ITO, Chandigarh V. M/s Punjab STate Cooperative Agricultural Development Bank Ltd., Chandigarh

ITA 914/CHANDI/2012

• Counselvise Citation: 91421514 RSA 2012
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 914/CHD/2012 ASSESSMENT YEAR: 2009-10 ITO, WARD 2(3), V M/S PUNJAB STATE COOPERATIVE CHANDIGARH. AGRICULTURAL DEVELOPMENT BANK LTD., SCO 53-54, SECTOR 17B, CHANDIGARH. PAN: AABFP-9402A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJEET SINGH RESPONDENT SHRI M.R.SHARMA DATE OF HEARING : 07.11.2012 DATE OF PRONOUNCEMENT : 09.11.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 14.06.2012 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE I NTEREST OF RS. 2,12,46,106/- ARISING OUT OF SURPLUS FUNDS IN RESER VE ACCOUNTS IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I). 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 7,36,966/- MADE BY THE AO BY HOLDING THAT THE PROVI SIONS OF NPA, IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I). 3. THE APPELLANT CRAVES TO ADD OR AMEND ANY GROUND AN Y GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OFF. 4. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE CA NCELLED 2 AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS B EFORE THE BENCH, BOTH LD. 'DR' AND LD. 'AR' STATED THAT THE G ROUNDS BEARING NO. 1 & 2 IN THE REVENUES APPEAL, ARE COVE RED BY THE EARLIER DECISION OF THE TRIBUNAL, AS REFERRED TO BY THE CIT(APPEALS) IN HIS ORDER FOR THE ASSESSMENT YEAR 2 009-10 DATED 14.06.2012 AND ALSO BY THE DECISION IN ITA NO . 742/CHD/2011, ASSESSMENT YEAR 2008-09, IN ASSESSEE' S OWN CASE, VIDE GROUND NOS. 1 & 2, AS IS EVIDENT FROM TH E PERUSAL OF DECISION OF THE TRIBUNAL DATED 19.09.2011 IN THE SA ID APPEAL. 4. WE HAVE PERUSED GROUND NO.1 RAISED BY THE REVENU E AND FOUND THAT THE STATED POSITION BY BOTH LD. 'DR' AND LD. 'AR', THAT THE ISSUE IS COVERED BY THE DECISION OF THE HO N'BLE TRIBUNAL IN ASSESSEE'S OWN CASE, AS REFERRED TO ABO VE, AS CORRECT. HOWEVER, RELEVANT PART OF THE FINDINGS OF CIT(APPEALS), AS RECORDED IN PARA 3 IS REPRODUCED HEREUNDER : 3. GROUND OF APPEAL NO. 2 IS AGAINST THE ADDITIO N OF RS.2,25,19,769/- BEING THE INTEREST ON 'RESERVE FUNDS' BY HOLDING TH AT DEDUCTION U/S 80P(2)(A)(I) IS RIOT ADMISSIBLE ON INTEREST ARISING OUT OF SURPLUS FUNDS, PARA 4 TO 6 OF HER APPELLATE ORDER DATED 31.05.2010 IN APP EAL NO. 239/P/09- 10,WHILE DECIDING THIS ISSUE, SHE HAD FOLLOWED THE DECISION OF THE HON'BLE ITAT, CHANDIGARH IN APPELLANT'S OWN CASE FOR A.Y. 2 006-07 IN ITA NO. 435/CHANDI/2009, IN WHICH THE HON'BLE ITAT HAD ADJU DICATED IN PARA 7 AS UNDER: - 'THE THIRD INCOME RELATES TO INTEREST