ACIT, Davangere V. M/s Davanagere District Central Co-operative Bank Limited, Chitradurga

ITA 894/BANG/2012

• Counselvise Citation: 89421114 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 12-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: V SRINIVASAN
• Keywords: Question of law; Bad and doubtful debts; Revised return; Capital expenditure
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI RAJPAL YADAV , JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER I.T.A. NO. 8 94 /BANG/201 2 (ASSESSMENT YEAR : 200 7 - 08 ) ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, DAVANGERE. VS . M/S. DAVANGERE DISTRICT CENTRAL CO - OPERATIVE BANK LIMITED, D.C. OFFICE CIRCLE, CHITRADURGA - 577 501 PAN AAATD 6617N APPELLANT RESPONDENT. APPELLANT BY : DR. P.K. SRIHARI, ADDL. CIT (D.R) RESPONDENT BY : SHRI V. SR I NIVASAN , C.A. DATE OF H EARI NG : 25.11 .2014 . DATE OF P RONOUNCEMENT : 3.12. 2 01 4 . O R D E R PER SHRI JASON P. BOAZ, A.M. : THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS), HUBLI DT. 11.05 .201 2 FOR ASSESSMENT YEAR 2008 - 09 . 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : - 2.1 THE ASSESSEE IS A DISTRICT CENTRAL CO - OPERATIVE BANK, CONTROLLED BY THE APEX BANK OF GOVT. OF KARNATAKA, AND IS ENGAGED IN PROVIDING LOANS TO PRIMARY AGRICULTURAL CO - OP. SOCIETIES (PACS S) AT SUBSIDISED RATES. FOR ASSESSMENT YEAR 2008 - 09 , THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 2 6 . 09 .200 8. A REVISED RETURN O F INCOME WAS FILED ON 26.2.2009 DECLARING TOTAL INCOME OF RS. 41,15,660 . THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') VIDE ORDER DT.2 9 .12.20 10 , WHEREIN THE INCOME OF 2 ITA NO. 8 94 /BANG/ 20 1 2 THE ASSESSEE WAS DETERMINED AT RS. 4,55,09,110 , AS AGAINST THE RETURNED INCOME OF RS. 41,15,662 IN VIEW OF THE FOLLOWING ADDITIONS / DISALLOWANCES THERETO : - I. ADDITION TO INTEREST INCOME : RS.2,33,08,318. II. PROVISION FOR NPA : RS.1,50,00,000 . III. DONATION : RS. 2,13,000. IV. CAPITAL EXPENDITURE : RS.15,20,350. V. INCOME TAX PAID : RS.50,41,908 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2008 - 09 DT. 29 .12.20 10 , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS), H UBLI. THE LEARNED CIT (APPEALS) VIDE ORDER DT. 11.5.2012 DISPOSED OFF THE ASSESSEE'S APPEAL ALLOW ING THE ASSESSEE PARTIAL RELIEF. 3. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), HUBLI DT. 11.5.2012 FOR ASSESSMENT YEAR 20 08 - 09 , REVENUE HAS PREFERRED T HIS APPEAL BEFORE TRIBUNAL RAISING THE FOLLOWING GROUNDS : - 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), HUBLI, IS BAD IN LAW. 2. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), HUBLI, IS OPPOSED TO LAW AND NOT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE CIT (APPEALS), HUBLI, ERRED IN REMITTING THE ADDITION OF RS. 2,33,08,318 MADE ON ACCOUNT OF ACCRUED INTEREST ON LOANS AND ADVANCES, TO THE A.O. TO RE - VERIFY THE BOOKS AND AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE AND RE - DETERMINE THE AMOUNT OF INTEREST. 4 . THE CIT (APPEALS), HUBLI, HAS NOT APPRECIATED THE AMENDMENT TO SECTION 145 MADE WITH EFFECT FROM 1.4.1997 AND ITS IMPLICATION IN ASSESSING THE ACCRUED INTEREST ON LOANS AND ADVANCES. 5 . T HE CIT (APPEALS), HUBLI, E RRED IN ALLOWING THE PROVISION FOR NPA OF RS.1, 37,31, 000. 6 . THE CIT (APPEALS), HUBLI IGNORED THE MANDATORY REQUIREMENT OF RBI GUIDELINES ACCORDING TO WHICH THE BANKS OUGHT TO COMPLY WITH AND FOLLOW MERCANTILE SYSTEM OF ACCOUNTING. 7 . FOR THESE AND OTHER GROUNDS THAT MAY BE URGED UPON AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT (APPEALS), HUBLI, MAY PLEASE BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 8 . THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DEL ETE ANY OTHER GROUNDS ON OR BEFORE THE HEARING OF APPEALS. 3 ITA NO. 8 94 /BANG/ 20 1 2 THE REVENUE HAS ALSO FILED AMENDED GROUNDS FOR THOSE RAISED AT S.NOS.3 & 5 (SUPRA) WHICH ARE AS UNDER : - 3. THE CIT (APPEALS), HUBLI ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE IN RESPEC T OF ADDITION OF RS.2,33,08,318 MADE ON ACCOUNT OF ACCRUED INTEREST ON LOANS AND ADVANCES. 5. THE CIT (APPEALS), HUBLI ERRED IN ALLOWING THE PROVISIONS FOR NPA OF RS.1,37,31,000. THIS ACTION OF CIT (APPEALS) RENDERS THE ORDER PERVERSE IN SO FAR AS HE HA S GIVEN A DIRECTION CONTRARY TO THE PROVISIONS OF SECTION 36(1)(VIIA)(A) OF THE IT ACT. 4. GROUNDS RAISED AT S.NOS.1, 2, 7 AND 8 ARE GENERAL IN NATURE AND THEREFORE NO ADJUDICATION IS CALLED FOR THEREON. 5. ADDITION TO INTEREST INCOME : RS . 2,33,08,318 . 5.1 THE GROUNDS RAISED AT S.NOS.3 AND 4 AND AMENDED GROUND N O .3 RELATE TO THE ISSUE OF INTEREST INCOME. IN THESE GROUNDS, REVENUE IS AGGRIEVED BY THE ORDER OF THE LEARNED CIT (APPEALS) IN DELETI NG THE ADDITIONS MADE ON ACCOUNT OF ACCRUED INTEREST ON LOANS AND A DVANCES WITHOUT APPRECIATING THAT AFTER THE AMENDMENT TO SECTION 145 OF THE ACT W.E.F. 1.4.1997, BANKS ARE REQUIRED TO FOLLOW THE MERCANTILE SYSTEM OF ACCOUNTING. 5.2 IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE IS FOLLOWING THE HYBRID SYSTEM OF ACCOUNTING, WHICH IS IN CONTRAVENTION OF THE PROVISIONS OF SECTION 145 OF THE ACT. AS PER THE ASSESSING OFFICER, IN TERMS OF SECTION 145 OF THE ACT, THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS AND PROFESSION SHALL BE COMPUTED IN ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS ACCOUNTING FOR THE INTEREST ON RECEIPT BASIS AND OTHERS O N ACCRUAL BASIS. IN SUPPORT OF HIS VIEW, THE ASSESSING OFFICER PLACED RELIANCE ON THE DECISION OF THE ITAT, CHENNAI IN THE CASE OF JCIT V INDIA EQUIPMENT LEASING LTD. (2008) 296 ITR (AT) 177. IN THAT VIEW OF THE MATTER, THE ASSESSING OFFICER HELD THAT INTEREST WHICH IS ACCRUED ON LOANS AND ADVANCES IS TO BE TREATED AS INCOME FOR THE RELEVANT ASSESSMENT YEAR AND ACCORDINGLY BROUGHT THE AMOUNT OF RS. 2,33,08,318 TO TAX IN THE ASSESSEE'S HANDS. 