00 LACS ARE CREDITED TO DEPRECIATION FLUCTUATION FUND. THEREFOR E, BY NETTING-OFF THE VALUE OF INVESTMENT WITH DEPRECIATION FLUCTUATION FUND, AMOU NT OF RS. 272.89 LACS IS WORKED OUT, WHICH IS THE MARKET VALUE [NAV] OF THE MUTUAL FUNDS UNITS AS ON 31ST MARCH, 2007. DURING THE YEAR UNDER APPEAL, FUR THER DEPRECIATION IN THE INVESTMENT IN MUTUAL FUND UNITS IS WORKED OUT AT RS . 107.50 LACS. HOWEVER, DUE TO INADEQUACY OF FREE RESERVES, THE SAID DEPREC IATION WAS DEBITED TO THE PROFIT AND-LOSS ACCOUNT BY CORRESPONDING CREDIT TO DEPRECIATION FLUCTUATION FUND, AT THE END OF THE YEAR, I.E., 31ST MARCH, 200 9R INVESTMENT IN MUTUAL FUNDS ARE STATED AT COST ON THE ASSET SIDE, WHEREAS , TOTAL DEPRECIATION IN THE VALUE ARE SHOWN IN DEPRECIATION FLUCTUATION FUND ON THE LIABILITY SIDE. THE AO, VIDE PARA 8.4 OF-THE ASSESSMENT ORDER DISALLOWE D THE CLAIM OF ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 17 - DEPRECIATION OF RS. 1,07,50,000/- AND ADDED BACK TH E SAME TO THE TOTAL INCOME OF THE APPELLANT ON THE FOLLOWING GROUNDS: 1) AS PER THE AUDIT REPORT FOR THE A.Y. 2008-09, 'INVESTMENTS ARE VALUED AT COST', WHEREAS AUDIT RE PORT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION SHOWS 'INVESTME NTS ARE VALUED AT CURRENT MARKET PRICE BASED ON SURRENDER V ALUE AS ON THE LAST DATE OF ACCOUNTING YEAR'. THEREFORE, THE A SSESSEE HAS NOT BEEN FOLLOWING CONSISTENT AND REGULAR METHOD OF ACCOUNTING AND IS SHIFTING ITS METHOD OF ACCOUNTING TO SUIT IT SELF. 2) THE ASSESSEE HAS NOT INVESTED IN GOVERNMENT SECU RITIES, AS THE INVESTMENT MADE IN MUTUAL FUND UNITS AND THAT TOO W HICH AM NON-SLR BASED. THE DEPRECIATION ON SECURITIES WAS AVAILABLE ONLY ON GOVT. SECURITIES AND LOT ON MUTUAL FUND UNI TS. 3) MUTUAL FUNDS UNITS THAT THE ASSESSEE HAS I NVESTED IN HAVE BEEN REGULARLY DECLARING DIVIDENDS AND IN FACT DURI NG THE SAID ASSESSMENT YEAR ITSELF, THE ASSESSES HAS EARNED RS. 1,80,18,202/- AS DIVIDEND. IT IS WELL KNOWN FACT TH AT AFTER DECLARATION OF DIVIDEND THE NAV FALLS DRASTICALLY. THE ASSESSES WAS CLEARLY NOT PROVIDING FOR APPRECIATION ON THOSE SECURITIES AS JUST BEFORE THE DECLARATION OF DIVIDEND, THE NAV OF THESE SECURITIES WOULD HAVE BEEN HIGHER AND THERE W OULD HAVE BEEN APPRECIATION. SINCE THE ASSESSEE H AS VALUED THE INVESTMENT AT THE YEAR-END, HENCE, SETTING OF APPRE CIATION HAS BEEN COMPLETELY IGNORED. 7.2.2 ON THE OTHER HAND, IT IS THE CONTENTION OF T HE LD. AR THAT, AS PER RBI GUIDELINES, NON-SLR SECURITIES ARE AVAILABLE FOR SA LE AND ARE REQUIRED TO BE VALUED AT MARKET VALUE. THE CBDT VIDE CIRCULAR NO . 