ITO, Ward-2, Nizamabad V. The Nizamabad District Co-Operative Bank Limited, Nizamabad

ITA 721/HYD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7756 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 13-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: D BALAJI
• Keywords: Business expenditure; Bad and doubtful debts; Revised return
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER SL. NO. ITA NO. AY APPELLANT RESPONDENT 01 905/H/13 2008-09 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD., NIZAMABAD. PAN AACAT3615K INCOME-TAX OFFICER, WARD 2, HYDERABAD. 02 906/H/13 2009-10 -DO- -DO- 03 721/H/13 2008-09 INCOME-TAX OFFICER, WARD 2, HYDERABAD. NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD., NIZAMABAD 04 722/H/13 2009-10 -DO- -DO- 05 1161/H/11 2007-08 -DO- -DO- ASSESSEE BY SHRI D. BALAJI REVENUE BY SHRI P. SOMA SEKHAR REDDY DATE OF HEARING 16-10-2014 DATE OF PRONOUNCEMENT 10-12-2014 O R D E R PER SAKTIJIT DEY, J.M.: THESE ARE SET OF FIVE APPEALS BOTH BY THE DEPARTMEN T AND ASSESSEE. WHILE THERE ARE CROSS APPEALS FOR AY 2008 -09 AND 2009- 10, APPEAL RELATING TO AY 2007-08 IS BY THE DEPARTM ENT ALONE. AS ISSUES ARE COMMON AND ASSESSEE IS ALSO SAME, THESE APPEALS ARE CLUBBED AND HEARD TOGETHER, THEREFORE, DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 1161/HYD/2011 2. EFFECTIVE GROUNDS RAISED BY THE DEPARTMENT ARE A S UNDER: 2 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. 2. THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 18,79,704 MADE ON ACCOUNT OF DISALLOWANCE TOWARDS INTEREST WA IVED. HOWEVER, AS PER THE PROVISIONS OF SECTION 36(1)(VII ), THE ASSESSEE IS ELIGIBLE TO CLAIM BAD DEBTS WRITTEN OFF TO THE EXTENT OF THE AMOUNT WHICH IT EXCEEDS THE RESERVE ALREADY CREATED. THE RESERVE FOR BAD DEBTS IS ALREADY MORE THAN THE CLAIM AND THE CIT(A) OUGHT TO HAVE SUSTAINED THE ADDITION. 3. THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 3,88,25,672 MADE TOWARDS BAD DEBTS. AS PER RULE 6ABA, THE AGGRE GATE AVERAGE OF ADVANCES SHOULD BE COMPUTED FROM THE AMO UNTS OF ADVANCES MADE BY EACH RURAL BRANCH AS OUTSTANDING A T THE END OF THE LAST OF EACH MONTH. THE CIT(A) ERRED IN MISI NTERPRETING THE RULE 6ABA TAKING INTO CONSIDERATION THE ENTIRE AMOUNT OF LOANS ADVANCED, WHEREAS ONLY THE LOANS ADVANCED DUR ING THE YEAR HAVE TO BE TAKEN INTO ACCOUNT. 4. THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 50,43,457 MADE TOWARDS PROVISION FOR AUDIT FEE. THE CIT(A) OM ITTED TO NOTE THAT THE ASSESSEE IS FOLLOWING MERCANTILE METH OD OF ACCOUNT, WHEREIN NO PROVISIONS TOWARDS EXPENDITURE ARE SHOWN. 3. THE FIRST ISSUE IS RELATING TO ADDITION OF RS. 1 8,79,704 MADE BY AO AND DELETED BY LD. CIT(A). 4. BRIEFLY THE FACTS ARE ASSESSEE IS A COOPERATIVE BANK IN THE DISTRICT OF NIZAMABAD. ASSESSEE IS MAINLY ENGAGED I N PROVIDING AGRICULTURAL FINANCE TO THE FARMERS IN THE DISTRICT . FOR THE AY UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 28/ 10/07 DECLARING TOTAL INCOME OF RS. 4,67,470 AFTER AVAILING DEDUCTI ON OF RS. 8,36,47,214 U/S 80P OF THE ACT. SUBSEQUENTLY, AO RE OPENED THE ASSESSMENT U/S 147 OF THE ACT FOR THE REASON THAT C LAIM OF DEDUCTION U/S 80P WAS NOT AVAILABLE TO ASSESSEE AND ACCORDING LY ISSUED A NOTICE U/S 148. IN RESPONSE TO THE SAID NOTICE, ASS ESSEE FILED A REVISED RETURN ON 13/04/10 DECLARING TOTAL INCOME O F RS. 1,85,23,360. IN COURSE OF THE ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE HAS CLAIMED THE FOLLOWING DEDUCTIONS: A) WAIVER OF INTEREST U/S 36(VII) RS. 18,79,704 A) DEDUCTION U/S 36(VIIA) RS.5,16,46,978 B) DEDUCTION U/S 36((VIII) RS. 1,22,04,590 3 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. AO ISSUED A SHOW CAUSE NOTICE REQUIRING ASSESSEE TO JUSTIFY THE DEDUCTION CLAIMED. AO POINTED OUT THAT ASSESSEE CAN WRITE OFF BAD DEBTS ONLY TO THE EXTENT OF THE AMOUNT EXCEEDING TH E RESERVE ALREADY CREATED. AO OBSERVED THAT AS THE BAD DEBT WRITTEN O FF HAS NOT EXCEEDED THE RESERVE CREATED, IT CANNOT BE ALLOWED. FURTHER, AO OBSERVED THAT THE ACTUAL DEDUCTION U/S 36(1)(VIIA) ON THE AGGREGATE AVERAGE ADVANCES BY THE RURAL BRANCHES WORKS OUT TO RS. 65,14,333 AS AGAINST RS. 5,16,46,978 CLAIMED BY ASSESSEE. AO WAS ALSO OF THE VIEW THAT DEDUCTION CLAIMED U/S 36(1)(VIII) OF RS. 1,22,04,590 INCLUDING THE PROVISIONS FOR SUSPENSE ACCOUNT OF RS . 54,89,959 TOWARDS SPECIAL RESERVES CANNOT BE ACCEPTED SINCE S UCH DEDUCTION IS APPLICABLE ONLY TO FINANCIAL CORPORATIONS BUT NOT C OOPERATIVE BANKS. IN RESPONSE TO THE SHOW CAUSE NOTICE, ASSESSEE FILED I TS REPLY, OBJECTING TO THE PROPOSED DISALLOWANCES BUT AO DID NOT FIND M ERIT IN THE SUBMISSIONS OF ASSESSEE. AO DISALLOWED THE WAIVER O F INTEREST AMOUNT OF RS. 18,79,704 BY OBSERVING THAT THE SAID AMOUNT HAS NOT EXCEEDED THE RESERVE CREATED FOR BAD DEBTS, HENCE, NOT ALLOWABLE. AS FAR AS DEDUCTION CLAIMED U/S 36(1)(VIIA) IS CONCERN ED, AO HELD THAT SUCH DEDUCTION HAS TO BE COMPUTED BY TAKING INTO AC COUNT ONLY THOSE ADVANCES WHICH HAVE BEEN MADE DURING THE YEAR AND O UTSTANDING BUT NOT THE ENTIRE LOAN ADVANCES SINCE THE EXISTENCE OF THE BANK AND REMAINING OUTSTANDING. ACCORDING TO AO, THE RULE DO ES NOT SPECIFY THAT THE ADVANCES MADE DURING THE PAST YEARS SHALL ALSO HAVE TO BE TAKEN INTO ACCOUNT FOR ARRIVING AT THE QUANTUM OF D EDUCTION. ACCORDINGLY, HE RESTRICTED THE DEDUCTION U/S 36(1)( VIIA) TO RS. 1,28,21,305. AO ALSO DID NOT ALLOW ASSESSEES CLAIM OF DEDUCTION U/S 36(1)(VIII). AS A RESULT, ASSESSMENT WAS COMPLETED BY DETERMINING THE TOTAL INCOME AT RS. 7,12,71,655. BEING AGGRIEVED OF THE ASSESSMENT ORDER SO PASSED ASSESSEE PREFERRED APPEAL BEFORE LD . CIT(A). 