INCOME ON RES ERVE FUNDS AMOUNTING TO RS. 3,98,94,432/-. THE ASSESSING OFFIC ER DISALLOWED THE CLAIM ON THE PLEA THAT THE SAID INTEREST INCOME WAS NOT EARNED FROM THE PROVIDING OF CREDIT FACILITIES TO THE MEMBERS. THE INCOME IN QUESTION WAS EARNED ON SURPLUS FUNDS KEPT BY THE ASSESSEE IN THE BANKS TO EARN INCOME. THE CIT(APPEALS) HAS ALLOWED THE CLAIM OF T HE ASSESSEE ON THE GROUND THAT THE INTEREST INVESTED OUT OF RESERVE FU NDS IS TO BE TREATED AS FROM AN ACTIVITY ATTRIBUTABLE TO THE ASSESSEE 'S BU SINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE CONTENTION OF THE LE ARNED DR WAS ON THE SAME LINES AS MADE OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 3 NO DOUBT, IN THIS CASE, THE DIRECT SOURCE OF INCOME IS NOT THE LOAN ADVANCED TO THE MEMBERS OF THE SOCIETY. SO HOWEVER, IN VIEW OF THE EXPRESSION 'ATTRIBUTABLE TO' PRESENT IN SECTION 80P(2)(A)(I), THE SAID INCOME CAN BE SAID TO BE INCIDENTAL AND IN PROXIMITY TO THE BUSINESS O F THE ASSESSEE OF PROVIDING CREDIT FACILITY TO ITS MEMBERS. QUITE NAT URALLY, THE FUNDS AVAILABLE WITH THE ASSESSEE FOR ITS BUSINESS HAVE B EEN KEPT IN THE BANKS WHICH HAS RESULTED IN EARNING THE SUBJECT INTEREST INCOME. IN FACT, IN OUR VIEW THE PARITY OF REASONING ENUNCIATED IN THE CASE OF KARNATAKA STATE CO- OPERATIVE APEX BANK 251 ITR 194 AND THE SPECIAL BEN CH OF THE TRIBUNAL IN THE CASE OF SURAT DISTRICT CO-OPERATIVE BANK, 85 ITD 1 (SB) (AHD) CLEARLY HELPS THE CASE OF THE ASSESSEE. IN OUR VIEW, THE ASSESSIN G OFFICER WAS NOT JUSTIFIED IN OBSERVING THAT THE SURPLUS FUNDS HAVE BEEN INVES TED NOT FOR PROVIDING FURTHER CREDIT TO THE MEMBERS BUT HAVE BEEN USED TO MAXIMIZING PROFIT OR UTILIZING IN OTHER AREAS. IN OUR VIEW, THE FUNDS KE PT IN THE BANK CAN BE SAID TO BE READY FOR UTILIZATION BY THE ASSESSEE IN ITS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT IS ONLY TILL S UCH TIME THE SAME ARE NOT DEPLOYED OR ARE NOT REQUIRED FOR GIVING CREDIT FACI LITIES TO ITS MEMBERS, THE SAME HAVE BEEN KEPT IN THE BANKS. THE INCOME FR OM SUCH DEPOSITS, IN OUR CONSIDERED OPINION, CAN BE SAID TO BE ATTRIBUTE D TO THE BUSINESS OF PROVIDING CREDIT, SO AS TO FALL WITHIN SECTION 80P( 2)(A)(I) OF THE ACT. IN OUR VIEW, CIT (APPEALS) MADE NO MISTAKE ON THIS SCORE A LSO. HENCE, ON THIS GROUND, THE REVENUE HAS TO FAIL. ' 3.2 I HAVE GONE THROUGH RELEVANT PORTIONS OF THE OR DER OF THE MY PREDECESSOR IN A.Y. 2007-08 AND HON'BLE ITAT IN THE CASE OF THE APPELLANT IN A.Y. 2006-07 AND I AM ENTIRELY IN AGRE EMENT WITH THE FINDINGS GIVEN BY MY PREDECESSOR. IN FACT, THE ADDI TION MADE ON THIS ACCOUNT WAS DELETED BY ME IN A.Y. 2008-09. HENCE TH E ADDITION MADE ON THIS ACCOUNT IS DELETED IN THIS YEAR ALSO. GROUND O F APPEAL NO. 2 IS ALLOWED. 