4 ITA NO. 8 94 /BANG/ 20 1 2 5.3.1 ON APPEAL BEFORE THE LEARNED CIT (APPEALS), THE ASSE SSEE SUBMITTED THAT BEING BOUND BY RBI GUIDELINES IN THIS REGARD, IT HAS BEEN RECOGNISING THE INTEREST RECEIVABLE ON LOANS AND ADVANCES WHICH ARE DOUBTFUL (NON - PERFORMING ASSETS) ON RECEIPT BASIS. ACCORDING TO THE ASSESSEE, AS PER SECTION 145 OF THE ACT, ONLY THE REAL INCOME AND NOT THE NOTIONAL INCOME IS TO BE CONSIDERED FOR TAXATION. IN SUPPORT OF THIS PROPOSITION, THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE HON'BLE APEX COURT IN UCO BANK LTD. V CIT 237 ITR 829 (SC). 5.3.2 THE ASSESSEE AL SO MADE SUBMISSIONS BEFORE THE LEARNED CIT (APPEALS) TO THE EFFECT THAT THE ASSESSING OFFICER ERRED IN ARRIVING AT THE QUANTUM OF ADDITION DUE TO THE FOLLOWING : - (I) THE INTEREST HAS BEEN COMPUTED ON THE CLOSING BALANCE OF ADVANCES, THEREBY COMPUTING THE INTEREST AS IF THE WHOLE OF THE ADVANCES APPEARING IN THE BALANCE SHEET AS ON 31.3.2007 WERE ADVANCED ON 1.4.2006, WHEREAS THE LOANS WERE SPREAD OVER THE ENTIRE YEAR. (II) THE ASSESSING OFFICER HAS NOT CONSIDERED THE OPENING BALANCES OF THE ADVANCES WI TH THE ASSESSEE. (III) THE ASSESSING OFFICER HAS MADE A DOUBLE ADDITION, BY THE ADDITION OF INTEREST ON NPA S ON LIABILITY SIDE OF BALANCE SHEET. (IV) THE ASSESSING OFFICER HAS NOT CONSIDERED THE INTEREST SHARING MECHANISM WHEREBY THE EFFECTIVE RATE OF INTEREST ON THE ADVANCES WAS ONLY 7.5% AS AGAINST 9% ADOPTED BY THE ASSESSING OFFICER. THE LEARNED CIT (APPEALS), AGREEING WITH THE ASSESSEE'S CONTENTION THAT THE ISSUE IS COVERED BY THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF UCO BANK L TD. (SUPRA), ALLOWED THE ASSESSEE S APPEAL ON THIS ISSUE. 5.4 REVENUE IS AGGRIEVED BY THE ORDER OF THE LEARNED CIT (APPEALS) ON THIS ISSUE. THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACING STRONG SUPPORT ON THE ORDER OF ASSESSMENT, SUBMITTED THAT T HE ASSESSEE HAS TO FOLLOW THE PROVISIONS OF SECTION 145 OF THE ACT FOR THE PURPOSES OF COMPUTATION OF INCOME UNDER THE NORMAL PROVISIONS OF THE ACT. IT WAS 5 ITA NO. 8 94 /BANG/ 20 1 2 SUBMITTED THAT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 145 OF THE ACT, THE ASSESSEE IS REQUIRE D TO FOLLOW EITHER THE CASH SYSTEM OR MERCANTILE SYSTEM OF ACCOUNTING, BUT CANNOT FOLLOW THE HYBRID SYSTEM OF ACCOUNTING. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE RBI GUIDELINES RELIED ON BY THE ASSESSEE HAVING NOTHING TO DO WITH THE ACC OUNTING SYSTEM FOR RECOGNISING TAXABLE INCOME AS PER THE INCOME TAX ACT, 1961 AS THEY OPERATE IN DIFFERENT FIELDS. 5.5 PER CONTRA, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT (APPEALS) AND PLACED RELIA NCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS : - (I) CIT V URBAN CO - OP. BANK LTD. [ ITA NO.471 OF 2013 (KAR. HIGH COURT) ] DT.30.6.2014. (II) SHIVA SAHAKARI BANK NIYAMITHA (ITA NO.257/BANG/2007) OF ITAT, BANGALORE. (III) THE ASSESSEE'S OWN CASE IN ITA NO. 889/BANG/2012 DT.10.10.2014 OF THE CO - ORDINATE BENCH OF BANGALORE TRIBUNAL WHEREIN THIS ISSUE WAS ADJUDICATED IN FAVOUR OF THE ASSESSEE. 5.6.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CONSIDERED THE MATERIAL ON RECORD. AS SUBMITTED BY THE LEARNED AU THORISED REPRESENTATIVE, WE FIND THAT THIS VERY ISSUE WAS CONSIDERED AND ADJUDICATED UPON IN THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE IN ITA NO.889/BANG/2012 DT.10.10.2012 FOR ASSESSMENT YEAR 2007 - 08 WHEREIN THE TRI BUNAL AT PARAS 5.6.1 AND 5.6.2 HAS HELD AS UNDER : - 5.6.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JUDICIAL DECISIONS PLACED RELIANCE UPON. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS IN TH E BUSINESS OF BANKING AND IS GOVERNED BY THE BANKING REGULATION S ACT, 1949 . THE QUESTION FOR CONSIDERATION BEFORE US IS WHETHER THE INTEREST ACCRUED ON NPAS , WHICH ARE DOUBTFUL OF BEING RECOVERED, SHOULD BE RECOGNISED AS INCOME ON ACCRUAL BASIS OR ON RECE IPT BASIS. WE FIND THAT THIS ISSUE HAS BEEN CONSIDERED BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF URBAN CO - OPERATIVE BANK LTD. (SUPRA). IN THAT CASE, THE QUESTION OF LAW BEFORE THE HON'BLE HIGH COURT WAS WHETHER THE TRIBUNAL WAS RIGHT IN HOLDIN G THAT THE INCOME FROM NON - PERFORMING ASSETS SHOULD BE ASSESSED ON CASH BASIS AND NOT ON MERCANTILE BASIS, DESPITE THE ASSESSEE'S MAINTAINING MERCANTILE SYSTEM OF ACCOUNTING ? THE HON'BLE C OURT AT PARA 3 OF ITS ORDER OBSERVED AS UNDER : - 6 ITA NO. 8 94 /BANG/ 20 1 2 3. THE SAID QUESTION HAS BEEN ANSWERED BY THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, BANGALORE VS. CANFIN HOMES LIMITED [(2011) 201 TAXMAN 273/13 TAXMANN.COM 43 (KARNATAKA)] AT PARAGRAPH 8, WHICH READS AS UNDER : - 8. THEREFORE, IT IS CLEA R, IF AN ASSESSEE ADOPTS MERCANTILE SYSTEM OF ACCOUNTING AND IN HIS ACCOUNTS HE SHOWS A PARTICULAR INCOME AS ACCRUING, WHETHER THAT AMOUNT IS REALLY ACCRUED OR NOT IS LIABLE TO BRING THE SAID INCOME TO TAX. HIS ACCOUNTS SHOULD REFLECT TRUE AND CORRECT STA TEMENT OF AFFAIRS. MERELY BECAUSE THE SAID AMOUNT ACCRUED WAS NOT REALISED IMMEDIATELY CANNOT BE A GROUND TO AVOID PAYMENT OF TAX. BUT, IF IN HIS ACCOUNT IT IS CLEARLY STATED THOUGH A PARTICULAR