599 DATED 24.04.1991 CLARIFIED THAT SECURITIES HELD BY BANKS MUST BE REG ARDED AS THEIR STOCK-IN-TRADE AND THE CLAIM OF LOSS, IF DEBITED IN BOOKS OF ACCOU NT, SHOULD BE GIVEN THE SAME TREATMENT AS IS NORMALLY GIVEN TO THE STOCK-IN-TRAD E AND BANKS ARE STATUTORILY REQUIRED TO PREPARE THEIR STATEMENT OF AFFAIRS AS P ER FORMAT AND PRINCIPLES OF BANKING REGULATION ACT, AS PER WHICH, THEY ARE REQU IRED TO SHOW VALUE OF SHARES/SECURITIES AT COST OR MARKET VALUE UNDER THE HEAD 'INVESTMENT'. IN THE INSTANT CASE, BALANCE SHEET AND PROFIT & LOSS A/C I S PREPARED BY FOLLOWING THE STATUTORY GUIDELINES AND REAL INCOME IS BROUGHT TO TAX. ACCORDING TO THE ID. AR, THE APPELLANT HAD IN THE PAST ALSO CREATED-THE DEPR ECIATION FLUCTUATION FUND TO SAFEGUARD THE LOSS IN FUTURE. THE OPENING BALANCE O F THE SAID DEPRECIATION FLUCTUATION FUND WAS RS.115.10 LACS AS ON 1.4.2008. THUS, THIS IS NOT THE FIRST TIME THAT THE CLAIM IS MADE. 7.2.3 SO FAR AS THE FINDING OF THE AO THAT DE PRECIATION ON SECURITIES WAS AVAILABLE ON GOVT. SECURITIES AND NOT ON MUTUAL FUND UNITS, THE LD. AR SUBMITTED THAT, THE AO HAS FAILED TO APPRECIATE THE ACCOUNTING PRINCIPLE THAT THE VALUATION OF EVERY STOCK/ASSET HAS TO BE DONE ON THE LAST DAY OF THE ACCOUNTING YEAR IN THE CASES OF THE BANKING COMPANY SO AS TO ARRIVE AT A CORRECT WORTH OF THE BANK AT THE END OF ACCOUNTING YEAR. IN THIS CONNECTION, THE LD. AR RELIED UPON THE DECISION OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. RAJKOT DIST. CO-OPERATIVE BANK LTD. HAS DIRECTED TO ALLOW ANY PREMIUM PAID ON INVESTMENT [MORE THAN THE COST] DURING THE MATURITY PERIOD OF SECURITIES THOUGH IT IS NOT PART OF STOCK IN TRADE. THE LD. AR ALSO RELIED ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 18 - UPON THE DECISIONS RENDERED IN THE CASES OF CIT VS. VIJAYA BANK 40 TAXMANN.COM 92, CIT VS. BANK OF BARODA 129 TAXMAN 7 16 (BOM), KARNATAKA BANK LTD. VS. CIT TAXMANN.COM 150 (SUPRA) TO HIGHLI GHT THE FACT THAT, NOWHERE IT HAS BEEN MENTIONED THAT DEPRECIATION IS AVAILABL E ON GOVERNMENT SECURITIES AND NOT ON MUTUAL FUNDS. 7.2.4 AS REGARDS THE ALLEGATION OF THE AO THAT THE APPELLANT HAS VALUED ITS INVESTMENT ONLY AT THE YEAR-END AND HENCE, SETTING- OFF OF APPRECIATION IN THE INVESTMENT DURING THE YEAR HAS COMPLETELY BEEN IGNO RED, THE LD. AR OF THE APPELLANT SUBMITTED THAT, THE OBSERVATION OF THE AO IS TOTALLY ERRONEOUS IN AS MUCH AS THE VALUE OF INVESTMENT AT THE END OF THE Y EAR REFLECTS THE 'REALIZABLE VALUE', I.E., VALUE AT WHICH THIS INVESTMENT CAN BE SOLD/REDEEMED AT THAT POINT OF TIME. THEREFORE, THE SAID REALIZABLE VALUE IS AL WAYS A NET RESULT OF ALL THE APPRECIATION/DEPRECIATION IN INVESTMENT HAPPENED DU RING THE YEAR. FOR EXAMPLE, AN INVESTMENT MADE FOR RS. 100/- IS HAVING THE MARKET VALUE OF RS.150/- AT THE MIDDLE OF THE YEAR AND