5. SIMILAR ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ITA NO.742/CHD/2011, ASSESSMENT YEAR 2008-09 IN ASSESSEE'S OWN CASE, AS IS EVIDENT FROM THE FOLLOWI NG REPRODUCTION OF THE SAME: 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. WE FIND THAT THE SIMILAR ISSUES AS RAISED VIDE GROU ND NOS. 1 TO 3 WERE RAISED IN THE CASE OF ASSESSEE ITSELF IN IT A NO. 1113/CHD/2010 RELATING TO ASSESSMENT YEAR 2007-08 AND THE TRIBUN AL VIDE ITS ORDER DATED 9.2.2010 IN TURN RELYING ON ITS EARLIER ORDER IN I TA NO. 435/CHANDI/2009 RELATING TO ASSESSMENT YEAR 2006-07 (ORDER DATED 24.9.2009) IN THE CASE OF ASSESSEE ITSELF, DISMISSE D THE APPEAL OF THE REVENUE. 5. THE ISSUE RAISED IN GROUND NO. L IS AGAINST TH E ORDER OF C1T(A) IN HOLDING THAT INTEREST OF RS. 2,12,46,106/- ARISI NG OUT OF SURPLUS FUNDS IN RESERVE ACCOUNTS IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I). SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL AND IT WAS HELD BY THE TRIBUNAL THAT INCOME ARISING FROM DEPOSIT S IN BANK WHICH COULD BE SAID TO BE READY FOR UTILIZATION BY THE ASS ESSEE IN HIS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS WAS HELD TO BE ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITIES IN ORD ER TO FALL WITHIN THE AMBIT OF SECTION 80P(2)(A)(I) OF THE ACT. THE TRIB UNAL VIDE PARA 4 IN 4 TURN RELYING ON THE EARLIER ORDER OF THE TRIBUNAL H ELD AS UNDER:- 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. WE FIND THAT THE ISSUE RAISED IN GROUN D NO.] REGARDING ALLOWANCE OF DEDUCTION U/S 80P(2)(A)(I) O F THE ACT OF INTEREST INCOME EARNED ON SURPLUS FUNDS IN A CCOUNTS AMOUNTING TO RS. 1,22,73,385/'- IS COVERED BY THE O RDER OF THE TRIBUNAL IN ITA NO. 435/CHANDI/2009 RELATING TO ASS ESSMENT YEAR 2006-07 DATED 24.9.2009 IN ASSESSEE'S OWN CASE . THE TRIBUNAL HAS ADJUDICATED THE ISSUE VIDE PARAS 7 & 8 OF ITS ORDER AND THE TRIBUNAL UPHOLDING THE ORDER OF CIT(A ) DISMISSED THE GROUND OF APPEAL RAISED BY THE REVENU E BY OBSERVING AS UNDER:- '7. THE THIRD ISSUE RAISED BY THE REVENUE IS WITH REGARD TO THE ACTION OF THE CIT(APPEALS) IN ALLOWIN G DEDUCTION U/S SOP(2) (A) (I) ON INTEREST INCOME ON RESERVE FUNDS AMOUNTING TO RS. 74,19,803/-. ON THIS ASPECT ALSO, IN VIEW OF THE PRECEDENT DATED 25.3.20 09 (SUPRA), WHEREIN THE FOLLOWING DISCUSSION HAS BEEN MADE, THE ORDER OF THE CLT(APPEALS) DESERVES TO BE AFFIRMED : - '14. THE THIRD INCOME RELATES TO INTEREST INCOME ON RESERVE FUNDS AMOUNTING TO RS. 3,98,94,432/-. THE A SSESSING OFFICER DISALLOWED THE CLAIM ON THE PLEA THAT THE S AID INTEREST