INCOME IS DUE TO HIM BUT IT IS NOT POSSIBLE TO RECOVER THE S AME, THEN IT CAN N OT SAID TO HAVE BEEN ACCRUED AND THE SAID AMOUNT CANNOT BE BROUGHT TO TAX. IN THE INSTANT CASE WE ARE CONCERNED WITH A NON - PERFORMING ASSET. AS THE DEFINITION OF NON - PERFORMING ASSET SHOWS AN ASSET BECOMES NON - PERFORMING WHEN IT CEASES T O YIELD INCOME. NON - PERFORMING ASSET IS AN ASSET IN RESPECT OF WHICH INTEREST HAS REMAINED UNPAID AND HAS BECOME PAST DUE. ONCE A PARTICULAR ASSET IS SHOWN TO BE A NON - PERFORMING ASSET, THEN THE ASSUMPTION IS IT IS NOT YIELDING ANY REVENUE. WHEN IT IS NOT YIELDING ANY REVENUE, THE QUESTION OF SHOWING THAT REVENUE AND PAYING TAX WOULD NOT ARISE. AS IS CLEAR FROM THE POLICY GUIDELINES ISSUED BY THE NATIONAL HOUSING BANK, THE INCOME FROM NON - PERFORMING ASSET SHOULD BE RECOGNIZED ONLY WHEN IT IS ACTUALLY R ECEIVED. THAT IS WHAT, THE TRIBUNAL HELD IN THE INSTANT CASE. THEREFORE, THE CONTENTION OF THE REVENUE THAT IN RESPECT OF NON - PERFORMING ASSETS EVEN THOUGH IT DOES NOT YIELD ANY INCOME AS THE ASSESSEE HAS ADOPTED A MERCANTILE SYSTEM OF ACCOUNTING, HE HAS TO PAY TAX ON THE REVENUE WHICH HAS ACCRUED NOTIONALLY IS WITHOUT ANY BASIS. IN THAT VIEW OF THE MATER, THE SECOND SUBSTANTIAL QUESTION FRAME IS ANSWERED AGAINST, THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 5.6.2 WE FIND THAT THE FACTS OF THE CASE O N HAND BEFORE US AND THE QUESTION OF LAW RAISED IN THE ABOVE REFERRED CASE ARE IDENTICAL AND THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF URBAN CO - OPERATIVE BANK LTD. (SUPRA), WE DECIDE THE ISSUE IN F AVOUR OF THE ASSESSEE. CONSEQUENTLY, GROUNDS RAISED BY REVENUE AT S.NOS.3 AND 5 ARE DISMISSED. 5. 6.2 RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V URBAN CO - OPERATIVE BANK (SUPRA) AND THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007 - 08 (SUPRA) , WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. CONSEQUENTLY, THE GROUNDS RAISED AT S.NOS.3 & 4 AND AMENDED GROUND NO.3 RAISED BY REVENUE ARE DISMISSED. 7 ITA NO. 8 94 /BANG/ 20 1 2 6. PROVISION FOR NON - PERF ORMING ASSETS ( NPA ) 6.1 THE GROUNDS RAISED AT S.NO. 5 & 6 AND AMENDED GROUND AT S.NO.5 PERTAIN TO THE ISSUE OF PROVISION FOR NPAS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.1,50, 00, 000 AS PROVISION FOR N PAS. IT IS THE CLAIM AND CONTENTION OF THE ASSESSEE THAT SUCH A PROVISION IS MANDATED AS PER THE PRUDENTIAL NORMS OF RBI AND HENCE IS AN ALLOWABLE DEDUCTION U/S.36(1)(V I IA) OF THE ACT. THE ASSESSING OFFICER, HOWEVER, DID NOT AGREE WITH THIS CONTENTION OF THE ASSESSEE. ACCORDING TO THE ASSESSING OFFICER, SUCH A PROVISION IS LIABLE TO BE ADDED TO THE INCOME AND IF AT ALL ANY DEDUCTION IS TO BE CLAIMED, THE ASSESSEE HAS TO CLAIM IT AS BAD AND DOUBTFUL DEBTS. 