RS. 90/- AT THE END OF THE YEAR. ACCORDING TO THE AO, THE APPELLANT HAS FIRST TO PRO VIDE FOR APPRECIATION IN INVESTMENT AT THE MIDDLE OF THE YEAR AT RS. 50 (150 -100) AND THEREAFTER, DEPRECIATION IN VALUE OF RS. 60(150-90) HAS TO BE S ET-OFF AGAINST PREVIOUS APPRECIATION, I.E., RS. 50. AND NET DEPRECIATION T O THE EXTENT OF RS. 10 CAN ONLY BE ALLOWED. HOWEVER, IN THE INSTANT CASE, THE APPEL LANT HAS DIRECTLY CLAIMED RS.10 AS DEPRECIATION, WHICH IS NET RESULT OF APPRE CIATION / DEPRECIATION HAPPENED DURING THE YEAR. THEREFORE, THE AO HAS TO TALLY MISUNDERSTOOD THE PRINCIPLE OF ACCOUNTANCY AND HENCE, THE ALLEGATION IS NOT SUSTAINABLE. THE AR OF THE APPELLANT ALSO SUBMITTED THAT 'PROVISION OF SECTION 94(7) OF THE ACT (DIVIDEND STRIPPING) IS NOT APPLICABLE TO THE APPEL LANT AND REQUESTED TO ALLOW THE CLAIM OF DEPRECIATION AS PER AUDITED FINANCIAL STATEMENT. 7.2.5 I HAVE CAREFULLY ASSESSED THE ABOVE SITUATION . THE HON. SUPREME COURT IN THE CASE OF UNITED COMMERCIAL BANK VS CIT (1999) 240 ITR 355 HAS HELD THAT, PREPARATION OF THE BALANCE SHEET BY A BANK GO VERNED BY THE PROVISIONS OF THE BANKING REGULATIONS ACT, 1949, IN ACCORDANCE WI TH STATUTORY PROVISIONS WILL NOT DISENTITLE THE APPELLANT FROM SUBMITTING T HE INCOME TAX RETURN ON ITS REAL TAXABLE INCOME IN ACCORDANCE WITH TH E METHOD OF ACCOUNTING IT ADOPTS CONSISTENTLY AND REGULARLY. FOR THE PURPOSE OF INCOME TAX, WHAT IS TO BE TAXED IS REAL INCOME, WHICH IS TO BE DEDUCTED ON TH E BASIS OF THE ACCOUNTING SYSTEM REGULARLY MAINTAINED BY THE ASSESSEE. THE ME THOD BY WHICH THE ASSESSEE BANK IS VALUING SECURITIES BY TREATING THE M AS STOCK IN TRADE IS IN ACCORDANCE WITH THE ACCOUNTING PRINCIPLES AND THE R EVENUE ITSELF WAS TREATING THE PROFIT ON MATURITY OF SUCH SECURITIES AS BUSINE SS INCOME. AGAIN, AS PER RBI GUIDELINES, NON-SLR SECURITIES ARE AVAILABLE FOR SA LE AND ARE REQUIRED TO BE VALUED AT MARKET VALUE. THE CBDT VIDE CIRCULAR NO. 599 DATED 24.04.1991 CLARIFIED THAT SECURITIES HELD BY BANKS MUST BE REG ARDED AS THEIR STOCK-IN-TRADE AND THE CLAIM OF LOSS, IF DEBITED IN BOOKS OF ACCOU NT, SHOULD BE GIVEN THE SAME TREATMENT AS IS NORMALLY GIVEN TO THE STOCK-IN-TRAD E AND BANKS ARE STATUTORILY REQUIRED TO PREPARE THEIR STATEMENT OF AFFAIRS AS P ER FORMAT AND PRINCIPLES OF BANKING REGULATION ACT. IN THE INSTANT CASE, BALAN CE SHEET AND PROFIT & LOSS A/C IS PREPARED BY FOLLOWING THE STATUTORY GUIDELIN ES AND REAL INCOME IS BROUGHT TO TAX. THEREFORE, THE AO IS NOT RIGHT IN DISALLOWING THE DEPRECIATION ON INVESTMENT CLAIMED BY THE APPELLANT. HENCE, THE DISALLOWANCE OF RS.1,07,50,000/- MADE BY THE AO IS DIRECTED TO BE D ELETED. ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 19 - 15. HEARD LD. COUNSEL FOR BOTH THE PARTIES. WE FIN D THAT HONBLE JURISDICTION HIGH COURT IN CASE OF RAJKOT DISTRICT CO-OP. BANK LTD. (SUPRA) HAS HELD TO ALLOW ANY PREMIUM PAID ON INVES TMENT TURNING OUT TO BE MORE THAN THE COST THEREOF DURING THE MATURITY PERIOD OF SECURITIES ALTHOUGH NOT FORMING PART OF S TOCK IN TRADE. THE ASSESSEE ACCORDINGLY SUBMITS THAT INVESTMENTS I N THE IMPUGNED MUTUAL FUNDS IS TO BE ACCORDINGLY VALUED O N THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR. IT FURTHER ST ATES TO HAVE INVESTED IN AN INSTITUTION CREATED BY LAW I.E. MUTU AL FUNDS UNIT OF UNIT TRUST OF INDIA NOT CREATED BY PRIVATE OR CO-OP ERATE SECTOR. ITS CASE THEREFORE IS THAT DEPRECIATION/LOSS IN THE VALUE OF INVESTMENT IS ALLOWABLE UNDER RBI DIRECTIONS AND AB OVE STATED CASE LAW. WE FIND THAT HONBLE KARNATAKA HIGH COUR T IN CASE OF CIT VS. VIJAYA BANK (2013) 40 TAXMANN.COM 92 UPHOLD S TRIBUNALS ACTION THEREBY OBSERVING THAT IT WAS COR RECT IN ALLOWING DEPRECIATION CLAIMED ON HELD TO MATURITY INVESTMENT BY TREATING IT AS STOCK IN TRADE DESPITE THE SAME NOT BEING TRADED ON A REGULAR BASIS IN ACCORDANCE WITH RBI AND CBDT CIRCULARS. S IMILARLY, HONBLE BOMBAY HIGH COURT IN CIT VS. BANK OF BARODA 129 TAXMAN 716 OBSERVES THAT THE SAID BANK VALUED ITS I NVESTMENTS IN THE FORM OF SHARES AND SECURITIES AT COST OR MAR KET PRICE, WHICHEVER IS LOWER. AND THAT IT WAS ENTITLED TO DE DUCTION ON ACCOUNT OF DEPRECIATION IN VALUE OF INVESTMENTS INV OLVING DEBITING OF LOSS TO P&L ACCOUNT AS REFLECTED IN THE NATURE O F PROVISION FOR LIABILITY IN BALANCE SHEET AND IN CASE OF SHARES AN D SECURITIES VALUED AT COST ON ASSETS SIDE. THE REVENUE DOES NO T REFER TO ANY CASE LAW TO THE CONTRARY. WE DRAW SUPPORT THEREFRO M FOR ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 20 - UPHOLDING THE CIT(A)S FINDINGS ACCORDINGLY. THIS THIRD GROUND STANDS DECIDED IN ASSESSEES FAVOUR. REVENUES APPEAL ITA NO.558/RJT/2014 IS DISMISSED. A.Y. 2010-11 REVENUES APPEAL ITA NO.559/RJT/2014 & ASSESSEES C.O. NO.5/RJT/15. 16. THE REVENUES FIRST SUBSTANTIVE GROUND SEEKING TO REVIVE ADDITION OF ACCRUED INTEREST ON NPA ACCOUNT OF RS.2 3,49,786/- IS FOUND TO BE COVERED BY OUR CORRESPONDING FINDING IN A.Y. 2007-08 ON AN IDENTICAL ISSUE DECIDED THEREIN IN PRECEDING PARAGRAPHS. THIS GROUND ALSO FOLLOWS SUIT. 17. THE REVENUES SECOND SUBSTANTIVE GROUND ASSAILS CORRECTNESS OF THE LOWER APPELLATE ORDER RESTRICTIN G SECTION 14A R.W.R. 8D DISALLOWANCE OF RS.1,51,56,596/- TO THAT @ 1% OF THE EXEMPT INCOME COMING TO RS.1,70,054/-. THE ASSESSE ES CROSS OBJECTION ON THE OTHER HAND SEEKS TO DELETE THE ENT IRE DISALLOWANCE. WE COME TO THE RELEVANT FACTS AS DIS CUSSED IN THE