5. IN COURSE OF HEARING OF APPEAL BEFORE LD. CIT(A) , ASSESSEE CONTENDED THAT THE INTEREST WAIVED OF RS. 18,79,704 HAS TO BE ALLOWED 4 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. AS DEDUCTION AS GOVT. OF AP HAS DIRECTED TO WAIVE I NTEREST ON THE ADVANCES MADE BY ASSESSEE TO PRIMARY AGRICULTURAL C OOPERATIVE SOCIETIES (PACS). ACCORDINGLY, ASSESSEE WAIVED SUCH INTEREST AND DEBITED TO THE P&L A/C. ALTERNATIVELY, IT WAS SUBMI TTED BY ASSESSEE THAT WHEN THE INTEREST AMOUNT IS TO BE DEBITED TO T HE RESERVE ACCOUNT SUCH RESERVE GETS REDUCED BY SIMILAR AMOUNT AND THE AMOUNT WILL BECOME ALLOWABLE U/S 36(1)(VIIA). LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD DELETED THE ADDITION BY HOLDING AS UNDER: 3.I CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND THE OBSERVATIONS MADE BY AO. ACCORDIN G TO THE DETAILS SUBMITTED BY THE APPELLANT, THE APPELLANT W AIVED INTEREST ALREADY ACCRUED. THE INTEREST ACCRUED IS CREDITED T O THE INTEREST ACCOUNT AND AS PER THE DIRECTIONS OF THE GOVERNMENT OF AP, SUCH INTEREST ACCRUED IS WAIVED. WHEN THE AMOUNT OF INTEREST IS WAIVED, SUCH AMOUNT IS CREDITED TO INTEREST ACCOUNT AND IS DEBITED TO THE WAIVER OF INTEREST ACCOUNT. THEREFOR E, THE SAME IS ALLOWABLE AS EXPENDITURE. IN SO FAR AS THE CONTE NTION OFF THE AO THAT THE SAID AMOUNT IS TO BE REDUCED FROM THE B AD DEBTS RESERVE IS CONCERNED, I FIND THAT SUCH RESERVE IS T O BE MAINTAINED AT A DEFINED LEVEL AS CLAIMED BY THE APP ELLANT. THE RESERVE AT PRESENT IS LESS THAN THE PERMISSIBLE LIM IT. THE AO, DID NOT DOUBT THE GENUINENESS OF THE INTEREST WAIVE D BY THE APPELLANT IS ALLOWABLE AS A DEDUCTION U/S 36(10(VII ) OF THE ACT. THE ADDITION MADE BY THE AO IS DELETED. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED. AS FAR AS THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 36(1)(VIIA), LD. CIT(A) AFTER CONSIDERING THE FACTS IN THE LIGHT OF STATUTORY PROVISIONS NOTED THAT THE DEDUCTION HAS TO BE COMPUTED IN TWO DIFFERENT WAYS AND THE AGGREGATE OF THE TWO IS TO BE CONSIDERED FO R DEDUCTION. SHE NOTED THAT FIRSTLY, 7.5% OF THE PROFIT FROM BANKING BUSINESS BEFORE ALLOWING DEDUCTION UNDER CHAPTER VIA HAS TO BE CONS IDERED. SECONDLY, THE SAID AMOUNT IS TO BE INCREASED BY 10% OF THE AGGREGATE AVERAGE RURAL ADVANCES COMPUTED IN ACCORDANCE WITH RULE 6ABA OF THE IT RULES. SHE FOUND THAT THE DISPUTE BETWEEN TH E ASSESSEE AND THE DEPARTMENT IS ONLY WITH REGARD TO THE WORKING O F THE 10% OF THE AGGREGATE AVERAGE RURAL ADVANCES WITH REFERENCE TO APPLICATION OF RULE 6ABA. WHILE, AO WAS OF THE VIEW THAT THE RESER VE FOR BAD DEBT 5 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. HAS TO BE WORKED OUT BASED ON THE ADVANCES MADE IN THE RURAL AREAS DURING THE YEAR, ASSESSEE CLAIMED THAT THE SAME HAS TO BE WORKED OUT ON THE BASIS OF THE AGGREGATE OF THE ADVANCES OUTST ANDING IN THE RURAL AREA DURING THE YEAR. LD. CIT(A) REFERRING TO THE P ROVISIONS OF RULE 6ABA, WAS OF THE VIEW THAT THE 10% OF AGGREGATE AVE RAGE RURAL ADVANCES HAS TO BE MADE BY CONSIDERING THE AMOUNT O F ADVANCES OUTSTANDING AT THE END OF THE LAST DAY AND NOT THE ADVANCES GIVEN DURING THE MONTH. ACCORDINGLY, LD. CIT(A) ALLOWED A SSESSEES CLAIM OF DEDUCTION U/S 36(1)(VIIA) BY OBSERVING AS UNDER: IT IS CLEAR FROM A READING OF THE RULE THAT THE WOR KING HAS TO BE MADE BY CONSIDERING THE AMOUNT OF ADVANCES OUTSTAND ING AT THE END OF THE LAST DAY. THERE IS NO AMBIGUITY IN THE R ULE. THE OUTSTANDING AMOUNT OF ADVANCES BY EACH RURAL BRANCH AT THE END OF THE LAST DAY OF EACH MONTH HAS TO BE WORKED OUT. THE AMOUNT TO BE INCLUDED IS THE TOTAL OF THE ADVANCES OUTSTANDING AND NOT THE AMOUNT OF ADVANCES GIVEN DURING THE MON TH. I FIND THAT THE AO WORKED OUT THE DEDUCTION BY TAKING INTO CONSIDERATION THE ADVANCES MADE DURING THE MONTH. T HIS IS NOT CORRECT AND IS NOT IN ACCORDANCE WITH THE RULE 6ABA . I FIND THAT THE WORKING MADE BY THE APPELLANT IS IN ACCORDANCE WITH THE SAID RULE AS THE APPELLANT CONSIDERED THE ENTIRE OU TSTANDING ADVANCES AS AT THE END OF EACH MONTH CONTAINED IN T HE PREVIOUS YEAR. THEREFORE, I HOLD THAT THE APPELLANT IS ELIGI BLE FOR DEDUCTION OF RS. 5,16,46,977. I ACCORDINGLY DIRECT THE AO TO ALLOW THE AMOUNT OF RS. 5,16,46,977 U/S 36(1)(VIIA) AS AGAINST THE AMOUNT ALLOWED OF RS. 1,28,21,305. THIS GROUND OF APPEAL IS ALLOWED. 6. LD. DR REITERATING THE VIEW EXPRESSED BY AO SUB MITTED THAT AS FAR AS THE WAIVER OF INTEREST OF RS. 18,79,704 IS C ONCERNED, THE SAME CANNOT BE ALLOWED AS DEDUCTION U/S 36(1)(VII) AS TH E AMOUNT DOES NOT EXCEED THE PROVISION CREATED U/S 36(1)(VIIA). AS F AR AS THE ISSUE RELATING TO DEDUCTION CLAIMED U/S 36(1)(VIIA) IS CO NCERNED, LD. DR SUBMITTED THAT THE 10% DEDUCTION HAS TO BE WORKED O UT ON THE AGGREGATE AVERAGE OF OUTSTANDING ADVANCES MADE DURI NG THE YEAR. 7. THE LD. AR ON THE OTHER HAND SUBMITTED BEFORE US THAT THE WAIVER OF INTEREST TO PACS WAS AS PER THE DIRECTION OF THE STATE GOVT. AND HAS TO BE CONSIDERED AS A BUSINESS EXPENDITURE ALLOWABLE U/S 37(1). LD. AR SUBMITTED THAT AS THE AMOUNT HAS ACTU ALLY ACCRUED AND 6 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. DEBITED TO THE P&L A/C DURING THE YEAR, IT IS ALLOW ABLE AS AN EXPENDITURE. ALTERNATIVELY, LD. AR SUBMITTED THAT P ROVISO 1 TO SECTION 36(1)(VII) WOULD NOT APPLY EVEN IF THE WAIVER OF IN TEREST IS CONSIDERED AS BAD DEBT AS THE AMOUNT OF INTEREST WAIVED IS TO BE DEBITED TO THE PROVISION/RESERVE FOR BAD DEBTS RESERVE (BDR) ACCOU NT WHICH WILL RESULT IN INCREASING THE PROVISION ON BDR ACCOUNT T O 5,03,09,683. (RS. 4,84,29,979 + RS. 18,79,704). HENCE, THE AMOUNT WIL L BE STILL