INCOME WAS NOT EARNED FROM THE PROVIDING O F CREDIT FACILITIES TO THE MEMBERS. THE INCOME IN QUESTION WAS EARNED ON SURPLUS FUNDS KEPT BY THE ASSESSEE IN THE BANKS TO EARN INCOME. THE CIT(APPEALS) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE INTEREST INVESTED OUT OF RESERV E FUNDS IS TO BE TREATED AS FROM AN ACTIVITY ATTRIBUT ABLE TO THE ASSESSEE'S BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS M E M HERS. THE CONTENTION OF THE LEARNED D R WAS ON THE SAME LINES AS MADE OUT BY TH E ASSESSING OFFICER IN THE ASSESSMENT ORDER. NO DOUBT , IN THIS CASE, THE DIRECT SOURCE OF INCOME IS NOT THE L OAN ADVANCED TO THE MEMBERS OF THE SOCIETY. SO HOWEVER, IN VIEW OF THE EXPRESSION 'ATTRIBUTABLE TO ' PRESENT IN SECTION 80P(2) (A) (I), THE SAID INCOME CAN BE SAID TO BE INCIDENTAL AND IN PROXIMITY TO TH E BUSINESS OF THE ASSESSEE OF PROVIDING CREDIT FACILI TIES TO ITS MEMBERS. QUITE NATURALLY, THE FUNDS AVAILABL E WITH THE ASSESSEE FOR ITS BUSINESS HAVE BEEN KEPT I N THE BANKS WHICH HAS RESULTED IN EARNING THE SUBJECT INTEREST INCOME IN FACT, IN OUR VIEW THE PARITY OF REASONING ENUNCIATED IN THE CASE OF KARNATAKA STATE CO-OPERATIVE APEX BANK, 251 ITR 194 AND THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SURAT DISTRICT CO-OPERATIVE BANK, 85 1TD 1 (SB) (AHD) CLEARLY HELPS THE CASE OF THE ASSESSED. IN OUR VIEW , THE ASSESSING OFFICER WAS NOT JUSTIFIED IN OBSERVING TH AT THE SURPLUS FUNDS- HAVE BEEN INVESTED NOT FOR PROVIDING FURTHER CREDIT TO THE MEMBERS BUT HAVE BEEN USED TO MAXIMIZING PROFIT OR UTILIZING IN ETHER AREAS, IN O UR VIEW, THE FUNDS KEPT IN THE BANK CAN BE SAID TO BE READY FOR UTILIZATION BY THE ASSESSEE IN ITS BUSINE SS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. LT I S ONLY TILL SUCH TIME THE SAME ARE NOT DEPLOYED OR AR E NOT REQUIRED FOR GIVING CREDIT FACILITIES TO ITS ME MBERS, THE SAME HAVE BEEN KEPT IN THE BANKS. THE INCOME FR OM SUCH DEPOSITS, IN OUR CONSIDERED OPINION, CAN BE SA ID TO BE ATTRIBUTABLE 10 THE BUSINESS OF PROVIDING CREDIT FACILITIES, SO AS TO FALL WITHIN SECTION 80P(2)(A)( I) OF 5 THE ACT. IN OUR VIEW, CIT(APPEALS) MADE NO MISTAKE ON THIS SCORE ALSO. HENCE, ON THIS GROUND, THE REVENUE HAS TO FAIL. ' 8. RESPECTFULLY CONCURRING WITH THE AFORESAID PRECEDENT, DECISION OF THE CITFAPPEALS) IS UPHELD A ND REVENUE FAILS ON THIS ASPECT ALSO. 6. THE ISSUE RAISED IN THE PRESENT GROUND IS IDENTICAL TO THE ISSUE RAISED BEFORE TRIBUNAL IN EARLIER YEAR. ACCORDINGLY , FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL (SUPRA) IN ASSESSEE'S OWN CASE, WE DISMISS THE GROUND OF APPEA1 NO.1 RAISED BY THE REVENUE. 