CIT(A)S ORDER AS UNDER: 4.2 I HAVE PERUSED THE ASSESSMENT ORDER AND THE WR ITTEN SUBMISSION FILED BY THE ID. AR. 4.2.1 ON PERUSAL OF THE ASSESSMENT ORDER AND THE RE CORDS, IT IS SEEN THAT, THE APPELLANT BANK HAD EARNED DIVIDEND INCOME OF RS. 17 ,00,541/- FROM INVESTMENT IN UTI MID CAP FUNDS ETC AND CLAIMED THE SAID INCOME AS EXEMPT U/S 10 OF THE ACT. THE AO DISALLOWED RS. 1,51,56,59 6/-, U/S. 14A BY APPLYING THE FORMULA PRESCRIBED IN RULE 8D OF THE IT RULES, 1962. IN THE SAID WORKING THE INTEREST EXPENDITURE OF RS. 7,05,55,708/- DEBIT ED TO THE P&L ACCOUNT WAS ADOPTED. THUS, ACCORDING TO THE AO, THE INTEREST PA ID ON DEPOSIT, HAD DIRECT NEXUS WITH THE EARNING OF EXEMPT DIVIDEND INCOME. O N THE OTHER HAND, IT IS THE CONTENTION OF THE ID. AR THAT, AS PER THE LANGUAGE OF SECTION 14A, THE AO CAN DISALLOW ONLY EXPENDITURE 'INCURRED' BY THE ASSESSE E IN RELATION TO THE EXEMPT INCOME. THE WORD 'INCURRED' CLEARLY IMPLIES THAT IT MUST BE SHOWN AS A FACT ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 21 - THAT SOME EXPENDITURE WAS IN FACT INCURRED TO EARN EXEMPTED INCOME. SECTION 14A HAS NOT CONFERRED SPECIFIC POWER TO THE AO TO A SSUME THAT A PART OF THE EXPENDITURE MUST HAVE NECESSARILY BEEN INCURRED TO EARN EXEMPTED INCOME WHICH HE CAN ESTIMATE AND DISALLOW. THE AO HAS NO A UTHORITY TO ESTIMATE THE EXPENDITURE WHICH THE APPELLANT WOULD HAVE, IN HIS OPINION, INCURRED IN RELATION TO THE EXEMPTED INCOME. THE WORD 'INCURRED ' SIGNIFIES THAT THE EXPENDITURE MUST HAVE BEEN ACTUALLY INCURRED, NOT N OTIONALLY'. HE FURTHER REQUIRES ESTABLISHING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN R ELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN SUPPORT OF THIS CONTENTION, THE ID. AR RELIED JUDICIAL PRONOUNCEMENTS. 4.2.2 THE SECOND LIMB OF THE APPELLANT'S ARGUMENT I S THAT, THE ENTIRE INVESTMENT IN UTI MUTUAL FUNDS WERE MADE FROM THE S HARE CAPITAL AND FREE RESERVES, WHICH ARE INTEREST FREE FUNDS OF THE APPE LLANT. (IN SUPPORT OF WHICH THE APPELLANT PRODUCED A COPY OF ITS BALANCE SHEET, WHICH IS PLACED ON RECORD). THEREFORE, SINCE THE INVESTMENTS WERE FROM OWN FUND S AND NOT FROM BURROWED FUNDS ON WHICH INTEREST WAS PAID, AS PER THE NORMS LAID DOWN BY THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. GUJARA T STATE FERTILIZERS & CHEMICALS LTD. (2013) 217 TAXMAN 343 (GUJARAT) WHER EIN IT WAS HELD THAT 'NO AD-HOC DISALLOWANCE OF DIVIDEND INCOME U/S 14A WAS WARRANTED WHERE THE ASSESSEE HAD SUFFICIENT FUNDS AVAILABLE WITH IT , WHICH WAS MORE THAN AMOUNT IT INVESTED FOR EARNING DIVIDEND INCOME', TH E APPELLANT SUBMITTED THAT, THE DISALLOWANCE MADE BY THE AO IS ON WRONG FOOTING AND SOUGHT ITS DELETION. 