ALLOWABLE U/S 36(1)(VIIA) AS IT IS WITHIN THE RESER VE CREATED. IN SO FAR AS DEDUCTION CLAIMED U/S 36(1)(VIIA) IS CONCERNED, LD. AR SUBMITTED THAT THERE CANNOT BE ANY GRIEVANCE WITH THE ORDER P ASSED BY LD. CIT(A) AS SHE HAS FOLLOWED THE STATUTORY PROVISIONS CONTAINED U/S 6ABA OF THE ACT. LD. AR SUBMITTED THAT AS PER RULE 6ABA 10% DEDUCTION HAS TO BE WORKED OUT ON THE TOTAL OUTSTAN DING ADVANCE AND NOT THE ADVANCES MADE DURING THE YEAR. LD. AR SUBMI TTED THAT AS THE DEDUCTION CLAIMED BY ASSESSEE IS WELL WITHIN THE RE SERVE WORKED OUT IN TERMS WITH SECTION 36(1)(VIIA) READ WITH RULE 6A BA, LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. IN SUPPORT OF H IS AFORESAID CONTENTION, LD. AR SUBMITTED THE FOLLOWING COMPUTAT ION WORKING OUT THE DEDUCTION CLAIMED IN REFERENCE TO THE RESERVE C REATED: NOTE NO.1: RESERVES CREATED UPTO 31/03/2006 (PAGE NO. 44 OF TH E BALANCE SHEET): BDR (41252713-10622940) 30629773.00 RESERVE FOR BDR.NPA 44963503.00 TOTAL 75593276.00 X NOTE NO. 2: RESERVES CREATED DURING THE YEAR BDR 3216997.00 PROV. FOR BDR/NPA 48429979.00 TOTAL 51646976.00 Y X+Y (CLOSING BAL AS ON 31.03.07) 127240252.00 NOTE NO. 3: 7.5% OF PROFIT 6306972.00 .. A 10% OF AAA OF RURAL BRANCHES 10% OF 1572488571 157248857.00 B X+Y IS LESSER THAN A+B THEREFORE, Y I.E. RS. 5,16,46,976 WAS ALLOWED BY C IT(A) 7 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. BEFORE GOING INTO THE ISSUE, IT IS NECESSARY TO LOO K INTO THE RELEVANT STATUTORY PROVISIONS. SECTION 36(1)(VII) PROVIDES F OR DEDUCTION ON ACCOUNT OF BAD DEBTS ACTUALLY WRITTEN OFF IN THE BO OKS OF ACCOUNT. HOWEVER, PROVISO TO 36(1)(VII) MAKES AN EXCEPTION B Y PROVIDING THAT IN CASE OF AN ASSESSEE TO WHICH CLAUSE (VIIA) APPLIES THE CLAIM OF BAD DEBT SHALL BE LIMITED TO THE AMOUNT BY WHICH SUCH D EBT EXCEEDS THE CREDIT BALANCE IN THE PROVISION FOR BAD AND DOUBTFU L DEBTS MADE UNDER CLAUSE (VIIA). CLAUSE (VIIA) PERMITS A COOPERATIVE BANK TO CLAIM DEDUCTION OF PROVISION MADE FOR BAD AND DOUBTFUL DE BTS AS PER THE PRESCRIBED CONDITIONS. AS HAS BEEN CORRECTLY OBSERV ED BY LD. CIT(A), THE ONLY DISPUTE BETWEEN ASSESSEE AND DEPARTMENT IS IN RESPECT OF WORKING OUT 10% OF AGGREGATE AVERAGE RURAL ADVANCE S. WHILE ASSESSEE HAS MADE SUCH WORKING BY CONSIDERING THE E NTIRE OUTSTANDING ADVANCES AT THE END OF EACH MONTH, AO H AS WORKED OUT BY CONSIDERING THE AGGREGATE AVERAGE RURAL ADVANCES OF EACH MONTH AND NOT ON THE ENTIRE OUTSTANDING ADVANCES. HOWEVER , A PERUSAL OF THE PROVISION CONTAINED U/S 36(1)(VIIA) AND RULE 6A BA, WOULD MAKE IT CLEAR THAT THE 10% OF AGGREGATE AVERAGE ADVANCES HA S TO BE WORKED OUT ON THE ENTIRE OUTSTANDING ADVANCES AND NOT THE ADVANCES OF THAT MONTH ALONE. THAT BEING THE CASE, WE AGREE WITH THE VIEW HELD BY LD. CIT(A). 9. NOW COMING TO THE QUANTUM OF DEDUCTION CLAIMED U /S 36(1)(VII) AND 36(1) (VIIA), LAW IS WELL SETTLED THAT AN ASSES SEE CAN CLAIM DEDUCTION UNDER BOTH THE CLAUSES SUBJECT TO THE CON DITION IMPOSED UNDER THE PROVISO TO 36(1)(VII). AS CAN BE SEEN FRO M THE WORKING SUBMITTED BY LD. AR, THE PROVISION CREATED DURING T HE YEAR U/S 36(1)(VIIA) READ WITH RULE 6ABA, AMOUNTS TO RS. 16, 35,55,829.00 WHEREAS ASSESSEE HAS CLAIMED DEDUCTION OF RS. 5,16, 46,976, WHICH IS WELL WITHIN THE PROVISION PERMISSIBLE UNDER SECTION 36(1)(VIIA). 8 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. THEREFORE, THERE CANNOT BE ANY DOUBT WITH REGARD TO THE ALLOWABILITY OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 36(1)(VIIA). ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) I N DELETING ADDITION OF RS. 3,88,25,673. HOWEVER, AS FAR AS DEDUCTION OF RS . 18,79,704 IS CONCERNED, THE SAME CANNOT BE ALLOWED U/S 36(1)(VII ) CONSIDERING THE FACT SUCH AMOUNT HAS NOT EXCEEDED THE PROVISION FOR BAD AND DOUBTFUL DEBTS U/S 36(1)(VIIA). AT THE SAME TIME, ALTERNATIV E CLAIM OF THE ASSESSEE THAT IT IS TO BE ALLOWED U/S 37(1), IN OUR VIEW, IS ACCEPTABLE. ON A PERUSAL OF THE ASSESSMENT ORDER AND THE FACTS AND MATERIALS AVAILABLE ON RECORD, IT IS QUITE EVIDENT THAT THE A MOUNT WAS WAIVED AT THE DIRECTION OF THE STATE GOVT. DEPARTMENT HAS NOT CONTROVERTED THIS FACT. THEREFORE, IN OUR VIEW, THE WAIVER OF INTERE ST AT THE INSTANCE OF THE STATE GOVERNMENT, HAS TO BE ALLOWED AS BUSINESS EXPENDITURE U/S 37(1). ACCORDINGLY, WE UPHOLD THE ORDER OF LD. CIT( A) IN DELETING ADDITION OF RS. 18,79,704 THOUGH, FOR A DIFFERENT R EASON. THE GROUNDS RAISED BY THE DEPARTMENT ARE DISMISSED. 10. THE NEXT ISSUE IS WITH REGARD TO DELETION OF AN AMOUNT OF RS. 50,43,457 MADE TOWARDS PROVISION FOR AUDIT FEE. 11. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE, D URING THE ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE HAS DEBITED AN AMOUNT OF RS. 50,43,457 BY CLAIMING THAT IT REPRESE NTS AUDIT FEE WHICH HAS ACCRUED AT THE END OF THE YEAR. AO, HOWEVER, DI D NOT ALLOW THE CLAIM OF ASSESSEE BY HOLDING THAT ONLY THOSE EXPEND ITURES WHICH ARE INCURRED AND ASCERTAINED DURING THE YEAR ARE ALLOWA BLE BUT NOT FUTURE OR EXPECTED EXPENDITURE. ASSESSEE CHALLENGED THE DI SALLOWANCE MADE BEFORE LD. CIT(A). 12. LD. CIT(A) DELETED THE ADDITION MADE BY AO BY O BSERVING THAT AS THE ASSESSEE IS MAINTAINING HIS ACCOUNT BY FOLLO WING THE MERCANTILE SYSTEM AND AS AUDIT FEE HAS ALREADY BEEN INCURRED TOWARDS SERVICES RENDERED AND THE AMOUNT IS PROVIDED IN THE BOOKS OF ACCOUNT 9 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. AFTER ASCERTAINING THE EXPENDITURE, THE SAME HAS TO BE ALLOWED. SHE FURTHER OBSERVED THAT AO DID NOT BRING ON RECORD TH E FACT THAT PROVISION MADE BY ASSESSEE IS EITHER EXCESSIVE OR N OT CORRECT. 