The Gujarat State Co.Op.Bank Ltd., Ahmedabad V. The Pr.CIT-1, Ahmedabad

ITA 703/AHD/2019

AI Insights

The case involves The Gujarat State Co-op. Bank Ltd. appealing against the order of the Principal Commissioner of Income-Tax-I, Ahmedabad, which had revised the assessment order under Section 263 of the Income-Tax Act, 1961. The revision was based on the grounds that the original assessment order was erroneous and prejudicial to the interests of the Revenue concerning three issues: the allowance of a claim for provision for diminution in the value of investments, deductions for amounts routed through specific funds instead of the Profit & Loss account, and the allowance of leave encashment which was not paid before the due date of filing the return. The Tribunal upheld the revision concerning the leave encashment issue but set aside the revisions related to the other two issues, finding that the original assessment had correctly allowed the claims in accordance with applicable guidelines and judicial decisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 108252 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 16-11-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 21-04-2019
• Other Referred Cases: CIT Vs. Rajkot Dist. Co. Op. Bank Ltd.
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Depreciation; Cost of acquisition; Wrong claim; Set aside
• Section: 37; 263; 143(3); 37(1); 43

Judgement Text

, ‘‘स ’’ । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE MRS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND MRS. MADHUMITA ROY, JUDICIAL MEMBER ITA No. 703/Ahd/2019 /Assessment Year: 2014-15 The Gujarat State Co-op. Bank Ltd., Sardar Vallabhai Patel Sahakar Bhavan, Nr. Shashtrinagar BRTS Bus Stand, Ankur Road, Ahmedabad Gujarat-380013 PAN : AAAAT 9774 F Vs. Principal Commissioner of Income-Tax-I, Pratyaksh Kar Bhavan, Ahmedabad-380015 / (Appellant) / (Respondent) Assessee by : Shri Tushar Hemani, Sr. Advocate & Shri Parimalsinh B. Parmar, AR Revenue by : Shri A.P. Singh, CIT /Date of Hearing : 17.11.2022 /Date of Pronouncement: 15.02.2023 ेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order of learned Principal Commissioner of Income-Tax-1, Ahmedabad [hereinafter referred to as “Ld. Pr. CIT” for short] dated 22.03.2019 passed in exercise of his revisionary jurisdiction under Section 263 of the Income-Tax Act, 1961 [hereinafter referred to as "the Act" for short] for Assessment Year (AY) 2014-15. 2. The assessee has raised the following ground:- “On the facts and in the circumstances of the case it is most respectfully submitted that the Ld. Principal Commissioner of Income Tax-1 has erred in law and on facts in holding that the order passed u/s 143(3) of the Income Tax Act, 1961 dated 29.11.2016 as erroneous and prejudicial to the interest of revenue and directing the Ld. Assessing Officer to make fresh assessment by passing the order u/s 263 of the Income Tax Act, 1961 dated 22.03.2019.” 2 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 3. As transpires from the order of the Ld. Pr. CIT, the assessment order passed by the Assessing Officer was found to be erroneous causing prejudice to the Revenue on account of three issues allegedly not properly examined by the Assessing Officer:- (i) Assessee’s claim of provision for diminution in the value of investment to the tune of Rs.19,14,34,500/-; (ii) Assessee’s claim of deduction of amounts reduced directly from Rural Development Fund and Sahkar Prachar Fund of Rs. 1,81,46,538/- and Rs.5,00,000/- respectively without routing the same through P&L account; and (iii) Leave encashment of Rs.9,63,399/- claimed by the assessee but which was not paid before the due date of filing of return of income for the year and hence was required to be disallowed. 4. At the outset itself, learned Counsel for the assessee conceded that with respect to the issue of leave encashment being allowed to the assessee despite the same being not allowable under law, he conceded that the order of the Ld. Pr. CIT finding error in this regard in the assessment order was correct. 5. Therefore, vis-à-vis the issue of assessment order being erroneous on account of the Assessing Officer having allowed the assessee an otherwise ineligible claim of leave encashment amounting to Rs.9,63,399/-, we uphold the order of the Ld. Pr. CIT on account of the same. 6. With respect to the issue of claim of provision for diminution in the value of investments of Rs.19,14,34,500/-, the facts, as derived from the order of the Ld. Pr. CIT before us are that the assessee, being a State Cooperative Society engaged in banking related activities, had made above claim with respect to 3 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 provision for diminution in the value of its investments and the same was allowed by the Assessing Officer. The Ld. Pr. CIT found the allowance of claim by the Assessing Officer to be not in accordance