6. RESPECTFULLY FOLLOWING DECISION OF THE TRIBUNAL IN IDENTICAL ISSUE, AS REFERRED TO ABOVE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. GROUND NO.2, RAISED BY THE REVENUE IS ALSO COVER ED BY THE DECISION OF THE TRIBUNAL, AS INDICATED BY THE C IT(APPEALS) IN HIS IMPUGNED ORDER AND BY THE DECISION OF THE TR IBUNAL FOR THE ASSESSMENT YEAR 2008-09 DATED 19.09.2012 IN ASS ESSEE'S OWN CASE. THE RELEVANT FINDINGS OF THE CIT(APPEALS ), AS CONTAINED IN PARA 4 TO 4.2 IS REPRODUCED HEREUNDER : 4. GROUND OF APPEAL NO. 3 IS AGAINST DISALL OWANCE OF RS. 7S6966/- ON ACCOUNT OF PROVISION FOR NPA MADE BY THE APPELLANT. 4.1 SIMILAR ADDITION WAS MADE IN THE CASE OF THE AP PELLANT IN A.Y. 2007- 08, WHICH HAS BEEN DELETED BY MY PREDECESSOR BY FOL LOWING THE DECISION OF HON'BLE ITAT, CHANDIGARH IN THE APPELLANT'S OWN CAS E FOR A.Y. 2006-07 (SUPRA). THE HON'BLE ITAT HAD ADJUDICATED IN PARA 5 OF ITS ORDER, CITED SUPRA, AS UNDER: - 'THE FACTS ARE THAT THE ASSESSEE CLAIMED DEDUCTION OF A SUM OF RS. 16,75,070/- REPRESENTING THE PROVISION ON ACCOUNT O F NPAS. THE PROVISION OF NPAS WAS MADE IN THOSE CASES IN WHICH THE LOANEES STARTED MAKING DEFAULTS IN RE-PAYMENT OF LO ANS. IN TERMS OF THE GUIDELINES ISSUED BY NABARD FOR CREATI NG PROVISIONS DEPENDING UPON THE LENGTH OF DEFAULT, THE DEDUCTION OF RS. 16,75,070/- WAS SOUGHT TO BE JUSTIFIED. THE ASSESSI NG OFFICER OBSERVED THAT SUCH A CLAIM COULD ONLY BE ALLOWED IF THE ASSESSEE WAS ENGAGED IN A BUSINESS OF BANKING. SINC E, IT WAS HELD THAT ASSESSEE WAS NOT ENGAGED IN THE BANKING B USINESS, THE CLAIM WAS DENIED. IN APPEAL, THE CIT(APPEALS) HELD THAT THOUGH THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE SAID CLAIM 6 BUT THE CONSEQUENTIAL INCREASE IN INCOME WOULD RESU LT IN A HIGHER CLAIM OF DEDUCTION U/S 80P(2)(A) (I) OF THE ACT . A GAINST SUCH DECISION, THE REVENUE IS IN APPEAL. IN OUR CONSIDERED OPINION, THE DISALLOWANCE OF THE PROVISION FOR NPA HAS BEEN SUSTAINED BY THE CTT (APPEALS), BUT EV IDENTLY, THE INCOME RESULTING THEREOF HAS BEEN HELD TO BE EL IGIBLE FOR SOP (2) (A)(I) OF THE ACT. ON THIS ASPECT, WE FIND NO JUSTI FICATION FOR THE GROUND RAISED BY THE REVENUE. THERE IS NOTHING BROU GHT ON RECORD TO DISREGARD THAT THE INTEREST IRRECOVERABLE , WHICH IS EMBEDDED IN THE NPAS IS NOTHING BUT INTEREST RECEIV ABLE FROM MEMBERS, THOUGH NOT REGULARLY RECEIVED. IT IS ONLY THE DEFAULTED INTEREST INCOME, WHICH IS SOUGHT TO BE CLAIMED AS A DEDUCTION. IF THE SAID DEDUCTION IS NOT ALLOWED, THE NATURAL CORO LLARY IS THAT THE ENHANCED INCOME WOULD BECOME ELIGIBLE FOR80P(2(A) ( I), TO WHICH THE ASSESSEE IS OTHERWISE ENTITLED. IN FACT, SIMILAR I SSUE CAME UP BEFORE THE TRIBUNAL IN THE CASE OF H.P.STATE CO-OPE RATIVE BANK LTD. (SUPRA) WHEREIN THE SAME CLAIM WAS HELD A S ELIGIBLE FOR BENEFIT U/S 80P(2)(A)(I) OF THE ACT FOR THE REASON THAT EVEN THE INTEREST WAS ALSO EARNED FROM THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS. THEREFORE, ON THIS ASPECT, WE FIND NO JUSTIFIABLE G RIEVANCE FOR THE REVENUE AND THE REVENUE FAIL ON THIS ASPECT . 