13. THE LD. DR SUBMITTED BEFORE US, AS THE PROVISI ON CREATED BY ASSESSEE IS NOT AN ASCERTAINED LIABILITY, LD. CIT(A ) WAS NOT JUSTIFIED IN ALLOWING THE CLAIM. HE SUBMITTED THAT ONLY AFTER CO MPLETION OF AUDIT, THE FEE CHARGED BY THE AUDITOR ACCRUES. HOWEVER, WH EN THE AUDIT HAS NOT BEEN MADE, ASSESSEE COULD NOT HAVE MADE THE PRO VISION FOR AUDIT FEE AS LIABILITY HAS NOT ACCRUED. 14. THE LD. AR ON THE OTHER HAND SUBMITTED BEFORE U S THAT ALREADY THE AMOUNT HAS ACCRUED TO ASSESSEE TOWARDS AUDIT FE E, HENCE, IT CANNOT BE SAID THAT THE LIABILITY HAS NOT ASCERTAIN ED. IN THIS CONTEXT, LD. AR REFERRED TO THE LETTER DATED 25/09/07 OF THE GOVT. OF AP COOPERATION DEPARTMENT WHEREIN THE ASSESSEE BANK WA S INTIMATED ABOUT THE PAYMENT OF AUDIT FEE OF RS. 53,78,637. T HUS, LD. AR SUBMITTED THAT AS THE LIABILITY HAS ALREADY ACCRUED THE DEDUCTION CLAIMED BY ASSESSEE IS ALLOWED. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. AS CAN BE SEEN, AO HAS DISALLOWED THE DEDUCTION CLA IMED FOR THE REASON THAT THE PROVISION HAS BEEN CREATED FOR AN U NASCERTAINED LIABILITY WHERE AS LD. CIT(A) HAS ALLOWED ASSESSEE S CLAIM BY HOLDING THAT THE LIABILITY HAS ALREADY ACCRUED. ON A PERUSA L OF THE LETTER DATED 25/09/07 OF THE GOVT. OF AP COOPERATION DEPARTMENT, ON WHICH, LEARNED AR RELIED UPON, IT IS SEEN THAT AS ON 31/03 /06, THERE IS A OUTSTANDING DEMAND OF RS. 39,36,734 ON ACCOUNT OF A UDIT FEES WHEREAS AN AMOUNT OF RS. 14,41,903 WAS RAISED DURIN G THE FY 2006- 07. FROM THIS LETTER, IT APPEARS THAT THE AUDIT FE E DOES NOT RELATE TO THE CURRENT AY. LD. AR WAS ALSO NOT ABLE TO EXPLAIN TO WHICH AY IT RELATES AND WHY IT REMAINS OUTSTANDING. FURTHER, IT IS NOT KNOWN 10 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. WHETHER THE PROVISION CREATED IS TOWARDS DISCHARGE OF AUDIT FEE AS MENTIONED IN THE SAID LETTER. THEREFORE, WITHOUT EX AMINING AS TO WHETHER THE EXPENDITURE RELATES TO THE CURRENT YEAR , LD. CIT(A) IN OUR VIEW WAS NOT JUSTIFIED IN ALLOWING ASSESSEES CLAIM . IN AFORESAID VIEW, WE ARE INCLINED TO SET ASIDE THE ORDER OF LD. CIT(A ) ON THIS ISSUE AND REMIT THE MATTER BACK TO THE AO TO VERIFY, ASSESSEE S CLAIM AND ALLOW THE EXPENDITURE CLAIMED IF IT PERTAINS TO THE AY UN DER CONSIDERATION AND HAS ACCRUED AS AN EXPENDITURE. THIS GROUND IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, DEPARTMENTS APPEAL IS ALLOWED F OR STATISTICAL PURPOSES. ITA NO. 721/HYD/13 17. THE ONLY EFFECTIVE GROUND RAISED BY DEPARTMENT IS AS UNDER: THE CIT(A) ERRED IN COMPUTING THE ELIGIBLE DEDUCTIO N U/S 36(1)(VIII) ON LONG TERM ADVANCES MADE IN EARLIER Y EARS ALSO WHEREAS THE SAME SHOULD BE COMPUTED ON THE LONG TER M ADVANCES MADE ONLY DURING THE CURRENT YEAR. 18. BRIEFLY THE FACTS ARE, DURING THE ASSESSMENT PR OCEEDING, AO NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS. 10,10,689 U/S 36(1)(VIII) OF THE ACT. IN RESPONSE TO THE QUERY RA ISED BY AO, ASSESSEE SUBMITTED THAT LONG TERM FINANCE OF THE BANK DURING THE YEAR STOOD AT RS. 112,55,32,957. IT WAS SUBMITTED BY ASSESSEE THA T LONG TERM FINANCES SHOULD ALSO INCLUDE ALL THE LONG TERM LOAN S ADVANCED IN THE EARLIER YEAR AND OUTSTANDING. IT WAS SUBMITTED THAT LONG TERM FINANCES SHOULD NOT BE RESTRICTED TO ADVANCES MADE DURING TH E YEAR ONLY. AO, HOWEVER, DID NOT AGREE WITH THE CONTENTION OF ASSES SEE. HE WAS OF THE VIEW THAT DEDUCTION U/S 36(1)(VIII) HAS TO BE C OMPUTED ON THE ADVANCES MADE DURING THE YEAR ONLY. ACCORDINGLY, AO WORKED OUT THE DEDUCTION U/S 36(1)(VIII) TO RS. 88,107. BEING AGGR IEVED OF DISALLOWANCE OF DEDUCTION CLAIMED, ASSESSEE PREFERR ED APPEAL BEFORE LD. CIT(A). 11 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. 19. IN COURSE OF HEARING OF APPEAL BEFORE LD. CIT(A ), IT WAS SUBMITTED BY ASSESSEE THAT DEDUCTION HAS TO BE WOR KED OUT ON THE TOTAL OUTSTANDING ADVANCES AND CANNOT BE RESTRICTED TO THE ADVANCES FOR THE YEAR ALONE. LD. CIT(A) AFTER CONSIDERING TH E SUBMISSIONS OF ASSESSEE IN THE LIGHT OF THE STATUTORY PROVISION, H ELD THAT THE DEDUCTION HAS TO BE WORKED OUT ON THE BASIS OF TOTA L OUTSTANDING ADVANCES AND NOT THE OUTSTANDING ADVANCES OF THE YE AR ALONE. ACCORDINGLY, HE DELETED THE ADDITION MADE BY AO. 20. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD AS WELL AS ORDERS OF REVENU E AUTHORITIES. HAVING EXAMINED THE ISSUE IN THE CONTEXT OF STATUTO RY PROVISION AS CONTAINED U/S 36(1)(VIII) WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF LD. CIT(A). IN OUR VIEW, THE PROVISIONS OF SECTION 36(1 )(VIII) CANNOT BE INTERPRETED IN A MANNER TO SUGGEST THAT 20% OF THE DEDUCTION HAS TO BE WORKED OUT ONLY ON THE ADVANCES GIVEN DURING TH E YEAR. IN THAT VIEW OF THE MATTER, WE UPHOLD THE ORDER OF LD. CIT( A) AND THE GROUND RAISED IS DISMISSED. 20A. IN THE RESULT, DEPARTMENTS APPEAL IS DISMISS ED. ITA NO. 722/HYD/13 21. THE DEPARTMENT HAS RAISED THE FOLLOWING THREE E FFECTIVE GROUNDS: 1. THE CIT(A) ERRED IN ADOPTING THE INCOME OF RS. 1 3,94,75,750 AS PER ASSESSMENT ORDER INSTEAD OF ADOPTING GROSS T OTAL INCOME OF RS. 4,15,92,798 FOR THE PURPOSE OF COMPUTING THE ELIGIBLE DEDUCTION U/S 36(1)(VIIA). 12 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. 2. THE CIT(A) ERRED IN NOT CONSIDERING THE 10% OF A GGREGATE AVERAGE ADVANCES BEING LONG TERM ADVANCES GRANTED D URING THE RELEVANT FINANCIAL YEAR FOR THE PURPOSE OF COMPUTIN G THE ELIGIBLE DEDUCTION U/S 36(1)(VIIA). 3. IN RESPECT OF DEDUCTION U/S 36(1)(VIII), THE CIT (A) ERRED IN CALCULATING THE ELIGIBLE DEDUCTION AT THE RATE OF 2 0% OF PROFITS ON LONG TERM LOANS ADVANCED IN EARLIER YEARS ALSO INST EAD OF RESTRICTING THE SAME TO THE LONG TERM LOANS ADVANCE D DURING THE RELEVANT AY. 22. IN GROUND NO.1, THE GRIEVANCE OF THE DEPARTMENT IS LD. CIT(A) SHOULD HAVE ADOPTED GROSS TOTAL INCOME OF RS. 4,15, 92,798 INSTEAD OF RS. 13,94,75,710 WHILE COMPUTING ELIGIBLE DEDUCTION U/S 36(1)(VIIA). 