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2016 (3) TMI 871 - AT - Income TaxDeduction claimed on account of provision made in the books of account for bad and doubtful debts u/s 36 - Held that:- The assessee was engaged in the business of banking and in terms of section 36(1)(viia) of the Act, was entitled to claim the deduction in respect of provision made for bad and doubtful debts, on account of aggregate average advances made by the rural branches of the assessee bank. Section 36(1)(viia) of the Act provides that such deduction shall not exceed 7.5% of the total income i.e. income computed before making any deduction under this clause and Chapter VI-A of the Act and the assessee for the year under consideration claimed deduction of ₹ 1.95 crores under section 36(1)(viia) of the Act in its return of income on account of bad and doubtful debts relating to advances made by the rural branches. However, as against the said claim made in the return of income, the assessee had made provision for bad and doubtful debts of ₹ 56 lakhs. On account of this, the assessee’s claim was restricted to ₹ 56 lakhs and the balance was disallowed. The issue arising before us is identical to the issue before the Tribunal in assessment year 2009-10 and following the same parity of reasoning, we dismiss the ground of appeal No.1 raised by the assessee. Deduction claimed on account of amortization of premium in respect of HTM investments - Held that:- The assessee is entitled to the claim of deduction on account of amortization of premium paid on Government securities held in HTM category - Decided in favour of assessee. Treatment of interest income arising on Non-Performing Assets (NPAs) - Held that:- Interest accrued on NPAs is not taxable in the hands of assessee, in view of the guidelines issued by the RBI. Thus we hold that no addition is warranted on account of interest accrued on NPAs. See Vasantadada Nagari Sahakari Bank Ltd. case [2015 (1) TMI 1218 - BOMBAY HIGH COURT] - Decided in favour of assessee. Disallowance of loss on account of sale of Available for Sale (AFS) securities - Held that:- Loss arising on account of sale of AFS securities as per directions of the RBI is allowable in the hands of assessee.r. The perusal of assessment order reflects that while computing the assessed income in the hands of assessee, the Assessing Officer had disallowed the provision debited to Profit & Loss Account of ₹ 49,99,457/- which comprises of provision of ₹ 41,70,140/-. In view of our order, we direct the Assessing Officer to allow the claim of deduction on account of loss of ₹ 41,70,140/- arising on sale of AFS investments.- Decided in favour of assessee. Addition made on account of disallowance of contribution to Education Fund - Held that:- In view of the proposition laid down by the Hon’ble Bombay High Court in Krishna Sahakari Sakhar Karkhana Ltd. Vs. CIT (1997 (7) TMI 97 - BOMBAY High Court), wherein similar expenditure claimed by the assessee was held as allowable. Where the assessee is following the mercantile system of accounting, the expenditure relatable to the year under consideration though not paid is to be allowed in the hands of assessee. Further, the provisions of section 43B of the Act are not attracted in respect of such payments to the State authorities. Accordingly, we direct the Assessing Officer to allow the contribution - Decided in favour of assessee. Deduction under section 36(1)(viii) - Held that:- The assessee had failed to create a special reserve in its books of account out of eligible profits of the year and in view thereof, the assessee was not entitled to the claim of benefit of deduction under section 36(1)(viii) of the Act in view of the ratio laid down by the Pune Bench of Tribunal in Shree Sharada Sahakari Bank Ltd. Vs. ITO (2015 (6) TMI 34 - ITAT PUNE) - Decided against assessee
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