4.1.1. HON'BLE ITAT HAS ALSO U PHELD THE ORDER OF MY PREDECESSOR IN A.Y. 2007-08 VIDE PARA 6 & 7 OF ORDER DATED 09.12 .2010 IN ITA NO. 1113/CHANDI/2010. 4.2 I HAVE GONE THROUGH THE DECISION OF MY PREDECES SOR AND HON'BLE ITAT, CHANDIGARH ON THIS ISSUE AND I AM ENTIRELY IN AGREEMENT WITH THE FINDINGS GIVEN BY MY PREDECESSOR WHICH HAVE BEEN AFFIRMED BY HON'BLE ITA T. IN FACT, THE ADDITION MADE ON THIS ACCOUNT WAS DELETED BY ME IN A.Y. 2008-09. HENCE, THE ADDITION MADE ON THIS A CCOUNT IS DELETED IN THIS YEAR ALSO. GROUND OF APPEAL NO. 3 IS ALLOWED. 8. SIMILARLY, FINDINGS OF THE ORDER DATED 19.09.201 1 OF THE TRIBUNAL IN ITA NO.742/CHD/2011 ARE ALSO REPRODUCED HEREUNDER : 7. THE ISSUE RAISED BY THE REVENUE IN GROUND NO . 2 IS AGAINST THE ORDER OF THE CIT(A) IN HOLDING DISALLOWANCE OF PROV ISIONS OF NPA IS ELIGIBLE FOR DEDUCTION U/S 80(P)(2)(A)(I) OF THE AC T. WE FIND THAT THIS ISSUE HAS ALSO BEEN DELIBERATED UPON BY THE TRIBUNA L VIDE ITS ORDER DATED 9.12.2010 IN TURN RELYING UPON THE ORDER OF THE TRI BUNAL DATED 24.9.2009 (VIDE PARAS 5 & 6) WHICH IN TURN, FOLLOWED ITS OWN PRECEDENT OF ORDER DATED 25.3 2009 IN ITA NOS. 120/CHANDI/2007 AND OTHERS FOR 7 ASSESSMENT YEAR 1998-99 TO 2005-06, AFFIRMING THE STAND OF THE CIT(A) DISMISSED THE GROUND OF APPEAL RAISED BY THE REVENUE BY HOLDING AS UNDER:- '5. THE SECOND GROUND RAISED BY THE REVENUE IS WITH REGARD TO THE ACTION OF THE CIT(APPEALS) IN DELETING THE DISA LLOWANCE OF RS. 41, 20,183/- REPRESENTING PROVISION OF NON PERFORMI NG ASSETS (NPAS). ON THIS ASPECT ALSO, THE TRIBUNAL IN ITS OR DER DATED 25.3.2009 (SUPRA) HAS ADJUDICATED THE ISSUE IN FOLL OWING WORDS: 12. THE SECOND ASPECT IS IN RELATION TO INCOME RESULTIN G ON ACCOUNT OF DISALLOWANCE OF RS. 16,75,070/- REPRESENTING PROVISION OF NON-PERFORMING ASSETS (NPAS). THE FACTS ARE THAT THE ASSESSE E CLAIMED DEDUCTION OF A SUM OF RS. 16, 75, 070/- REP RESENTING THE PROVISION ON ACCOUNT OF NPAS. THE PROVISION OF NPAS WAS MADE IN THOSE CASES IN WHICH THE LOANE ES STARTED MAKING DEFAULTS IN RE-PAYMENT OF LO ANS. IN TERMS OF THE GUIDELINES ISSUED BY NABARD FOR CREATING PROVISIONS, DEPENDING UPON THE LENGTH OF DEFAULT, THE DEDUCTION OF RS. 16,75,070/- W AS SOUGHT TO BE JUSTIFIED. THE ASSESSING OFFICER