with RBI guidelines and the CBDT circular issued in this regard. The assessee, we have noted, and it was brought to our notice by the learned Counsel for the assessee during the course of hearing before us also, had explained to the Assessing Officer during the assessment proceedings and even to the Ld. Pr. CIT in the revisionary proceedings that the claim of provision for diminution in the value of investment was made in accordance with RBI guidelines and CBDT circular in this regard. It had been pointed out that the investment made by the assessee had been classified during the impugned year as Available For Sales (AFS), Held To Maturity (HTM) and Held For Trading (HFT); as per the RBI guidelines and in accordance with the said guidelines ,requiring the AFS portfolio of investment to be valued as at the end of the year on Mark to Market basis, the AFS portfolio of investments had been so valued and the resultant diminution in value of the same was accordingly provided for in the Books of the assessee. It had been pointed out that the assessee had adopted this prescribed classification of investments by RBI, during the impugned year itself and accordingly had valued both the opening and closing AFS investment in accordance with the method prescribed by RBI on Mark to Market basis resulting in diminution in value of these investments to the extent of Rs.2,84,44,000/- as at the beginning of the year and Rs.16,29,90,500/- as at the end of the year – amounting in all to the total diminution in the value of investments being to the tune of Rs.19,14,34,500/-. 7. It was also pointed out that as per RBI Circular No. 665 dated 05.10.1993 and CBDT Instruction No. 17 of 2008 dated 26.11.2008, the assessee was allowed to claim this provision of diminution in the value of investment made in accordance with the guidelines prescribed by the RBI. Various judicial decisions holding so were also brought to the notice of the Assessing Officer 4 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 and even to the Ld. Pr. CIT, including the decision of the Hon’ble jurisdictional High Court in the case of CIT Vs. Rajkot Dist. Co. Op. Bank Ltd., [2014) 43 taxmann.com 161 (Guj.). It was, therefore, pleaded before both the Ld. Pr. CIT and even before us that this issue of claim of provision for diminution in the value of investment to the tune of Rs.19,14,34,500/- had been examined in detail during the assessment proceedings by the Assessing Officer; the assessee had furnished all facts and basis for claim of the same, demonstrating the claim to be in accordance with RBI guidelines and CBDT circulars in this regard and also relevant judicial decisions and the Assessing Officer had allowed the claim taking a plausible view on the matter. 8. The Ld. Pr. CIT, we find, despite having been pointed out as above that the assessee’s claim was in accordance with the RBI guidelines/CBDT circulars and judicial decisions in this regard, has held to the contrary while finding the assessment order to be erroneous so as to cause prejudice to the Revenue. He has held the assessee’s claim was not in accordance with the RBI guidelines & CBDT circulars and the judicial decisions did not support the claim of the assessee and he held that being a provision the same was not allowable in law and ought to have been added back to the income of the assessee. We have perused the findings of the Ld. Pr. CIT in this regard at paragraph No. 3.1.2 of his under as under:- “3.1.2 It is noticed that the following points are relevant in dealing with the above issue and should have taken into consideration by the AO who failed to do so. The AO should have applied his mind after taking into consideration the RBI Guidelines, CBDT Circulars and certain Judicial decisions, discussed below briefly, for arriving at the correct conclusion regarding disallowance of "Provision for diminution in the value of investment" claimed by the assessee in its P&L A/c. (i) At the outset, it is pertinent to mention here that the judgment of the Hon'ble Apex Court in the case of United Commercial Bank vs. CIT 240 ITR 355 (SC) upon which reliance has been placed, only specifies that preparation of the balance sheet in accordance with the statutory 5 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 provision would not disentitle the assessee in submitting the income-tax return on the real taxable income in accordance with the method of accounting adopted by the assessee consistently and regularly. Besides, the judgment of Hon'ble Gujarat High Court in the case of CIT Rajkot-II vs. Rajkot Dist, Co. Op. Bank Ltd. Tax Appeal No.56 of 2013 (Guj.), upon which reliance has also been placed by the assessee, is regarding investment held till maturity, whereas the present assessee held it as Available for Sale Category. Hence the judgments relied upon by the assessee are not applicable, (ii) The assessee has debited an amount of Rs. 19,14,34,500/- in the Profit & Loss Account under the head of 'Provision for Diminution in Value of Investment' and claimed as expenses which is not actual expenditure and therefore does not seem to be allowable as business expenses. Had the assessee been following guidelines issued by RBI, it should have created reserve/provision in the balance sheet or added back the amount in the statement to total income to determine the real income. It may be mentioned that RBI's direction is only in the context of presentation of NPA/investment in the balance sheet of an NBFC/Banking Co. and has nothing to do with computation of taxable, income or accounting concepts. Income Tax Act and RBI direction operate in different domains. Nature of expenditure under the Income Tax Act cannot be conclusively determined by the manner in which accounts are presented in term of RBI guidelines. (iii) In facts, CBDT had issued Instruction No. 17/2008 dated 26/11/2008 wherein it is provided that as per RBI guidelines dated 16th October 2000, the investment portfolio of the bank is required to be classified under three categories viz. Held to Maturity (HTM), Held for Trading (HFT) and Available for Sales (AFS). Investments classified under HTNA category need not be marked to market and are carried at acquisition cost unless these are of more than face value, in which case the premium V should be amortized over the period remaining to maturity. In the case of HFT and AFT securities forming stock in trade of bank, the depreciation/ appreciation is to be aggregated scrip wise and only net deprecation, if any, is required, to be provided for in the accounts. (iv) On perusal of para 6.6 of Notes on account of Audit Report, it is noticed that till accounting year 2012-13, all investments in Government Securities have been treated as permanent investments by the Bank. However, the Bank has been trading in such securities occasionally. For current year, the Bank has decided to classify certain Government Securities having the Book Value of Rs.411.06crore (face value Rs.420 Crore) as Available for Sales (AFS) under current investment. 6 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 Similarly, in para 6,7 of Notes on account, it has been reported that the bank had provided Rs. 19,14,34,500/- for depreciation in the value of investment under AFS as on 31-03-2014 by charging the following depreciation (notional loss) in value to profit & Loss A/c a.Upon transfer to AFS at the beginning of the year - Rs. 2,84,44,000/ b. At the year end Rs. 16,29,90,500/- On perusal of above, it seems that the assessee has valued the investment at mark to market rate at the beginning of year at Rs.2,84,44,000/- and at the year end at Rs.76,29,90,500/-. The total of these twos, i.e., Rs.19,14,34,500/- has been shown as Provision for Diminution in Value of Investment. It is also observed that the assessee has for first time classified the investment in Government Securities in HTM (Held to Maturity) and AFS (Available for Sales) and prior to this, the entire investment was in HTM treating it as permanent investment. It is not clear as to how this manner of classification of investment and the respective valuation is commensurate with the existing guidelines. The respective note on account deals with this issue ambiguously and the same has remained to be examined by the Assessing Officer. (v) Thus, it emerges from above discussion that the Assessee Bank has apparently not classified the investment portfolio of the bank as required by the RBI guidelines under three categories viz. Held to Maturity (HTM), Held for Trading (HFT) and Available for Sales (AFS) and not also followed the guideline of RBI/CBDT's Circular No.665 dated 05th October 1993 and CBDT Instruction No. 17 of 2008 dated 26/11/2008 and also the norms as provided in RBI's circular dated 02/07/2007 in terms of accounting treatment of the Investment due to which claim of Rs.1914,34,500/- as provision remains unjustified. (vi) It is further observed from records that the assessee has made provision for premium amortizations of Rs.2,74,27,223/- considering securities as "Held for Maturity" and made another provisions for premium amortizations at Rs.19,14,34,500/- on the basis of Marked to Market which has been debited in Profit & Loss Account prepared for the year under consideration. The assessee bank is writing off premium paid on purchase of securities over the remaining life of security and this is being allowed also. It seems that once the premium paid is written off, the same security cannot be revalued again on the same date to claim loss on revaluation because under any circumstances, bank will get principal amount on its maturity. Both the benefits cannot be claimed simultaneously i.e. writing off premium and claiming notional loss also on revaluations on year end. This matter has also remained to be examined by the Assessing Officer. 