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2019 (6) TMI 462 - AT - Income TaxDisallowance of provision for GSEC Securities, provision for standard assets, provisions for statutory reserve, provisions of bad & doubtful debts and education reserve - HELD THAT:- Regarding provision for GSEC Securities, we find that these are, in effect, valuation differential in the carrying value of the GESEC securities held by the assessee bank and which has been determined as per RBI guidelines and even the CBDT in its instruction no. 17/2008 dated 26.11.2008 has accepted the said valuation methodology so guided by the RBI. Accordingly, the same is directed to be allowed subject to verification by the Assessing officer. See M/S HDFC BANK LTD AND VICE -VERSA [2011 (6) TMI 774 - ITAT MUMBAI] - Decided in favour of the assessee and against the revenue. Education reserve - charge on the profits - as per section 48 of the Rajasthan Co-operative Society Act, the assessee is mandatorily required to contribute 1% of its profits every year - HELD THAT:- We find that the liability to pay the amount paid towards the education fund is after quantification of profits by the assessee bank under the Rajasthan Cooperative Society Act. It is only after the net profit reaches the bank that the question of its disposal in terms of the provisions arises under the Act and not earlier thereto. The net profit is to be apportioned by transferring part of it as may be prescribed by Rules to the reserve fund or to the education fund constituted under the Rules. Apparently, there is no charge in the year in which assessee incurs losses. It is only when there are profits, the amount has to be paid towards the education fund. If it is to be considered as diversion at source by overriding title, whether assessee incurs profits or loss, the said amount has to be paid. In the present case, the amount towards education fund at 1 per cent is payable only when assessee has profits in any year which leads us to a considered view that this is not a diversion at source but an appropriation of profits which is not allowable for tax purposes. Therefore, respectfully following the principles laid down in case of Jodhpur Co-operative Marketing Society [2004 (4) TMI 21 - RAJASTHAN HIGH COURT] the matter is decided in favour of the Revenue and against the assessee. Provision for standard assets, statutory reserve and bad and doubtful debts have been rightly disallowed by the AO as deduction u/s 36(1)(viia) and 36(1)(viii) have separately been allowed and we donot see any infirmity in the action of the ld CIT(A) in confirming the same. Calculation of deduction u/s 36(1)(viia) and u/s 36(1)(viii) - as submitted that the AO has given no reasons while reducing the provision for standard assets and provision for GSEC while computing such deductions - HELD THAT:- In the instant case, the AO has reduced the provision for standard assets and provision for GSEC while computing the net profits instead of adding the same on the belief that these provisions are not allowable. As we have held above, provision for standard asset is not allowable, however the provision for GSEC is allowable subject to verification. Therefore, for the purposes of quantifying the deduction u/s 36(1)(viia) and U/s 36(1)(viii), only the amount which has been finally so determined as disallowable towards such provisions should be added back in the net profits. The AO is directed to recomputed the deductions u/s 36(1)(viia) and U/s 36(1)(viii) accordingly. In the result, the ground is allowed for statistical purposes. Depreciation on computers - @ 33.33% OR 60% specified in the Income-tax rules - HELD THAT:- We find that depreciation on computers has been provided @ 60% in the Income-tax Rules.Accordingly, the AO is directed to compute the depreciation on computers @ 60% and the ground of appeal is thus allowed.
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