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TMI Blog2011 (9) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 2,12,46,106/- arising out of surplus finds in reserve accounts is eligible for deduction u/s 80P(2)(a)(i). 2. The Ld. CIT(A) has erred in holding that the provisions of NPA if disallowed is eligible for deduction u/s 80P(2)(a)(i). 3. The Ld. CIT(A) has erred in allowing the claim of Rs. 1,28,36,746/- made on account of disallowance u/s 14A of the Income Tax Act. 3. Shri Ajay Sharma appeared for the Revenue and Shri M.R.Sharma appeared for the assessee and put forth their contentions. The Ld. DR for the Revenue placed reliance on the order of Assessing Officer. The Ld. Counsel for the assessee pointed that the issues raised above are covered by the order of the Tribunal in the case of assessee itself relating to assessment year 2007- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o assessment 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 Revenue by observing as under:- "7. The third issue raised by the Revenue is with regard to the action of the CIT(Appeals) in allowing deduction u/s 80P(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 25.3.2009 (supra), wherein the following discussion has been made, the order of the CIT(Appeals) deserves to be affirmed :- "14. The third income relates to interest income on reserve funds amounting to Rs. 3,98,94,432/-. The Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er credit to the members but have been used to maximizing profit or utilizing in other areas. In our view, the funds kept 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 such time the same are not deployed or are not required for giving credit facilities to its members, the same have been kept in the banks. The income from such deposits, in our considered opinion, can be said to be attributable to the business of providing credit facilities, so as to fall within Section 80P(2)(a)(i) of 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 af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed deduction of a sum of Rs. 16,75,070/- representing the provision on account of NPAs. The provision of NPAs was made in those cases in which the loanees started making defaults in re-payment of loans. In terms of the guidelines issued by NABARD for creating provisions, depending upon the length of default, the deduction of Rs. 16,75,070/- was sought to be justified. The Assessing Officer observed that such a claim could only be allowed if the assessee was engaged in a business of banking. Since, it was held that assessee was not engaged in the banking business, the claim was denied. In appeal, the CIT(Appeals) held that though the Assessing Officer was justified in disallowing the said claim, but the consequential increase in income w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 following the aforesaid precedent, we are in conformity with the order of CIT(A). The ground of appeal No. 2 raised by the Revenue is dismissed. 9. The issue raised in ground No.3 is against deletion of addition made on account of disallowance u/s 14A of the Act. The Ld. AR also pointed out that the said claim of the assessee had been allowed by Assessing Officer under the provisions of section 80P(2)(d) and there is no claim of exemption under the provisions of section 10(38) and hence provisions of section 14A are not applicable. The CIT(A) deleted the addition vide para 5.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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