23. IN THE ASSESSMENT ORDER PASSED FOR THE IMPUGNED AY, AO WHILE COMPUTING DEDUCTION U/S 36(1)(VIIA) OF THE ACT, WO RKED OUT 7.5% OF GROSS TOTAL INCOME OF RS. 4,15,92,798 WHEREAS DURIN G THE PROCEEDING BEFORE THE FIRST APPELLATE AUTHORITY, LD. CIT(A) NO TICED THAT AO HAS DETERMINED THE GROSS TOTAL INCOME OF ASSESSEE AT RS . 13,94,75,710. LD. CIT(A), THEREFORE, TAKING INTO ACCOUNT THE AFOR ESAID GROSS TOTAL INCOME DETERMINED BY AO IN THE ASSESSMENT ORDER WOR KED OUT 7.5% ON THE SAME WHILE COMPUTING THE DEDUCTION U/S 36(1) (VIIA). 24. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. ON A PERUSAL OF SECTION U/S 36(1)(VIIA), IT IS EVID ENT THAT THE AMOUNT OF 7.5% HAS TO BE WORKED OUT ON THE TOTAL INCOME COMPU TED BEFORE MAKING ANY DEDUCTION UNDER SECTION 36(1)(VIIA) AND CHAPTER VIA. IN OTHER WORDS, 7.5% HAS TO BE WORKED OUT ON THE GROSS TOTAL INCOME. THAT BEING THE CLEAR STATUTORY PROVISION, LD. CIT(A ), IN OUR VIEW, HAS NOT COMMITTED ANY ERROR IN WORKING OUT 7.5% OF GROS S TOTAL INCOME OF RS. 13,94,75,710, DETERMINED BY AO. HOWEVER, IN COU RSE OF HEARING BEFORE US, LD. AR BROUGHT IT TO OUR NOTICE THAT IN THE CONSEQUENTIAL ORDER PASSED BY AO IN PURSUANCE TO THE FIRST APPELL ATE AUTHORITYS ORDER, THE GROSS TOTAL INCOME HAS BEEN REVISED TO R S. 9,47,39,180. LD. AR, THEREFORE, SUBMITTED BEFORE US THAT AO MAY BE DIRECTED TO 13 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. COMPUTE THE DEDUCTION U/S 36(1)(VIIA) ON THE GROSS TOTAL INCOME AS MAY BE DETERMINED IN PURSUANCE TO THE ORDER PASSED BY THE TRIBUNAL. CONSIDERING THE SUBMISSIONS OF THE PARTIES AND KEEP ING IN VIEW THE RELEVANT STATUTORY PROVISION, WE DIRECT AO TO COMPU TE DEDUCTION U/S 36(1)(VIIA) ON THE TOTAL INCOME AS MAY BE DETERMIN ED IN PURSUANCE TO THE DIRECTION OF THE TRIBUNAL (BEFORE ALLOWING ANY DEDUCTION U/S 36(1)(VIIA) AND UNDER CHAPTER VIA). 25. THE NEXT ISSUE AS RAISED IN GROUND NO. 2 IS IN RESPECT OF ALLOWANCE OF ASSESSEES CLAIM OF DEDUCTION U/S 36(1 )(VIIA). 26. WHILE COMPLETING THE ASSESSMENT, AO COMPUTED DE DUCTION U/S 36(1)(VIIA) BY CONSIDERING 10% OF THE AVERAGE AGGRE GATE RURAL ADVANCES DURING THE MONTH WHICH REMAINED OUTSTANDIN G ON THE LAST DAY OF THE MONTH. HOWEVER, LD. CIT(A) ACCEPTED ASSE SSEES CLAIM THAT AS PER SECTION 36(1)(VIIA) READ WITH RULE 6ABA, DE DUCTION HAS TO BE WORKED OUT ON THE ENTIRE OUTSTANDING AVERAGE AGGREG ATE RURAL ADVANCES ON THE LAST DAY OF THE MONTH. 27. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. SIMILAR ISSUE AROSE IN DEPARTMENTS APPEAL IN ITA NO. 1161/HYD/2011 DECIDED BY US HEREINBEFORE. WHILE DISMISSING GROUND RAISED BY THE DEPARTMENT WE HAVE HELD THAT 10% OF THE AVERAGE AGG REGATE ADVANCES WOULD ALSO INCLUDE THE ADVANCES MADE EARLI ER AND REMAINING OUTSTANDING AND NOT TO BE CONFINED ONLY T O THE ADVANCES MADE DURING THE MONTH. IN VIEW OF THE ABOVE, WE UP HOLD THE ORDER OF LD. CIT(A) ON THIS ISSUE. GROUND RAISED BY DEPARTME NT IS DISMISSED. 28. IN GROUND NO. 3, DEPARTMENT HAS CHALLENGED THE DECISION OF LD. CIT(A) IN ALLOWING ASSESSEES CLAIM OF DEDUCTION U/ S 36(1)(VIII) @ 20% ON LONG TERM LOAN ADVANCED EVEN IN EARLIER YEAR S AND NOT RESTRICTING THE SAME TO LONG TERM LOANS ADVANCED DU RING RELEVANT AY. 14 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. 29. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. SIMILAR ISSUE WAS ALSO DECIDED WHILE CONSIDERING DE PARTMENTS APPEAL IN ITA NO. 721/HYD/2013. FOLLOWING OUR DECISION THE REIN PARAGRAPH 20 OF THE ORDER, WE UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING THE GROUND RAISED. 30. IN THE RESULT, DEPARTMENTS APPEAL IS DISMISSED . ITA NO. 905/HYD/13 31. THOUGH ASSESSEE HAS RAISED SIX GROUNDS, EFFECTI VE GROUNDS ARE AS UNDER: 2. THE LD. CIT(A) OUGHT NOT TO HAVE CONFIRMED THE D ISALLOWANCE MADE BY THE LD. AO FOR THE CLAIM FOR WAIVER OF INTE REST OF RS. 5,84,360 SAYING THAT PROVISION FOR BAD AND DOUBTFUL DEBTS ARE COMPUTED SEPARATELY AND QUANTIFIED AND HENCE NO FUR THER DEDUCTION U/S 36(1)(VII) IS ALLOWABLE. 3. THE LEARNED CIT(A) OUGHT TO HAVE ALLOWED DEDUCTI ON AS CLAIMED BY THE ASSESSEE WHICH IS ADMISSIBLE STATUTO RILY U/S 36(1)(VIIA) INSTEAD OF RESTRICTING THE SAME TO THE AMOUNT ERRONEOUSLY CLAIMED IN THE REVISED RETURN OF INCOME BY OVERSIGHT. 32. THE FIRST ISSUE AS RAISED IN GROUND NO. 2 IS IN RESPECT OF DISALLOWANCE OF AN AMOUNT OF RS. 5,84,360 BEING WAI VER OF INTEREST TO PRIMARY AGRICULTURAL COOPERATIVE SOCIETIES (PACS). 33. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE, D URING THE ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE HAS DEDUCTED AN AMOUNT OF RS. 5,84,360 TOWARDS WAIVER OF INTEREST. AO ON EXAMINING THE DETAILS WAS OF THE VIEW THAT THE WAIVER OF INTE REST CLAIMED BY ASSESSEE AS BAD DEBTS WRITTEN U/S 36(1)(VII) IS ONL Y ALLOWABLE TO THE EXTENT OF THE AMOUNT BY WHICH IT EXCEEDS THE RESERV E ALREADY CREATED. AS THE AMOUNT CLAIMED TOWARDS WAIVER OF INTEREST DI D NOT EXCEED THE 15 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. RESERVE CREATED FOR BAD DEBTS, AO WAS OF THE VIEW T HAT THE SAME IS NOT ALLOWABLE U/S 36(1)(VII). ACCORDINGLY, HE ISS UED A SHOW CAUSE NOTICE PROPOSING TO DISALLOW THE DEDUCTION CLAIMED OF RS. 5,84,360. IN RESPONSE TO THE SHOW CAUSE NOTICE, ASSESSEE SUBMITT ED THAT THE WAIVER OF INTEREST IS ON ACCOUNT OF INTEREST WAIVED ON SETTLEMENT WITH BORROWERS/DEBTORS, HENCE, THE SAME SHOULD BE ALLOWE D. AO, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF ASSESSEE A S HE WAS OF THE VIEW THAT THE AMOUNT OF RS. 5,84,360 CLAIMED AS BAD DEBTS DID NOT EXCEED THE RESERVE CREATED FOR BAD DEBTS AS ON 01/0 4/07, HENCE, THE DEDUCTION CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE, HENCE, THE DISALLOWED THE SAME. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). CIT(A) ALSO CONFIRM ED THE ADDITION MADE BY ACCEPTING THE REASONING OF THE AO. 34. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS THE CONTENTION OF LD. AR BEFORE US THAT THE A MOUNT CLAIMED AS DEDUCTION IS NOT IN THE NATURE OF BAD DEBTS, BUT, I S ACTUALLY A BUSINESS EXPENDITURE ALLOWABLE U/S 37(1). IT WAS SUBMITTED E VEN IF IT IS CONSIDERED AS BAD DEBT U/S 36(1)(VII), THE PROVISO TO SECTION 36(1)(VII) WILL NOT APPLY, SINCE THE SAID AMOUNT IS TO BE DEBI TED TO PROVISION/RESERVE FOR BAD DEBT RESERVE ACCOUNT AND IF IT IS SO DEBITED, THEN, THE SAME WILL STILL BE ALLOWABLE U/S 36(1)(VI IA). HAVING CONSIDERED THE SUBMISSIONS OF THE PARTIES, WE ARE O F THE VIEW THAT SIMILAR ISSUE WAS DECIDED BY US IN DEPARTMENTS APP EAL IN ITA NO. 1161/HYD/11. FOLLOWING OUR FINDING IN PARA HEREINB EFORE, WE HOLD THAT ASSESSEES CLAIM OF DEDUCTION OF THE INTEREST WAIVE D AMOUNTING TO RS. 5,84,360 DESERVES TO BE ALLOWED. ACCORDINGLY, WE DI RECT AO TO DELETE THE ADDITION MADE. THIS GROUND IS ALLOWED. 35. THE NEXT ISSUE AS RAISED IN GROUND NO. 3 IS IN RESPECT OF DEDUCTION CLAIMED U/S 36(1)(VIIA). 16 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. 36. BRIEFLY THE FACTS ARE, ASSESSEE DURING THE YEAR CLAIMED DEDUCTION U/S 36(1)(VIIA), OF AN AMOUNT OF RS. 34,5 8,567, WHICH WAS ALSO ACCEPTED BY AO WHILE COMPLETING THE ASSESSMENT , THOUGH AO COMPUTED THE ELIGIBLE DEDUCTION OF RS. 90,65,767 BE ING 10% OF THE OUTSTANDING AMOUNT OF AGGREGATE AVERAGE ADVANCES IN ADDITION TO THE CLAIM OF RS. 8,34,857 BEING 7.5% OF THE TOTAL INCOM E. ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) CLAIMING DEDU CTION OF RS. 90,65,767 U/S 36(1)(VIIA) ON THE REASONING THAT AO HAS HIMSELF WORKED OUT THE SAID AMOUNT AS THE ELIGIBLE DEDUCTIO N. LD. CIT(A) HOWEVER DID NOT FIND MERIT IN THE SUBMISSIONS OF AS SESSEE AND RESTRICTED THE DEDUCTION U/S 36(1)(VIIA) TO RS. 34, 58,567 AS COMPUTED IN THE RETURN FILED. THE FINDING OF LD. CIT(A) IS A S UNDER: 7.3 PERUSED THE SUBMISSIONS OF THE APPELLANT AND T HE OBSERVAT I ONS OF THE A.O. IT IS A FACT THAT ASSESSEE IS ELIGI BLE FOR CREATING THE PROVISION FOR BAD AND DOUBTFUL DEBTS O N TWO COUNTS NAMELY, (I) 7.5% OF THE TOTAL INCOME AND(II) 10 0 /0 OF THE AGGREGATE AVERAGE ADVANCES . (AAA) BY RURAL BRANCHES, CALCULA TED AS PER RULE 6ABA. OH THE SAID LINES, THE APPELLANT CALCULATED S UCH PROVISIONS TOTALLING RS. 34,58,567/- INCLUDING. THE, AMOUNTS OF RS . 8,34,857/-, WHICH IS EQUIVALENT TO 7.5% OF RS. 1,11,31.,421/-, LE. WHICH IS THE TOTAL INCOME OF THE APPELLANT. THIS MEANS THE 10% O F THE AAA WAS WORKED OUT AT RS. 26,23,710/- BY THE ASSESSEE IN HI S COMPUTATION OF THE TOTAL INCOME. HOWEVER, THE A.O HAS WORKED OUT S UCH AMOUNT AT RS. 90,65,767/- INDICATING IT TO BE 10% OF THE OUTS TANDING AMOUNTS OF AGGREGATE AVERAGE ADVANCES (AAA) BY RURAL BRANCHES AS ON 31.03.2008, WHICH WAS QUANTIFIED A~ RS. 9,06,57,670 /-; OUT OF THE TOTAL ADVANCES OF LOANS BY THE BANK .THAT HAS BEEN PUT AT RS. 140,70,13,034/-. IN THIS REGARD, IT IS PERTINENT TO SAY THAT IT IS WRONG ON THE PART OF THE APPELLANT TO ASSUME THAT THE A.O HA S CALCULATED THE ELIGIBLE 20% OF THE PROFITS ON A AA AT RS. 90,65,767/-, SINCE THE A.O WAS ONLY INDICATING THE CALCULATION ON THE BASIS OF THE AMOUNTS AS AVAILABLE ON RECORD, AS PER THE STATUTORY PROVISION S IN THE' ASSESSMENT ORDER. IT IS ALSO R ELEVANT TO INDI CATE THAT THE AMOUNTS OF RS. 9,06,57,670 WAS SHOWN AS THE TOTAL OF TH E OUT STANDINGS OF AAA, WHICH WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER, FOR CA LCULATING THE E LIGIBLE PROFIT FOR THE PURPOSE OF CALCULATING THE PROVISIO NS FOR BAD AND DOUBTFUL DEBTS . AS PER THE A.O, SUCH AMOUNTS SHOULD BE CALCULATED ONLY ON THE ADVANCES MADE' DURING THE YEAR UNDER RE FERENCE. ON THESE LINES, THE DISALLOWANCES WERE RESTRICTED IN T HE EARLIER YEAR TO THE EXTENT OF THE AMOUNTS CLAIMED BY THE ASSESSEE I N. HIS COMPUTATION RESTRICTING SUCH CLAIM FOR CREATING THE PROVISIONS TO THE EXTENT OF AAA LENT/MADE BY THE BANK DURING THE YEAR ONLY AND SUCH 17 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. DECISION WAS CONFIRMED FOR THE AY 2009-10 IN THE CA SE OF THE SAME APPELLANT, WHEREIN IT WAS CLEARLY HELD THAT 10 0 /0 OF AAA SHOULD BE CONFINED TO THE ADVA N CES MADE DURING THE YEAR BUT NOT THE OUTSTANDING AMOUNTS AT THE END OF THE YEAR. ACCORDINGLY, THERE IS NO GROUND FOR THE ASSESSEE TO RAISE THIS ISSUE AGAINST THE ALLOWANCES ALLOWED BY THE A.O AND AS SUCH, THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS ARE RESTRICTED TO RS. 34,58,567/- AS CLAIMED BY THE ASSESSEE IN HIS COMPUTATION. ACCORDINGLY, THIS GROUND OF APPEAL IS TREATED AS DISMISSED. 37. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL A S OTHER MATERIALS ON RECORD. AT THE TIME OF HEARING, LD. AR COULD NOT ADVANCE ANY SUBSTANTIVE ARGUMENT IN SUPPORT OF THE GROUND RAISE D. EVEN OTHERWISE ALSO, THERE IS NO DISPUTE TO THE FACT THAT ASSESSEE HIMSELF HAS CREATED A RESERVE OF RS. 34,58,567 WHICH HAS BEEN CLAIMED A S DEDUCTION U/S 36(1)(VIIA) IN THE RETURN OF INCOME FILED FOR THE I MPUGNED AY. ONLY BECAUSE AO WHILE COMPUTING THE DEDUCTION U/S 36(1)( VIIA) HAS COMPUTED THE FIGURE OF ELIGIBLE DEDUCTION AT RS. 90 ,65,767, WILL NOT ENTITLE ASSESSEE TO CLAIM THE DEDUCTION OF RS. 90,6 5,767. AS WE DO NOT FIND ANY MERIT IN THE GROUND RAISED THE SAME IS DISMISSED. 38. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ITA NO. 906/HYD/13 39. ASSESSEE HAS RAISED SEVEN GROUNDS. GROUND NO. 1 , 5, 6 & 7 BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SPECIFI C ADJUDICATION. 40. AT THE OUTSET LEARNED AR EXPRESSED HIS INTENTIO N NOT TO PRESS GROUND NO. 3, ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 41. IN GROUND NO. 2 ASSESSEE HAS CHALLENGED THE DEC ISION OF LD. CIT(A) IN RESTRICTING THE EXPENDITURE CLAIMED TO RS . 2,26,16,355 IN PLACE OF RS. 3,12,31,869. 18 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. 42. BRIEFLY THE FACTS RELATING TO THE ISSUE ARE, DU RING THE ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE HAS CLAIMED DE DUCTION OF AN AMOUNT OF RS. 3,12,31,869 ON ACCOUNT OF WAIVER OF I NTEREST. AO BEING OF THE VIEW THAT INTEREST WAIVED IS IN THE NATURE O F BAD DEBT, ASSESSEE IS ELIGIBLE TO CLAIM SUCH BAD DEBT WRITTEN OFF ONLY TO THE EXTENT OF AN AMOUNT BY WHICH IT EXCEEDS THE RESERVE ALREADY CREA TED. AO NOTICED THAT THE RESERVE CREATED BY ASSESSEE FOR BAD DEBTS AS ON 01/04/2008 IS RS. 5,23,60,261. THEREFORE, AO WAS OF THE VIEW T HAT AS THE RESERVE CREATED FOR BAD DEBTS IS MORE THAN THE CLAIM OF BAD DEBTS, ASSESSEES CLAIM OF DEDUCTION CANNOT BE ALLOWED. THOUGH, ASSES SEE OBJECTING TO THE PROPOSED DISALLOWANCE, STATED THAT THE EXPENDIT URE CLAIMED IS NOT IN THE NATURE OF BAD DEBUT BUT IT IS A BUSINESS EXP ENDITURE, BUT, AO REJECTING THE SUBMISSIONS OF ASSESSEE, DISALLOWED T HE AMOUNT OF RS. 3,12,31,869. ASSESSEE CHALLENGED THE DISALLOWANCE B EFORE LD. CIT(A). 43. LD. CIT(A), THOUGH, IN PRINCIPLE, AGREED TO THE VIEW EXPRESSED BY AO THAT ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION U/S 36(1)(VII) OF AN AMOUNT WHICH EXCEEDS THE PROVISION FOR BAD DEBTS C REATED U/S 36(1)(VIIA). HOWEVER, HE OBSERVED THAT THE AMOUNT O F RS. 5,23,60, 261 CONSIDERED BY AO TO BE THE RESERVE CREATED WHILE DE TERMINING THE ELIGIBILITY OF DEDUCTION U/S 36(1)(VII) DID NOT SEE M TO HAVE ANY PROPER BASIS. LD. CIT(A), THEREFORE, CONSIDERING THE FACT THAT PROVISION FOR BAD AND DOUBTFUL DEBTS HAS BEEN QUANTIFIED AT RS. 8 6,15,514 U/S 36(1)(VIIA) DIRECTED THE AO TO ALLOW THE CLAIM OF W AIVER OF INTEREST TO THE EXTENT OF RS. 2,26,16,355. 44. THE LD. AR SUBMITTED BEFORE US THAT THE AMOUNT OF RS. 3,12,31,869 CLAIMED AS DEDUCTION IS NOT AT ALL IN T HE NATURE OF BAD DEBT. EXPLAINING FURTHER, IT WAS SUBMITTED THAT THE AMOUNT CLAIMED AS DEDUCTION IS NOT ACTUALLY INTEREST WAIVED BUT A REL IEF PACKAGE GIVEN TO THE PACS UNDER THE AGRICULTURAL DEBT WAIVER AND DEB T RELIEF SCHEME (ADWDRS), 2008. IT WAS SUBMITTED THAT AS PER THE SA ID SCHEME, ASSESSEE BEING A DISTRICT LEVEL BANK HAS TO DISBURS E LOSS OF INTEREST 19 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. ON WAIVED AMOUNT TO PACS AS PER THE VARIOUS SCHEMES FORMULATED BY THE CENTRAL GOVT., STATE GOVERNMENTS AND AP STATE C OOPERATIVE BANK. IT WAS SUBMITTED THAT AS PER THE SCHEME THE LOSS TO PACS ON ACCOUNT OF WAIVER OF INTEREST TO SMALL AND MARGINAL FARMERS FROM 01/03/08 HAS TO BE BORNE BY APCOB AND DISTRICT COOPERATIVE BANKS AT THE SHARING RATIO OF 70:30% THEREFORE THE AMOUNT CLAIMED AS DED UCTION IS 30% SHARE IN THE RELIEF PACKAGE BORNE BY ASSESSEE BANK. IT WAS, THUS, SUBMITTED THAT AS THE AMOUNT PAID TO THE PACS IS IN THE NATURE OF EXPENDITURE LAID OUT FOR THE PURPOSE OF BUSINESS AS PER THE SCHEME FORMULATED, THE SAME HAS TO BE ALLOWED U/S 37(1). 45. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT A S THE INTEREST WAIVER IS IN THE NATURE OF BAD DEBTS WRITTEN OFF TH E PROVISIONS OF SECTION 36(1)(VII) WOULD APPLY. 46. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. ON PERUSAL OF THE ADWDRS SCHEME, 2008, A COPY OF WH ICH IS AT PAGE 33 OF PAPER BOOK AND THE DIRECTION ISSUED BY THE AP STATE COOPERATIVE BANK, IT IS CLEAR THAT ASSESSEE HAS TO BEAR A SHARE IN THE RELIEF PACKAGE GIVEN TO PACS ON ACCOUNT OF LOSS INC URRED DUE TO WAIVER OF INTEREST TO SMALL AND MARGINAL FARMERS. T HEREFORE, THE EXPENDITURE INCURRED IS NOT STRICTLY IN THE NATURE OF BAD DEBTS WRITTEN OFF BUT IN THE NATURE OF EXPENDITURE PROVIDED U/S 3 7(1) OF THE ACT. ASSESSEE HAS NO OTHER OPTION BUT TO INCUR THE EXPEN DITURE AS PER THE DIRECTIVE OF THE GOVT. AS WELL AS APCOB. IN THE AFO RESAID VIEW OF THE MATTER, WE HOLD THAT THE AMOUNT OF RS. 3,12,31,869 IS ALLOWABLE AS BUSINESS EXPENDITURE. SINCE THE LD. CIT(A) HAS ALRE ADY ALLOWED EXPENDITURE TO THE EXTENT OF RS. 2,26,16,355, THE B ALANCE AMOUNT OF RS. 86,15,514 IS DIRECTED TO BE ALLOWED. THIS GROU ND IS ALLOWED. 20 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. 47. THE ONLY OTHER ISSUE AS RAISED IN GROUND NO. 4 RELATES TO DISALLOWANCE OF DEDUCTION CLAIMED OF RS. 65,17,568 TOWARDS MISCELLANEOUS RESERVES CREATED. 48. BRIEFLY THE FACTS RELATING TO THE AFORESAID ISS UE ARE, IN COURSE OF ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE HAS DEBITED AN AMOUNT OF RS. 2,27,82,782 TOWARDS MISCELLANEOUS RES ERVE. ON A QUERY MADE BY AO, IT WAS SUBMITTED BY ASSESSEE THAT THE RESERVE REPRESENTS CRYSTALLIZED LIABILITY. AO, HOWEVER, ON EXAMINING THE DETAILS SUBMITTED BY ASSESSEE, FOUND THAT THE AGREE MENTS, SUPPLY ORDERS/PURCHASE ORDERS PERTAINED TO FY 2009-10. HE, THEREFORE, WAS OF THE OPINION THAT AS THE LIABILITY DOES NOT PERTA IN TO THE YEAR UNDER CONSIDERATION, ASSESSEES CLAIM CANNOT BE ALLOWED. ACCORDINGLY, HE ADDED THE AMOUNT OF RS. 2,27,82,782. ASSESSEE CHALL ENGED THE ADDITION IN THE APPEAL PREFERRED BEFORE LD. CIT(A). 49. LD. CIT(A) ALSO SUSTAINED THE ADDITION BY HOLDI NG AS UNDER: 9.3 PERUSED THE SUBMISSIONS OF THE APPELLANT, WITH REFERENCE TO THE OBSERVATIONS MADE BY THE AO, IN THE ASSESSME NT ORDER. THE CLAIMS OF THE SAID RESERVES WAS DISALLOWED ON T HE BASIS THAT THE LIABILITY WAS NOT CRYSTALLIZED DURING THE YEAR AS PER THE AO AND IT IS A FACT TOO. FURTHER, THE CLAIM OF THE ASSESSEE UNDER 36(1)(VIII) TO THE EXTENT OF RS. 14,21,432 WAS REST RICTED BY THE ASSESSEE ITSELF HOLDING THAT THE SAME WAS MADE AS P ER THE INSTRUCTIONS OF THE RBI. FURTHER, THE ALLOWANCES CL AIMED UNDER SECTION 36(1)(VIII) BY THE APPELLANT TO THE EXTENT OF RS. 14,21,432 WAS RELATED TO SPECIFIC RESERVES SUCH AS AGRICULTURAL CREDIT STABLISATION FUND (RS. 9,16,042) AND COOPERA TIVE EDUCATION FUND (RS. 5,05,390) WHEREAS THE AMOUNTS C LAIMED NOW/SUBSEQUENTLY ARE NOT STATUTORY RESERVE AS DEFIN ED, BUT ARE ONLY GENERAL RESERVES. CONSIDERING THESE FACTS, THE CLAIM OF THE APPELLANT TO SET OFF THESE PROVISIONS AGAINST THE B ALANCE OF THE PROVISION AVAILABLE U/S 36(1)(VIII) TO THE EXTENT O F RS. 65,17,568 IS NOT TENABLE AND ACCEPTABLE. UNDER THE CIRCUMSTAN CES, I AM OF THE CONSIDERED OPINION THAT THE DISALLOWANCE OF RS. 2,77,81,782 MADE BY THE AO WHICH REPRESENTED THE RESERVES OF MISCELLANEOUS ITEMS, IS JUSTIFIED AND CONFIRMED. AC CORDINGLY, THIS GROUND OF APPEAL IS TREATED AS DISMISSED. 21 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. 50. LD. AR SUBMITTED BEFORE US THAT ASSESSEE IS CON DUCTING AN ELIGIBLE BUSINESS IN TERMS OF SECTION 36(1)(VIII) W HICH IS NOT DISPUTED EVEN BY THE DEPARTMENT. THEREFORE, AS PER THE TERMS OF SECTION 36(1)(VIII) ANY SPECIAL RESERVE CREATED AND MAINTAI NED BY A SPECIAL ENTITY IS TO BE ALLOWED. THE ONLY REQUIREMENT IS, IT SHOULD BE BELOW THE LEVEL OF 20% OF THE PROFIT DERIVED FROM THE ELI GIBLE BUSINESS. LD. AR SUBMITTED THAT THERE IS NO DISPUTE REGARDING ELI GIBLE DEDUCTION U/S 36(1)(VIII) TO THE EXTENT OF RS. 79,39,000. IT WAS SUBMITTED THAT AO HAS RESTRICTED THE ELIGIBILITY ONLY TO THE RESERVES CREATED FOR AGRICULTURAL CREDITS STABILIZATION FUND OF RS. 9,16 ,042 AND COOPERATIVE EDUCATION OF FUND OF RS. 5,05,390. IT WAS SUBMITTED THAT THERE IS NO DISTINCTION LIKE STATUTORY RESERVE OR GENERAL RESER VE IN TERMS OF SECTION 36(1)(VIII). THEREFORE, SINCE THE PROVISIONS OF SEC TION 36(1)(VIII) ARE MEANT FOR PROVIDING INCENTIVES AND STRENGTHENING IN STITUTIONS INVOLVED IN LONG TERM FINANCES, THE PROVISIONS REQUIRED TO B E INTERPRETED LIBERALLY AND BENEFICIALLY. LD. AR, THEREFORE, SUBM ITTED THAT THE DEDUCTION CLAIMED TOWARDS MISCELLANEOUS RESERVE SHO ULD BE ALLOWED TO THE EXTENT OF RS. 65,17,568. 51. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT A S THE RESERVE CREATED FOR RS. 65,17,568 ARE IN THE NATURE OF GENE RAL RESERVE THE SAME CANNOT BE ALLOWED. 52. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PART IES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. THE MISCELLANEOUS RESERVE CREATED BY ASSESSEE COMPR ISED OF THE FOLLOWING: I) CONSTRUCTION OF ADMINISTRATIVE BUILDING 25,00,0 00 II) COMPOUND WALLS TO BRANCHES 34,00,000 III) CORE BANKING SOLUTIONS (CBS) 1,74,44,00 0 IV) STORE WELLS 13,50,000 V) PACS JEWEL SAFES 7,14,000 VI) BRANCHES JEWEL SAFES 19,04,000 22 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. VII) JPA PREMIUM TO CROP LOANEES 3,98,782 VIII) FAKE NOTE DETECTORS 72,000 TOTAL 2,77,82,782 53. IT IS THE CONTENTION OF THE ASSESSEE BEFORE US THAT AS PER THE PROVISIONS OF SECTION 36(1)(VIII) ASSESSEE IS ELIGI BLE FOR DEDUCTION FOR AN AMOUNT OF RS. 79,39,000 WHEREAS DEDUCTION TO THE EXTENT OF RS. 14,21,432 HAS BEEN ALLOWED TO ASSESSEE, HENCE, ASSE SSEE REMAINS ELIGIBLE TO CLAIM DEDUCTION U/S 36(1)(VIII) TO THE EXTENT OF RS. 65,17,568. ON A PERUSAL OF SECTION 36(1)(VIII) OF T HE ACT, IT IS CLEAR THAT DEDUCTION NOT EXCEEDING TWENTLY PERCENT OF THE PROFITS DERIVED FROM ELIGIBLE BUSINESS CAN BE ALLOWED IN RESPECT OF ANY SPECIAL RESERVE CREATED. THE EXPRESSION SPECIAL RESERVE H AS NOT BEEN DEFINED U/S 36(1)(VIII). THE ONLY RESTRICTION IMPOS ED AS PER PROVISO TO SECTION 36(1)(VIII) IS AGGREGATE OF AMOUNT CARRIED TO SUCH RESERVE ACCOUNT SHOULD NOT EXCEED TWICE THE AMOUNT OF PAID UP SHARE CAPITAL AND GENERAL RESERVE. THEREFORE, IT CANNOT BE SAID T HAT THE ITEMS APPEARING IN THE MISCELLANEOUS RESERVE CANNOT BE TR EATED AS SPECIAL RESERVES AS THERE IS NOTHING IN THE PROVISION TO SU GGEST THAT ONLY STATUTORY RESERVES CAN BE TREATED AS SPECIAL RESERV E. IN VIEW OF THE ABOVE, CONSIDERING THE FACT THAT ASSESSEE IS ELIGIB LE TO CLAIM DEDUCTION U/S 36(1)(VIII) TO THE EXTENT OF RS. 79,3 9,000 OUT OF WHICH AN AMOUNT OF RS. 14,21,432 HAS ALREADY BEEN ALLOWED, A SSESSEE IS ENTITLED TO CLAIM DEDUCTION OF THE BALANCE AMOUNT O F RS. 65,17,568. ACCORDINGLY, WE DIRECT THE AO TO ALLOW DEDUCTION TO ASSESSEE TO THAT EXTENT. THIS GROUND IS ALLOWED. 54. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. 55. TO SUM UP, APPEAL IN ITA NO. 1161/HYD/2011 IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES, APPEALS IN ITA NOS. 721 & 722/HYD/13 ARE 23 ITA NOS. 905, 906, 721& 722/HYD/13 AND 1161/H/11 NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. DISMISSED AND APPEALS IN ITA NOS. 905 & 906/HYD/13 ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 10/12/2014. SD/- SD/- (P. M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 10 TH DECEMBER, 2014 KV COPY TO:- 1. NIZAMABAD DISTRICT COOPERATIVE CENTRAL BANK LTD. , KHALEELWADI, NIZAMABAD. 2. IT), WARD 2, NIZAMABAD 3. CIT(A)-VI, HYDERABAD 4. CIT-V, HYDERABAD 5.. THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYD ERABAD.