7 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 (vii) As per section 37 of the Income-tax Act, any provision cannot be deducted from income. With reference to the valuation of Securities, the assessee in its reply claimed that, it followed the guidelines issued by RBI for classification and valuation of investment, in this backdrop, it is worthwhile to mention here that as held by the Hon'ble Apex Court in the case of Southern Technologies Ltd., vs. JCIT, 320 ITR 577, RBI's directions have nothing to do with the accounting treatment or taxability of 'income' under the Income-tax Act as the two operate in different fields. The Hon'ble Supreme Court has further held that the income-tax Act is a tax on 'real income1 i.e. the profit arrived at on commercial principles subject to the provisions of the said Act. Accordingly, the provision for 'Diminution of value in investment' is only notional loss/expenses and, therefore, required to be added back to the total income. In accordance with this judgment, it is very, clear that provision could be created in pursuance of prudential norms prescribed by RBI, but this should not have become secure for making wrong claims under the Income tax Act. The amount in question was actually not the business loss during the year but only a notional provision of loss for diminution of the value and therefore the same cannot not be allowed as deduction. The Assessing Officer failed to take notice of this decision of the Hon'ble Supreme Court. In view of the above, it appears that the provision on ‘Diminution in value of investment' made by the assessee is not in accordance with RBI Guidelines. Further, the manner of valuation of security also remains ambiguous. Under the circumstances, the Assessing Officer ought to have examined the allowbility of above provision in the background of RBI guidelines, CBDT Circulars and relevant provisions of income tax Act, which he had failed to do. Under the circumstances, the alone issue needs to be examined properly in the light of the RBI Guidelines, CBDT circulars and relevant provisions of the Income-tax Act and consider the matter of allowably of 'Provision for diminution in value of asset' in accordance with law, adopting prescribed procedure and after going through the relevant material related to the issue.” 9. On going through the above, we have noted that the Ld. Pr. CIT’s finding that the assessee’s claim of provision for diminution in the value of investment was not in accordance with the RBI guidelines and CBDT circulars, is contrary to his own findings recorded at paragraph 3.1.2 (iii) of his order. In paragraph 3.1.2(iii) of his order, he himself notes that as per the RBI guidelines all investments are to be classified as AFS, HTM and HFT; and the investments 8 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 classified as AFS are to be valued at Mark to Market and the depreciation/appreciation in their value is to be accounted for scrip wise; that the CBDT Instruction No. 17/2008 provides for allowance of any claims made in accordance with RBI guidelines relating to such investment by banks. The Ld. Pr. CIT further notes the facts in relation to the present case at paragraph No. 3.1.2(iv) of his order that during the impugned year the assessee had adopted this method of classification of investment as prescribed by the RBI guidelines and valued them as per the RBI guidelines. Having noted so, he has still gone on to hold that the provision for diminution in value of investment on account of valuation of AFS as per the prescribed RBI guidelines on Mark to Market basis was not in accordance with RBI guidelines and the claim of the assessee on the same was not in accordance RBI/CBDT notifications in this regard. We fail to understand this contradictory reasoning of the Ld. Pr. CIT. Having noted the facts that the assessee’s claim was in accordance with RBI guidelines and CBDT notifications in this regard, he appears to have given frivolous reason for holding that they were not in accordance with the same. Even the judicial decisions relied upon by the learned Counsel for the assessee, being the Hon’ble jurisdictional High Court decision in the case of Rajkot Dist. Co. Op. Bank Ltd. (supra) clearly supports the case of the assessee. The Ld. Pr. CIT clearly has no basis for finding the claim of the assessee of Provision in the value of investments to be not in accordance with law. 10. In view of the above, we hold that the issue of the claim of the assessee of Provision in the value of investments of Rs.19,14,34,500/- was duly examined by the AO during assessment proceedings when the assessee had demonstrated the same to be in accordance with RBI guidelines, CBDT notifications and judicial decisions in this regard and the AO therefore had allowed the claim taking a plausible view on the matter. The Ld. Pr. CIT has been unable to demonstrate how the claim was not allowable to the assessee. Therefore, we 9 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 hold, there is no error in the Order of the AO allowing claim of provision for diminution in the value of investment to the tune of Rs.19,14,34,500/-. The order of the Ld. Pr. CIT holding so is accordingly set aside. 11. The next issue raised by the Ld. Pr. CIT for finding the assessment order as erroneous causing prejudice to the Revenue is regarding the assessee’s claim of deduction on account of amounts routed not through the P&L account but through Rural Development Fund and Sahkar Prachar Fund (separate funds) amounting to Rs.1,86,46,538/- and Rs.5,00,000/- respectively. 12. The case of the Ld. Pr. CIT, it transpires, is that since these claims were not routed through the P&L accounts, they were not allowable to the assessee as deduction as per the provisions of the Income-Tax Act and the Assessing Officer having not made any proper examination of this issue, the assessment order was, therefore, erroneous. 13. With respect to this issue also it was brought to our notice by the learned Counsel for the assessee and even to the notice of the Ld. Pr. CIT during revisionary proceedings that this issue had been inquired into by the Assessing Officer and all explanation furnished by the assessee for the eligibility of the assessee’s claim for deduction to the said amounts. As reproduced in the Ld. Pr. CIT’s order at paragraph No. 4.1, the assessee had explained the facts relating to these claims stating that the amounts of Rs.1,81,46,538/- paid through Rural Development Fund was the advances given to 17 District Co-op. Banks to boost-up the recovery works of the bank and to reduce the NPA of the banks. The Ld. Pr. CIT has noted this fact at paragraph No.4.2(i) of his order also. The assessee had further explained that these funds had been created as appropriation from the profits of the assessee and, therefore, no deduction had been claimed while creating the funds; that, therefore, when amount was advanced out of these funds to the 17 District Co-operative Banks in accordance 10 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 with the aims and objects of the assessee Co-operative Bank which was the State Nodal Co-operative Bank assisting the functioning of the District Co- operative Banks, the amounts so advanced was in lieu of the aims and objects of the assessee co-operative bank and had been rightly claimed as deduction despite having not been passed through the Profit and Loss account. It was explained that since at the time of creation of the funds, no deduction had been claimed by the assessee, the assessee had rightfully claimed deduction when the advances were made from these funds by the assessee. 14. We have noted that the Ld. Pr. CIT has given no findings with regard to this explanation of the assessee. It is not the case of the Ld. Pr. CIT that as per the explanation offered by the assessee it was not entitled to claim deduction of the amounts so advanced of Rs.1.81 crores. His case at paragraph No. 4.2(i) of his order is that there were no findings on record to show that whether these District Co-operative Banks had accounted for these advances in their books of accounts and utilized these also for the business purposes and, therefore, it was not conclusively proved that these amounts advanced had been incurred for business purposes as per Section 37(1) of the Act. His finding recorded in this regard at paragraph No. 4.2 (i) of his order is as under:- 4.2 (i) The sums of Rs.1,81,46,538/- was paid by the assessee to District Co- operative Bank, in form of advances, out of 'Rural Development Fund’ without bounding any liabilities. The assessee had claimed that the above amount was in fact paid to 17 District Co- operative Banks to boost-up the recovery work of the banks and to reduce the NPA of the banks. However, whether the District Banks had shown the amount in their books of account as receipts were not ascertained and verified by the Assessing Officer, There is nothing on record as to how the amount paid by the assessee bank was utilized for business purpose. Merely filing certificates, obtained from recipient bank, does not establish the facts that It was wholly and exclusively incurred for business purpose u/s 37(1) of the Income Tax Act and the Assessing Officer ought to have examined the same during assessment proceedings.” 