OBSERVED THAT SUCH A CLAIM COULD ONLY BE ALLOWED IF THE ASS ESSEE WAS ENGAGED IN A BUSINESS OF BANKING. SINCE, I T WAS HELD THAT ASSESSEE WAS NOT ENGAGED IN THE BANKING BUSINESS, THE CLAIM WAS DENIED. IN APPEAL, THE CLT(APPEALS) HELD THAT THOUGH THE ASSESSING OF FICER- WAS JUSTIFIED IN DISALLOWING THE SAID CLAIM, BUT THE CONSEQUENTIAL INCREASE IN INCOME WOULD RESULT IN A HIGHER CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. AGAINST SUCH DECISION, THE R EVENUE IS IN APPEAL. 13. IN OUR CONSIDERED OPINION, THE DISALLOWANCE OF THE PROVISION FOR NPA HAS BEEN SUSTAINE D BY THE CIT (APPEALS), BUT EVIDENTLY, THE INC OME RESULTING THEREOF HAS BEEN HELD TO BE ELIGIBLE FOR 80P(2)(A)(I) OF THE ACT. ON THIS ASPECT, W E FIND NO JUSTIFICATION FOR THE GROUND RAISED BY TH E REVENUE. THERE IS NOTHING BROUGHT ON REC ORD TO DISREGARD THAT THE INTEREST IRRECOVERABLE, WHICH IS EMBEDDED IN THE NPAS IS NOTHING BUT INTEREST RECEIVABLE FROM MEMBERS, THOUGH NOT REGULAR LY RECEIVED. IT IS ONLY THE DEFAULTED INTEREST INCOME, WHICH IS SOUGHT TO BE CLAIMED AS A DEDUCTION. IF THE SAID DEDUCTION IS NOT ALLOWED, THE NATURAL COROLLARY IS THAT THE ENHANCED INCOME WOULD BECOME ELIGIBLE FO R SOP(2) (A) (I), TO WHICH THE ASSESSEE IS OTHERWISE ENTITLED. IN FACT, SIMILAR ISSUE CAME UP BEF ORE THE TRIBUNAL IN THE CASE OF H.P.STATE CO-OPERATIVE BANK LTD. (SUPRA) WHEREIN THE SAME CLAIM WAS H ELD AS ELIGIBLE FOR BENEFIT U/S 80P(2)(A)(I) OF THE ACT FOR THE REASON THAT EVEN THE DEFAULTED INTEREST, WAS ALSO EARNED FROM THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREFORE, ON THIS ASPECT, WE FIND NO JUSTIFIABLE GRIEVANCE FOR THE REVENUE AND THE REVENUE FAIL ON THIS ASPECT. ' 8 6. IN VIEW OF THE AFORESAID DISCUSSION, AS THE FACT S AND CIRCUMSTANCES ARE IDENTICAL IN THE YEAR UNDER CONSIDERATION, FOLLOWING THE PRECEDENT, THE ORDER O F THE CIT(APPEALS) ON THIS ASPECT IS ALSO HEREBY AFFIRMED . AS A RESULT, ON THIS GROUND ALSO, THE REVENUE FAILS. 8. THE ISSUE IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE RAISED IN THE EARLIER YEARS AND FO11OWING THE AFORESAID PRECE DENT, WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A). THE GROUND OF APPEAL NO, 2 RAISED BY THE REVENUE IS DISMISSED. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBU NAL, REFERRED TO ABOVE, THIS GROUND OF APPEAL OF THE REV ENUE IS DISMISSED. 9. GROUND NOS. 3 & 4 ARE GENERAL IN NATURE AND NEED NO SEPARATE ADJUDICATION. ACCORDINGLY, SAME ARE DISMI SSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH NOV.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 9 TH NOV.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH