TMI Blog2013 (11) TMI 1696X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of Section 36(1)(viia)(a) the conditions to be satisfied is: that provision for bad and doubtful debts should have been made by the bank eligible to claim such deduction. Co-operative Banks do not strictly follow the provisions of Banking Regulation Act for the purpose of maintaining their Books of Accounts. Therefore, creation of provisions for bad and doubtful debts may be under different nomenclature. This will not disentitle the assessee for claiming deduction under the provisions of Section 36(1)(viia(a). The purpose for creation of reserve for NPA is same i.e., creating provision towards bad and doubtful debts. The decision in the case of CIT vs. Bank of Baroda, 262 ITR 334 (Bombay) [ 2003 (3) TMI 80 - BOMBAY HIGH COURT] . Therefore, the claim of ₹ 19,57,916/- becomes allowable. We order to allow the same. In the result, the appeal of the assessee bank is allowed. - ITA No.240/Jodh/2013 - - - Dated:- 29-11-2013 - SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER Appellant by : Shri U.C. Jain Respondent by : Shri N.A. Joshi, D.R. ORDER PER HARI OM MARATHA, JUDICIAL MEMBER: This appeal of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiterated their earlier stand. The ld. CIT(A) has given the following reasons to deny the impugned claim of the assessee :- 5.4. I further find that the deduction u/s 36(1)(viia) is allowable in respect of any provision for bad and doubtful debts made by a Cooperative Bank, an amount not exceeding seven and half percent of the total income computed before making any deduction under this clause and Chapter VIA and an amount not exceeding 10% of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. On analysis of the provision, it can be said that the first condition to become eligible for deduction is that there should be a provision for bad and doubtful debts whereas, in the appellant's case, the appellant has made provision for non performing asset (NPA) and it cannot be said that it was a provision for bad and doubtful debts. Classification of assets in accordance to RBI guidelines for prudential norms by the bank is for the purpose of showing sound and good assets in the balance sheet and it is not required to be debited to the P L account, it can therefore, be said that making of provision of non- performing assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the provision made by the company is allowable u/s 37(1). The decision relied is distinguishable on facts. The facts of the cited are related to the provision. However, in the instant case, the facts are related to NPA. Other cases relied by the appellant are also not applicable to the facts of the present case. Further the impaired assets and investment depreciation reserve are also in nature of provision and which not ascertained liabilities. On this ground itself, the appellant is not eligible for deduction since the above provisions are not in accordance with sec.36(1)(viia). The appellant's contention in this regard is rejected. The grounds raised by the appellant are dismissed. 8. It was argued by the ld. Authorized Representative that ground no.2 stands covered in favour of the assessee by the decision of the Tribunal. An excerpt with reference to the Paper Book referring the relevant portions of orders and the decisions relied on to support his contention has been prepared by the ld. Authorized Representative which is as under :- G.A. No.2 AO Order page 1 - 2 CIT(A) Order 1 - 7 PB Page 2 - 7 (WS CIT(A)), 20 - 21 (CBDT Instruction No.17/2008) Decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 is set aside and the appeal of the assessee is allowed. 11. Therefore, by respectfully following the ratio decidendi of the above Tribunal Order we allow ground no.(2) of this appeal in favour of the assessee. These provisions which are in line with the RBI guidelines become allowable. 12. The facts apropos ground no.(3) are that the A.O. has disallowed the provision for investment depreciation reserve for ₹ 19,57,916/- merely because the same is a provision and not an actual expenditure. The assessee bank made non-SLR trade investment in these mutual fund for ₹ 40,00,000/-. The market value of the investment in the Mutual Fund got reduced than the cost value and as per the accounting standard, therefore, loss on the mutual fund was provided in the profit loss account for the year amounting to ₹ 19,57,916/-. 13. The case of the assessee bank is that the provision for loss on investment is an allowable deduction as the investment was a trade investment and the same has to be valued at each balance sheet date and any income or loss arises due to valuation of such securities is required to be recognized as income or expenses in the P L account and is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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