4.2.3 I HAVE PERUSED THE ABOVE SUBMISSIONS AND ALSO GONE THROUGH THE RECORDS OF THE APPELLANT. IT IS SEEN FROM THE PROFI T AND LOSS ACCOUNT THAT THE BANK HAD RECEIVED INTEREST OF RS 11.61 CRORES FROM ADVANCES ETC. AS AGAINST WHICH THE BANK HAS PAID INTEREST OF RS 7.05 CRORES RESULTING INTO POSITIVE INTEREST INCOME TO THE TUNE OF RS 4.56 CRORES WHICH IS FROM THE APPLICATION OF BANK'S OWN FUND. IN THE WORKING OF DISALLOWANCE U/S . 14A, AS PER RULE 8D, THE AO HAD TAKEN INTO ACCOUNT THE ENTIRE INTEREST EXPEN DITURE, WHICH IMPLIES, THAT THE APPELLANT HAD BORROWED ALL ITS FUNDS TO MAKE IN VESTMENT IN MUTUAL FUNDS, RESULTING INTO EARNING OF EXEMPT INCOME. HOWEVER FR OM THE FACE OF THE RECORDS, THIS IS VIRTUALLY NOT CORRECT. THE APPELLANT HAD SU FFICIENT INTEREST FREE FUNDS AND RESERVES WHICH WERE DEPLOYED TO MAKE THE INVESTMENT S, AND HENCE, THE .ELEMENT OF DEPLOYING BORROWED FUNDS TO MAKE INVEST MENTS DOES NOT EXIST. THERE IS A DIRECT DECISION OF THE HON. GUJARAT HIGH COURT (WHICH IS REPRODUCED SUPRA), WHICH UPHOLDS THIS VIEW. FURTHER, IN THE CA SE OF CIT VS WINSOME TEXTILES INDUSTRIES LTD (204 ITR 319), THE HON. COU RT HAD DECIDED THAT, WHEN THE SHARES WERE ACQUIRED BY WAY OF OWN FUNDS AND NO INTEREST WAS INCURRED AS THERE WAS NO BORROWED FUNDS TO MAKE INVESTMENTS, THERE DOES NOT ARISE ANY DISALLOWANCE U/S. 14A. ALSO, IN THE CASE OF CIT VS HERO CYCLES LTD., (323 ITR 518), THE HON. COURT HAD HELD THAT, THE DISALLO WANCE U/S. 14A IS NOT PERMISSIBLE WHERE NO NEXUS BETWEEN THE EXPENDITURE INCURRED AND INCOME IS ESTABLISHED. THEREFORE, IN THE PRESENT CASE, S INCE THE APPELLANT HAD NOT UTILIZED BORROWED FUNDS IN MAKING INVESTMENTS IN ORDER TO EARN DIVIDEND INCOME, THE AO, BY DISALLOWING EXPENDITURE ALMOST 10 TIMES MORE THAN THE ACTUAL DIVIDEND INCOME, HAD ACTUALLY ERRED IN ESTAB LISHING THE NEXUS BETWEEN THE DIVIDEND INCOME AND EXPENDITURE INCUR RED ON EARNING SUCH DIVIDEND INCOME. THEREFORE, TO THAT EXTENT IT CAN BE SAID THAT THE INTEREST EXPENDITURE HAS BEEN NATIONALLY WORKED OUT BY THE A SSESSING OFFICER. ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 22 - 4.2.4 SECONDLY, THERE IS NO REASONABLENESS IN ESTIM ATING THE EXPENDITURE WHICH 'IS MORE THAN THE ACTUAL INCOME. THE HON. DEL HI ITAT IN THE CASE OF GILLETTE GROUP INDIA P. LTD VS ACIT (16 ITR TRIB 57 (DELHI), HAD HELD THAT THE DISALLOWANCE U/S. 14A CANNOT EXCEED THE EXPENDITURE ACTUALLY CLAIMED BY THE APPELLANT. 