11 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 15. We do not find any merit in the case made out by the Ld. Pr. CIT finding the assessment order erroneous for not conducting proper inquiry vis-à-vis the issue of claim of amount advanced through Rural Development Fund to the tune of Rs.1.81 crores. As pointed out above by us, the Ld. Pr. CIT though had invoked revisionary powers on this issue noting that the claim had been allowed to the assessee despite the fact that the amount was not routed through the Profit and Loss account, but directly through the specific funds, he subsequently found no anomaly in the explanation offered by the assessee for the same that while creating the fund, the assessee had not claimed any deduction being appropriation of profit only and, therefore, deduction was claimed when actual advances were made out of these funds or when in the alternative the funds were actually utilized for the purpose created. The Ld. Pr. CIT’s case is that the Assessing Officer should have inquired as to whether the District Co-operative Banks had utilized these amounts for their business purposes and only then allowed the claim to the assessee. On the merits of the issue, as long as it was established both to the Ld. Pr. CIT and to the Assessing Officer that the advances to the District Co-operative Banks had been made in accordance with aim and objects of the assessee for assisting the working of these banks, there cannot be any issue with regards to the allowance of this claim to the assessee. As long as it had been shown to both the Assessing Officer and Ld. Pr. CIT that the advances were made to boost-up the recovery of the Dist. Cooperative Banks and to reduce the NPA, how the District Co- operative Banks ultimately use these funds will not effect the nature of the advances made by the assessee as being for the purpose of business of the assessee. Therefore, the Ld. Pr. CIT’s finding that the Assessing Officer should have gone to the extra length to see whether the Dist. Co-operative Banks had used it for the purpose for which it was advanced so as to hold that the advance made by the assessee was for its business purpose, is not correct. Therefore, we hold that the explanation offered by the assessee was sufficient enough for the 12 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 Assessing Officer to have accepted the assessee’s claim of deduction of the amounts advanced through Rural Development Fund of Rs.1.81 crores to District Co-operative Banks and there was no error as such in the order of the Assessing Officer. 16. With respect to the amount of Rs.5,00,000/-, which was paid to Ahmedabad Municipal Corporation towards souvenir for “Run For Unity” out of the Sahkar Prachar Fund, the finding of the Ld. Pr. CIT for holding the assessment order erroneous for having accepted assessee’s claim of deduction thereon at paragraph 4.2(ii) of his order is as under:- 4.2 (ii) Similarly, it is also not ascertained how the claim of the assessee that amount of Rs.5,00,000/- paid to Ahmedabad Municipal Corporation towards souvenir for "Run For Unity" was allowable. The Assessing Officer should have ascertained whether the same could be categorized as expenses wholly and exclusively for business purpose u/s 37(1) of the Income Tax Act and would have disallowed, if not so.” 17. As is evident, the Ld. Pr. CIT has held that the Assessing Officer should have ascertained whether the amounts so paid could be categorized as incurred wholly and exclusively for the purposes of business of the assessee. Clearly, there is no finding by the Ld. Pr. CIT that this amount was not allowable to the assessee under Section 37(1) of the Act and it has been restored to the Assessing Officer for the purpose of determining the same. Moreover, as the facts demonstrate, the fund out of which the amount was paid related to advertisement fund of the assessee Co-operative bank bearing the name of Sahkar Prachar Fund and the amount of Rs.5,00,000/- had been paid for advertisement purposes only as per the facts noted by the Ld. Pr. CIT himself having been paid to souvenir for “Run For Unity”. Therefore, in the absence of any findings by the Ld. Pr. CIT of any reasons for the claim of deduction on account of the amount of Rs.5,00,000/- paid out of the Sahkar Prachar Fund being not allowable as per the provisions of Section 37(1) of the Act and facts 13 ITA No. 703/Ahd/2019 The Gujarat State Co-op Bank Ltd Vs. PCIT AY :2014-15 not demonstrating otherwise, the assessment order clearly is not erroneous for having allowed this claim to the assessee. In view of the above, the Ld. Pr. CIT’s order holding the assessment order erroneous on account of allowance of claim of amounts paid through Rural Development Fund and Sahkar Prachar Fund of Rs.1,86,46,538/- and Rs.5,00,000/- respectively is set aside. 18. In effect, the order of the Ld. Pr. CIT passed under Section 263 of the Act is upheld only to the extent of the issue of claim of leave encashment allowed to the assessee while on the remaining issues the order of the Ld. Pr. CIT is set aside. 19. In effect, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 15 th February, 2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad; Dated 15/02/2023 **bt ेश ! " #े"$ /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. स% % & ' / Concerned CIT 4. & ' ) (/ The CIT(A)- 5. "*+ , - , ,/DR,ITAT, Ahmedabad, 6. , /0 1 2 /Guard file. ेश - & स / BY ORDER, TRUE COPY स %ज (Asstt.. Registrar) ITAT, Ahmedabad