6.2 ON APPEAL, THE LEARNED CIT (APPEALS), RELY ING ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF UCO BANK LTD. (SUPRA), DELETED THE ADDITION AND ALLOWED THE ASSESSEE'S APPEAL ON THIS ISSUE THAT THE ACTUAL PROVISION OF RS.1,37,31,000 IS TO BE ALLOWED AS A DEDUCTION. 6.3.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JUDICIAL DECISIONS CITED AND RELIED ON. AS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE, WE FIND THAT THIS ISSUE WAS CONSIDERED AND ADJUDICATED UPON IN THE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007 - 08 IN ITA NO.889/BANG/2012 DT.10.10.2014 WHEREIN AT PARAS 6.3.1 AND 6.3.2 THEREOF IT HAS BEEN HELD AS UNDER : - 6.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JUDICIAL DECISIONS CITED AND RELIED ON. THE ISSUE RAISED IS WITH REFERENCE TO THE ASSESSEE'S CLAIM FOR DEDUCTION UNDER THE HEAD PROVISION FOR NPAS . THE ASSESSING OFFICER DID NOT ALLOW THE ASSESSEE'S CLAIM FOR THE REASON THAT IT WAS NOT WRITTEN OFF IN THE BOOKS OF ACCOUNT, AS IS REQUIRED BY SECTION 36(1)(VIIA) OF THE ACT. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT THE PROVISION FOR NPAS WAS MADE AS PER THE RBI S G UIDELINES, WHICH ARE BINDING ON THE ASSESSEE AND THEREFORE IT SHOULD BE ALLOWED AS A DEDUCTION UNDER THE ACT. IT WAS SUBMITTED THAT PROVISION FOR NPAS IS MADE ONLY WHEN RECOVERY IS DIFFICULT OR MAY NOT BE POSSIBLE AND THEREFORE THE SAME SHOULD BE ALLOWED AS DEDUCTION. 8 ITA NO. 8 94 /BANG/ 20 1 2 6.3.2 SECTION 36(1)(VIIA) OF THE ACT PROVIDES FOR ALLOWANCE OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS. ALTHOUGH THE ASSESSEE HAS USED THE NOMENCLATURE FOR THE PROVISION AS PROVISION FOR NPAS , BUT IN PITH AND SUBSTANCE THE PROVISION HAS BEEN CREA TED FOR BAD AND DOUBTFUL DEBTS AND IN DOING SO, THE ASSESSEE HAS FOLLOWED THE RBI GUIDELINES. IN THE LIGHT OF THE ABOVE DISCUSSIONS OF THIS ISSUE AND THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF UCO BANK LTD. (SUPRA), WE CONCUR WITH AND DO NOT FIND IT NECESSARY TO INTERFERE WITH THE DECISION OF THE LEARNED CIT (APPEALS) IN ALLOWING THE ASSESSEE'S CLAIM OF DEDUCTION ON ACCOUNT OF PROVISION FOR NPA. CONSEQUENTLY THE GROUNDS RAISED AT S.NOS.6 & 7 ARE DISMISSED. FOLLOWING THE AB OVE DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007 - 08 (SUPRA), WE UPHOLD THE ORDER OF THE LEARNED CIT (APPEALS) IN ALLOWING THE ASSESSEE'S CLAIM OF DEDUCTION ON ACCOUNT OF PROVISION FOR NPA. CONSEQUE NTLY GROUNDS RAISED AT S.NOS.5 AND 6 AND AMENDED G R O UND NO.5 ARE DISMISSED. 7 . IN THE RESULT, REVENUE S APPEAL FOR A.Y. 2008 - 09 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD DEC., 2 01 4 . SD/ - S D/ - ( RAJPAL YADAV ) ( JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR , ITAT, BANGALORE