4.2.5 RECENTLY, THE MUMBAI BENCH OF-THE TRIBUNAL, I N THE CASE OF RELINNCE INDUSTRIES LTD VS ADDL. CIT [2012] 79 DTR (TRIB) 31 5 (MUM), HAS RENDERED A VERY, SIGNIFICANT JUDGEMENT RELATING TO THE DISALLO WANCE U/S. 14A OF THE I T ACT, THE HON. ITAT HELD THAT, AS THE ASSESSEE'S OWN FUND S WERE FAR IN EXCESS OF THE INVESTMENT MADE BY IT, WHICH YIELDED EXEMPT INC OME, IT HAS TO BE PRESUMED THAT THE INVESTMENTS HAD COME FROM INTERES T FREE FUNDS AVAILABLE WITH THE ASSESSES AND THEREFORE, THE DISALLOWANCE U /S. 14A MADE BY THE AO IN RESPECT OF INTEREST ON BORROWINGS COULD NOT BE S USTAINED. WHILE DISMISSING THE APPEAL OF THE DEPARTMENT, THE HON.TRIBUNAL HAD RELIED UPON THE JUDGEMENT OF THE HON. BOMBAY HIGH COURT IN THE .CASE OF CIT V S RELIANCE UTILITIES AND POWER LTD (2009) 313 ITR 340 (BOM), WHEREIN IT WAS HELD THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST FREE AND OVERDRAFT AN D / OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT THE INVESTMENTS WOULD BE OUT OF THE INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY. IF T HE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET, THE INVESTMENTS AND THEREFORE, NO PART OF THE INTEREST ON THE BORROWINGS COULD BE DISALLOWED ON THE BASIS THAT TH E INVESTMENTS WERE OUT OF INTEREST BEARING FLUIDS. IT IS THUS QUITE CLEAR FRO M THE ABOVE DECISIONS OF THE HON. BOMBAY HIGH COURT AND ITAT MUMBAI THAT, NO DIS ALLOWANCE IS WARRANTED, NOTWITHSTANDING THE PROVISIONS OF RULE 8 D WHERE THE ASSESSOE'S OWN FUNDS ARE IN EXCESS OF THE INVESTMENTS MADE BY IT WHICH YIELDED EXEMPT INCOME. THEREFORE, SINCE THE APPELLANT WAS HAVING S UFFICIENT INTEREST FREE FUNDS, IT IS REASONABLY ACCEPTABLE THAT SUCH INTERE ST FREE FUNDS WENT INTO INVESTMENTS, WHICH GENERATED EXEMPT INCOME. THEREFO RE, NO DISALLOWANCE CAN BE MADE U/S. 14A AS NO INTEREST, BEARING FUND HAS B EEN DEPLOYED TO EARN EXEMPT DIVIDEND INCOME AND NO EXPENDITURE HAS BEEN INCURRED TO EARN EXEMPT DIVIDEND INCOME AND THE AO HAD NOT DEMONSTRATED ANY NEXUS BETWEEN THE EARNING OF EXEMPT INCOME AND EXPENDITURE INCURRED F OR SUCH INCOME. 4.2.6 HAVING GIVEN THE ABOVE FINDING, IT CANN OT BE SAID THAT THE APPELLANT HAD NOT INCURRED ANY ADMINISTRATIVE EXPENDITURE IN EARNING EXEMPT INCOME SINCE THE OFFICE AND ADMINISTRATIVE MACHINERY WOULD HAVE A SMALL INVOLVEMENT IN MANAGING THE INVESTMENTS OF THE APPELLANT. THERE FORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON. CALCUTTA HIGH COURT IN THE CASE OF EIH ASSOCIATED HOTELS LTD (126 TTJ 246), IT IS HELD THA T, 1% OF THE EXEMPT DIVIDEND INCOME, WOULD GO TOWARDS INCURRING ADMINISTRATIVE E XPENSES AND HENCE, THE DISALLOWANCE MADE BY THE AO U/S 14A IS RESTRICTED T O 1% OF THE EXEMPT DIVIDEND INCOME. THEREFORE, THE DISALLOWANCE IS RES TRICTED TO RS. 1,70,054/-. AO IS DIRECTED TO DELETE, THE REMAINING DISALLOWANC E. IN THE RESULT, THIS GROUND IS PARTLY ALLOWED. 18. IT HAS COME ON RECORD THAT THE ASSESSING OFFICE R COMPUTED PROPORTIONATE INTEREST DISALLOWANCE OF RS.1,39,63,8 04/- UNDER RULE 8D(2)(II) AND A SUM OF RS.11,92,792/- @0.5% OF AVERAGE INVESTMENTS UNDER CLAUSE (III) THEREOF; RESPECTIVEL Y TOTALING TO ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 23 - RS.1,51,56,596/-. THERE CAN HARDLY BE ANY DISPUTE ABOUT APPLICATION OF RULE 8D SINCE THE IMPUGNED ASSESSMEN T YEAR IS 2010-11. THE LOWER APPELLATE FINDINGS READ THAT AS SESSEES INTEREST INCOME OF RS.11.61 CRORES IS MUCH MORE THA N INTEREST EXPENDITURE OF RS.7.05 CRORES. THIS MAKES THE CIT( A) TO HOLD THAT IT IS A CASE OF AVAILABILITY OF SUFFICIENT INTEREST FREE FUNDS AND CAPITAL AND RESERVES. HE ALSO FOLLOWED HONBLE JUR ISDICTION HIGH COURT DECISION (SUPRA) TO THE VERY EFFECT IN DECIDI NG THE INTEREST DISALLOWANCE ISSUE IN ASSESSEES FAVOUR. THE REVEN UE DOES NOT REBUT BOTH THE IMPUGNED FACTUAL AS WELL AS LEGAL FI NDINGS. WE ACCORDINGLY CONFIRMED THE CIT(A)S ORDER KEEPING IN MIND THE CIT(A) DISCUSSION ON FACTS AND LAW. 19. THIS LEAVES US WITH THE ISSUE OF ADMINISTRATIVE EXPENDITURE DISALLOWANCE. THE CIT(A) RESTRICTS THE SAME TO 1% OF THE EXEMPT INCOME (SUPRA). WE FIND THAT RULE 8D(2)(III) ENVIS AGES THE SAME TO BE .5% OF THE AVERAGE VALUE OF THE INVESTMENT IN QUESTION. THE CIT(A)S FINDINGS UNDER CHALLENGE DO NOT TAKE INTO ACCOUNT THIS SPECIFIC CLAUSE. WE ACCEPT ASSESSEES ARGUMENTS AC CORDINGLY AND DIRECT THE ASSESSING OFFICER TO PROCEED AFRESH FOR NECESSARY COMPUTATION OF THE IMPUGNED DISALLOWANCE. THE REVE NUES SECOND SUBSTANTIVE GROUND FAILS. SO IS THE OUTCOME OF ITS APPEAL ITA NO.559/RJT/2014. THE ASSESSEES CROSS OBJECTIO N NO.5/RJT/2015 IS ACCEPTED FOR STATISTICAL PURPOSES. A.Y.2011-12 REVENUES APPEAL ITA NO.542/RJT/2014 20. A PERUSAL OF CASE FILE REVEALS THAT THE REVENUE S TWIN SUBSTANTIVE GROUNDS SEEK TO REVIVE ADDITION OF ACCR UED INTEREST ON ITA NOS.540, 541, 558, 559 & 542/RJT/2014 & C.O. NO. 5/RJT/2015 - 24 - NPA ACCOUNT OF RS.44,65,000/- AND SECTION 14A DISAL LOWANCE OF RS.13,45,281/-; RESPECTIVELY. BOTH PARTIES STATED THE OUTSET THAT THE SAME ARE COVERED BY OUR FINDINGS ON BOTH THE IS SUES IN PRECEDING ASSESSMENT YEARS FORMING PART OF THIS VER Y ORDER. WE APPRECIATE THIS FAIR SUBMISSION AND DECIDE BOTH ISS UES IN ASSESSEES FAVOUR. REVENUES APPEAL ITA NO.542/RJT /14 IS REJECTED. 21. THESE FIVE REVENUES APPEALS ITA NOS. 540, 541, 558, 559 & 542/RJT/2014 ARE DISMISSED AND ASSESSEES CROSS OBJ ECTION NO.5/RJT/2015 IN ITA NO.559/RJT/2014 IS ALLOWED FOR STATISTICAL PURPOSES. ORDERED ACCORDINGLY. PRONOUNCED IN THE OPEN COURT ON THIS THE 20 TH DAY OF JANUARY, 2016. SD/- SD/- (MANISH BORAD) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 20/01/2016 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKOT