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Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’, BANGALORE
Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO
PER SHRI VIJAY PAL RAO, JM:
This appeal of the revenue is directed against the order dated 03-
06-2015 of the CIT(A), Mysore for the Assessment year: 2012-13.
The revenue has raised the following grounds;
“1. The order of the ld.CIT(A) is opposed to law and facts of the case.
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The ld.CIT(A) has erred in deleting the addition on account of interest on non- performing assets as the assessee has already identified and accounted the interest on NPAs and as such it can be clearly held that this interest on NPAs has also accrued to the assessee as on 31-03-2012 and is taxable. The ld.CIT(A) has relied upon he decision of Hon’ble jurisdictional High Court in the case of CIT Vs Canfin Homes Ltd(2011) 5 Tax Corp(DT) 49593, reported in 347 ITR 382 on this issue despite the fact that the department has challenged this decision before the Hon ‘ble Supreme Court and the SLP is pending in this case.
3.1 The ld.CIT(A) ought to have upheld the decision of the AO in respect of the addition made in the case of interest income on account of method of accounting followed by the assessee as the assessee has neither allowed mercantile nor cash system but followed hybrid system. By virtue of the provisions of sec.1445 of the IT Act, the assessee is require to follow either cash or mercantile system of accounting to compute the real income. No adjustment could be made to the income assessed on accrual basis. CIT(A) deleted the amount ignoring he fact that the assessee is following the mercantile system of accounting as stated in the form 3CD.
3.2 Reliance on the decision of Hon’ble Karnataka High Court in CIT Vs The Karnataka Bank Ltd in ITA NO.433/2006 on this issue is wrong because the department has not accepted the decision and since the SLP filed has been dismissed without going into the merits of the case, he question of law remain unsettled.
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4.1 The ld.CIT(A) has erred in deleting the addition on non-deduction of TDS on interest expended on deposits and borrowings. The learned CIT(A)failed to appreciate the decision rendered by the Hon’ble Panaji ITAT in the case of the Belgaum District Central Co-Op.Bank Ltd, wherein it is clearly held that se.194A(3)(via)(b) makes no distinction between members and non-members of co-operative bank for purpose of deduction of tax.
4.2 The ld,.CIT(A) has erred by not considering the distinction between the Co-operative Bank and Co- operative Society is interpreted in the case of Bagani Nivedita Sahakari Bank Ltd Vs ACIT (2003) ITD 567 wherein it is held that co-operative society mention in sec.194A(3)(3)(v) should be interpreted as co-operative society other than co-operative bank.
5.1 The ld.,CIT(A) ought to have upheld the decision of the AO towards additions made on account of non-business expenditure as this expenditure is incurred as per the directions of the controlling authority and no-documentary evidence was furnished before the AO to prove to his satisfaction that on account of this expenditure, the assessee derived certain income or benefits.
5.2 The ld.CIT(A) has relied on the decisions of the Hon’ble Supreme Court in the case of Sri Venkata Sathyanarayana Rice Mills Vs CIT(223) ITR 101. Hon’ble Madras High Court in CIT Vs Velumanickam Lodge (317) ITR 338 and Hon’ble Rajasthan High Court inAddl.CIT Vs Rajasthan Spinning and Waving Mill Ltd 274 ITR 465. The ld.CIT(A) has failed to appreciate that the facts and
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circumstances of the quoted cases are different for the instant case. In all the above three cases the direct nexus between the expenditure and taxable income are clearly proved. But here there is no direct nexus exist or proved to the satisfaction of the AO.
The ld,.CIT(A) has erred in deleting the addition made in respect of amortization of premium paid on government securities. Amortization of premium paid on government securities claimed by the assessee as deduction is not an allowable deduction as in the assessee’s case the as securities classified as ‘Held as maturity’ are permanent long term investment made b y the assessee bank, which are predominantly capital in nature. Ratio of the decision of Hon’ble Madras High Court judgment in TN Power Finance & Infrastructure Development Corpn.Ltd Vs JCIT(2006) 280 ITR 491 (Mad.) wherein, it is held that RBI guidelines cannot override the mandatory provisions of income tax, is applicable in this case.
9.1 The ld. CIT(A) has erred in deleting the addition made in respect of disallowance of provisions for non- performing assets and standard assets. The ld.CIT(A) failed to appreciate the fact that and the provision for NPA is neither expenditure non an allowance which is permitted deductions u/s 28 to 43B of the Act.
9.2 The ld,CIT(A) has erred in holding both bad debts as per income tax Act and NPA under RBI norms as same. As per Sec.36(1)(vii) bad debt or part thereof written off as irrecoverable shall not include any provision for bad and
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doubtful debts. The provisions for NPA under RBI directions Is not only in respect of loss assets but also doubtful assets and sub-standard assets.
For these and such other grounds that may be urged that the order of the ld.CIT(A), on the above points may be set aside and the order of the AO be restored.
Ground no.1 is general in nature and does not require any
specific adjudication.
Ground no.2 & 3 regarding addition on account of interest on
NPA. The AO while completing the assessment made an addition on
account of interest on NPA of Rs.98,46,471/-. The assessee challenged
the action of the AO before the CIT(A). The CIT(A) deleted the addition
made by the AO, on account of interest on NPA by following the earlier
order for assessment year 2010-11.
We have heard the learned DR as well as the learned AR and
considered the relevant material on record. At the outset, we note that for
the assessment year 2010-11 this issue has been considered and decided
by this Tribunal in assessee’s own case vide order dated 04-09-2015 in
ITA No.34(B)/2014 along with ITA No.1266(B)/2014 in para-8 as under;
“8. As can be seen from the grounds raised, the Revenue does not dispute the proposition of law laid down by the Hon’ble High Court of Karnataka in Canfin
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Homes(Supra) and the fact that the said ratio is applicable to the case of the assessee. The only grievance of the revenue appears to be that a SLP ha been filed against the decision of the Hon’ble High Court and therefore, the issue is being agitated before the Tribunal. We are of the view in light of the pronouncement of Hon’ble High Court of Karnataka in the case of Canfin Homes(Supra), there can be no question of accrual of income on NPA and therefore, even under the mercantile system of accounting it cannot be said that income has accrued or arisen to the assessee. The fact that the revenue has preferred SLP against the decision of the Hon’ble High Court cannot be a ground to take any different view on the issue. We therefore, uphold the order of the CIT(A) and dismiss ground no.2 & 3.
As it is clear that this issue is covered by the judgment of the
Hon’ble High Court in the case of CIT Vs Canfin Homes Ltd. (2011) 347
ITR 382 and by following the said judgment of the Hon’ble jurisdictional
High Court this Tribunal has decided the issue in favour of the assessee
for the assessment year 2010-11. Following the earlier order of this
Tribunal in assesee’s own case we do not find any error or illegality in the
impugned order of the CIT(A) qua this issue. Accordingly, ground no.2 &
3 of the revenue’s appeal are dismissed.
Ground no.3.2 regarding addition on account of interest on
investments in government securities. The assessee did not offer the
interest accrued, but not due on government securities to tax. The AO
has made an addition of Rs.4,16,05,627/- by holding that the interest
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accrued but not due on government securities is income accrued to the
assessee during the year under consideration and accordingly, brought
the same to tax.
On appeal, the CIT(A) has deleted the addition made by the AO,
by following the earlier order for the assessment year 2010-11.
7.1 We have heard the rival submissions of the parties and
considered the relevant material on record. At the outset, we note that
for the assessment years : 2010-11 and 2011-12 vide order dated 04-09-
2014, this Tribunal has considered and decided an identical issue in
para-49 to 51 as under;
“49. We have heard the rival submissions. We have given a careful consideration to the rival submissions. At the time of hearing before us, it was agreed y the parties that the issue raised by the revenue in this appeal has already been decided by the Hon’ble Madras High Court in the case of CIT Vs Tamil Nadu Mercantile Bank Ltd ., 291 ITR 137 (Mad.) The question of law before the Hon’ble Madras High Court was as follows:
“Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that interest on securities is taxable only on specified dates when it became due for payment and not on accrued basis?”
The Hon’ble Madras High Court held as follows;
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“ In view of the deletion of the Section 18 of the Act with effect from April 1, 1989, the third proviso to section 145(1) was inserted with effect from April 1, 1989, which is a saving clause. Although the amendment was with effect from April 1, 1989, it clearly provides that any income by way of interest on securities shall be chargeable to tax as the income of the previous year in which such interest is due to the assessee only where no method of accounting is regularly employed by the assessee. In other words, if the assessee is maintaining cash system of accounting, the aforesaid proviso would not apply. The legislative intent is that when the assessee is maintaining the cash system of accounting, income by way of interest on securities will have to be charged to tax only when the assessee actually receives the interest and not on the date on which interest on such securities might become due.
The assessee, while filing the return of income for the assessment years 1989-90 and 1990-91, claimed exclusion of the sums representing the accrued interest for the periods till March 31, 1998 and till March, 31, 1990, for the respective assessment years, in respect of the securities held by it on the ground that it did not become due in the respective previous years and that even after the omission of sec.18, the interest on securities should be charged only when it become due for payment as it did not accrue on day- today basis. The AO, however, disallowed the claim of the assessee, holding that after the omission of sec.18, of the Act, i.e after July 8, 1988, interest is to be assessed under the head “Business” or “Other sources” as the case may be,
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and therefore, the interest which accrued upto the end of the accounting year became taxable as the income of the previous year. The CIT(A) held that the AO was not justified in holding that the interest accrued up to last day of the accounting year should be subjected to tax. This was upheld by the Tribunal.
On appeal to the High Court:
Held, dismissing the appeal that even though section 18 of the Act was deleted, the assessee was taxable for interest on securities only on specified dates when it became due for payment, in view of the third proviso to sec.145(1) of the Act, which was in force during the relevant assessment years”. 50. It is not in dispute before us that identical decision has also been rendered by the Hon’ble High Court of Kerala in the case of CIT Vs Federal Bank, 301 ITR 188(Ker.) and the Hon’ble Karnataka High Court in the case of Karnataka Bank Ltd in ITA No.433/Bang/2005 dated 12.9.2013. 51. In the present case, the assessee has been following the method of offering interest on securities to tax on receipt basis on maturity and the same has been accepted by the revenue in the past. In view of the aforesaid decision, we are of the view hat the order of the CIT(A) does not call for any interference. Consequently, the relevant grounds of appeal raised by the revenue are dismissed”.
Thus, it is clear that this issue is decided in favour of the assessee
by this Tribunal by following the decision of the Hon’ble Kerala High Court
in case of CIT Vs Federal Bank 301 ITR 188(Ker.) as well as
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the judgment of jurisdictional High Court in the cased of Karnataka
Bank Ltd. in ITA No.433/2005 dated 12.9.2013. Following the earlier
order of the Co-ordinate Bench of this Tribunal in assessee’s own case, we
do not find any error or illegality in the impugned order of the CIT(A) on
this issue. Hence, ground no.3.2 of the revenue is dismissed.
Ground no.4.1 and 4.2 regarding the disallowance u/s 40(a)(ia) of
the IT Act, 1961 for want of deduction of tax at source u/s 194A(1) of the
IT Act, 1961. During the course of assessment, the AO noted that the
assesee has paid interest of Rs.62,51,01,510/- on deposits from members
and payment to each of the depositors exceeded a sum of Rs.10,000/-.
The AO held that as per the provisions of sec.194A(1) of the Act, the
assessee is required to deduct tax in respect of the payment of interest on
deposits. Accordingly, the AO invoked the provisions of Sec.40(a)ia) of the
Act and disallowed the said amount of interest.
On appeal, the CIT(A) has deleted the disallowance made by the
AO by following the decision of this Tribunal in case of Bagalkot District
Central Co-op. Bank Ltd in ITA No.1572/Bang/2013 wherein it was held
that the Co-operative bank is covered by the exemption specified u/s
194A(3)(v) of the IT Act. Therefore, the co-operative bank is not required
to deduct tax at source u/s 194A of the IT Act, 1961.
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We have heard the learned DR as well as the learned AR and
considered the relevant material on record. The learned AR has invited
our attention to the decision of the Hon’ble jurisdictional High Court dated
16-12-2015 in case of Bailhongal Urban Co-Op. Bank Ltd. in ITA
No.100001 of 2014 wherein the Hon’ble High Court by considering the
Circular No.19/2015 in F.No.142/14/2015-TPL issued by Ministry of
Finance held inpara-2 & 3 as under;
“2.The Ministry of Finance, Government of India vide Circular No.19/2015 in F.No.142/14/2015-TPL, has clarified that the Co-operative Banks need not deduct tax at source under section 194A of the Act. The relevant portion at 42.5 reads as follows; “42.5 In view f this, the provisions of the section 194A(3)(v) of the Income tax Act have been amended so as to expressly provide that the exemption provided from deduction of tax from payment of interest to members by a co-operative society under section 194A(3)(v) of the Income- tax Act shall not apply to the payment of interest on time deposits by the co-operative banks to its members. As this amendment is effective from the prospective date of 1st June, 2015, the co-operative bank shall be required to deduct tax from the payment of interest on time deposits of its members, on or after the 1st June, 2015. Hence, a co- operative bank was not required to deduct tax from the payment of interest on time deposits of its members paid of credited before 1st June, 2015”. 3. In the light of the aforesaid circular, the view of the Tribunal holding that co-operative bank was required to
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deduct tax is not sustainable. Hence, this appeal merits consideration”.
By following the decision of the Hon’ble jurisdictional High Court in
the case of Bailhongal Urban Co-Op. Bank Ltd. w do not find any error or
illegality in the impugned order of the CIT(A) on this issue. Accordingly,
ground no.4.1 & 4.2 of revenue are dismissed.
Ground no.5.1 & 5.2 are regarding the disallowance of
expenditure on the ground of non-business expenditure. The AO noted
that the assessee had paid a sum of Rs.1,18,60,800/- to M/s Navodaya
Grama Vikasa Charitable Trust with a description HGVCT animator
salary. When the AO questioned the allowability of the said expenditure
the assessee submitted that the said trust is a registered trust formed as
per the directions of their controlling authority i.e NABARD. The
assessee is promoting the formation of self help groups through the said
trust and in turn the assessee is generating income by advancing loans to
these self help groups. The AO did not accept the contention of the
assessee and disallowed the said amount paid to trust on the ground hat
it is non-business expenditure.
On appeal, the CIT(A) allowed the claim of the assessee and
deleted the disallowance made by the AO by following the earlier order for
the assessment year 2010-11.
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We have heard the learned DR as well as the learned AR and
have considered the relevant material on record. At the outset, we note
that for the assessment year 2010-11, the Tribunal has considered and
decided an identical issue in para-29 & 30 as under;
“ 29. We have heard the submissions of the ld.DR, who relied on the order of the AO and the grounds of appeal. The ld. Counsel for the assessee relied on the order of the CIT(A). 30. We have given careful consideration to the rival submissions. Navodaya Grama Vikas Charitable Trust is a registered Trust formed as per the directions of the assessee’s controlling authority, NABARD. Through the said Trust the assessee is promoting the formation of self help groups in the districts of Dakshina Kannada and Udupi. The assessee has been advancing loans to those self help groups for generating income. The loans are given to SHGs for home industries like candle making, soap making and such other activities. The income generated by such self help groups come back to the assessee as deposits. Under this Micro Financing scheme rural poor and uneducated people get to know banking, learn to handle finance and increase their income level. The scheme has a great vision of upliftment of the rural poor through these activities. With this object in view, NABARD, as thrust the responsibility of making payments to Navodaya Trust. The expenses in question are in respect of the remuneration paid each month to 260 animators and 8 co-ordinators. Such animators and co- ordinators do the work of liaisoning, training, monitoring and guiding such SHGs. They are also promoting various loan products of the assessee’s bank and are also work as the persons canvassing for the deposits of the bank. Further, it
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is clear from the factual finding rendered by the CIT(A) that the assessee could generate disbursement to the tune of Rs.500 Crores and deposit mobilization to the extent of Rs.85 Crores from the SHGs. It is also clear that the expenditure in question was incurred by the assessee keeping in mind the commercial exigency. The decision of the Hon’ble Rajasthan High Court in Rajasthan Spinning and Weaving Mills Ltd cited supra, clearly support the conclusions arrived at by the CIT(A). In the aforesaid decision, the Hon’ble Rajasthan High Court held that it is not necessary to show that the expenses were not profitable or no benefit was actually derived. The receipt of actual benefit is also not necessary. The key aspect to be seen is relationship between the expenses incurred and carrying on of the business of the assessee. If there is a benefit to the assessee, then the expenditure has to be regarded as incurred for the purpose of business of the assessee and allowed as a deduction. The Hon’ble Rajasthan High Court followed the decision of the Hon’ble Supreme Court in the case of Sasoon J. David & Co. Pvt. Ltd Vs CIT, 118 ITR 261(SC) wherein reference was made to the expression ‘wholly or exclusively’ used in sec.37(1) of the Act and was of the view that the expression used is not necessary. In the light of the legal position as explained in the judicial pronouncement and keeping in view the facts of the present case, we are of the view that the order of CIT(A) does not call for any interference. Accordingly, grounds no.5 to 8 raised by the revenue are dismissed”.
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Following the earlier order of this Tribunal, we do not find any error
or illegality in the impugned order of the CIT(A) qua this issue.
Ground no.8 regarding addition made in respect of amortization
of premium on government securities.
We have heard the learned DR as well as the learned AR and
considered the relevant material on record. The AO noted that the
assessee has reduced a sum of Rs.45,25,556/- from the gross interest
from statutory liquidity ratio (SLR) received during the year being the
premium paid on government securities amortization. The AO has
disallowed this amount and added back to the income of the assessee.
On appeal, the CIT(A) has allowed the claim of the assessee by
following the order for the assessment year 2010-11 and 2011-12. We find
that for the assessment year 2010-11 and 2011-12 the Tribunal has
decided an identical issue in paras-39 & 40 as under;
“ 39. We have heard the rival submissions. The issue raised by the assesee in ground no.8 & 9 is no longer res integra and has been decided by this Tribunal in the case of M/s Sir M. Visweswaraya Co-operative Bank Ltd Vs JCIT , ITA No.1122/Bang/2010 for AY: 2007-08 order dated 11.5.2012. The following were the relevant observations of the Tribunal.
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“ 0.3 Let us first take up the issue relating to amortization of premium on investment in government securities. Relevant grounds read as under; “i). The ld.CIT(A) ought to have appreciated that the appellant has to invest surplus fund in government securities as per RBI guidelines and the premium paid wile investing in government securities that are bought in on market would have to be amortized till the maturity date of the security and thus the premium was written off was liable to be allowed as depreciation of value of securities; ii) The ld.CIT(A) ought to have appreciated that the classification of securities for RBI purposes would not take away the benefit which the appellant was entitled to and he ought to have appreciated that the case law referred were distinguishable and accordingly he ought to have allowed the deduction as claimed in full:.
The brief facts pertaining to this issue are that while framing the assessment u/s 143(3) of the IT Act, for the assessment year 2007-08, the AO noticed that the assessee has claimed a sum of Rs.26,.40,237/- under amortization of premium on investments and the assessee had no explanation for the claim. Hence, he disallowed the same. While disallowing the same, the AO followed the decision of the Madras High Court in the case of TN Power Finance and Infrastructure Development Corpn. Ltd. Vs JCIT (2006) 280 ITR 491. Aggrieved, the assessee moved the matter in appeal before the first appellate authority.
The ld.CIT(A) after considering the submissions made before him and following the decision of the Madras
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High Court has that merely because the RBI had directed the assessee to provide for non-performing assets, that direction cannot override the mandatory provisions of the Income-tax Act, contained in sec.36(1)(viia)a which stipulate for deduction not exceeding 5 percent of the total income only in respect of the provision for bad and doubtful debts which are predominantly revenue in nature or trade related and not for provision for non-performing assets which are of predominantly capital in nature. Thus, we are of the view that the assessee was not entitled to deduction of amortization of premium on investments u/s 36(1)(vii). Aggrieved, the assessee is n second appeal before us with this issue. 06. The ld. counsel for the assessee submitted that the CIT(A) had failed to see the reason that a issue similar to that of the present one had been allowed by various benches of the Hon’ble Tribunal, namely; a. Catholic Syrian Bank Ltd Vs ACIT –Cochin (2010) 38 SOT 553. b. Khanapur Co-op.Bank Ltd Vs ITO in ITA No.141/PNJ/2011(Panaji.) c. Corporation Bank Vs ACIT,M’lore in ITA No.112/Bang/2008
The ld. Counsel also laced reliance on Board’s Instructions No.17 of 2008(vii) and pleaded that the claim of the assessee be allowed as the assessee had the powers to debit in its P&L account a sum of Rs.29,02 lakhs for amortization of premium.
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Per contra, the learned DR aw unable to controvert to the submissions of the learned counsel for the assessee.
We have carefully considered the rival submissions and perused the relevant facts and materials on record. We have also considered the findings of the various benches of the Tribunal, as under; i) Catholic Syrian Bank Ltd Vs ACIT (2010) 38 SOT 553(Cochin) An identical issue to that of the subject matter under consideration has arisen before the Cochin Bench. After analyzing the issue in depth, the bench has observed that with regard to amortization of premium on purchase of government securities, it was clarified that this was mad as per the prudential norms of the RBI. Following the Tribunal decision in the assessee’s case and considering that the assessee bank is following consistent and regular method of accounting system, there is no justification in interfering with the order of the CIT(A) on this issue of amortization of premium on government securities. United Commercial Bank Vs CIT(1999) 156 CTR (SC) 380: (1999) 240 ITR 355 (SC) and South Indian Bank Ltd. (ITA NO.126/Coch/2004, dated ……Sept.2005 followed”.
ii) The Khanapur Co-Op. Bank Ltd Vs ITO –ITA No.141/PNJ/2011 dated 8.9.2011:
The Hon’ble Bench of Panaji Tribunal had recorded its findings that 6. Likewise, the premium amortized at Rs.1,78,098/- is claimed to be in respect of securities held
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under the category ‘held to maturity’. The AO has taken them as long term investments. In other words, he has accepted the assessee’s claim that the securities are ‘held to maturity’. That being so and having regard to the CBDT Instruction No.17 of 2008 dated 26.11.2008 as reproduced herein above, the premium paid on such government securities is required to be amortized over the period remaining to maturity……….
iii) In the case of Corporation Bank Vs ACIT, Mangalore in ITA 112/Bang/2008(Bang)/ for the assessment year 2004-05, the earlier bench had also held a similar view. In the light of the above discussion and the case laws discussed supra, taking into account the totality of the facts and materials, we are of the considered view that the assessee is entitled to claim this deduction and hence, we allow the grounds of the assessee relating to this issue”. 40. We are of the view that in the light of the decision on the issue considered by the Tribunal, the claim made by the assessee was rightly allowed by the CITA). Accordingly, the relevant ground of appeal is dismissed”.
Following the earlier order of this Tribunal we do not find any
merit or substance in the grounds raised by the revenue. Accordingly,
ground no.8 of the revenue’s appeal is dismissed.
Ground no.9.1 & 9.2 regarding disallowance of the claim of
provision of Rs.2.5 Crores towards NPA. The AO was of the view that
Explanation to sec.36(1)(vii) of the IT Act, provides that any bad debt or
part thereof written off cannot include any provision for bad and doubtful
20 ITA No.1195(Bang)/2015
debts. The provision for NPA under the RBI direction is doubtful assets
and accordingly, the AO disallowed the claim of the assessee.
On appeal, the CIT(A) has directed the AO to allow deduction
u/s 36(1)(viia) after considering the provisions made by the assessee.
Before us, learned DR has submitted that provision for doubtful
debts is not an allowable claim as held by the Hon’ble Supreme Court in
the case of Southern Technologies Ltd. Vs JCIT (320 ITR 577).
On the other hand, learned AR has submitted that the AO has
not considered the claim of assessee u/s 36(1)(viia) and therefore, this
ground of the revenue’s appeal is not arising from the order of the CIT(A).
Having considered the rival submissions as well as the relevant
material on record, we find that the AO disallowed this claim of assessee
as per Explanation to sec.36(1)(vii) whereas the CIT(A) directed the AO to
allow the claim u/s 36(1)(viia) after verification in para-3.7(b) of the
CIT(A)’s order.
“3.7(b) The careful reading of the provisions of sec.36(1)(viia) the Co-op. banks are entitled for deduction of 7.5% of the total income provided assessee created a provision in the books of account. In the instant case, the assessee bank has created a provision of Rs.2,05,00,000/- towards provision for NPA and Standard Assets vide Schedule 22 of the financial statements. The assessee bank is also entitled for deduction of 10% of the aggregate advances given by the rural branches. Since the assessee bank has created a provision in the books of account and is entitled for
21 ITA No.1195(Bang)/2015
deduction u/s 36(1)(viia) i.e 7.5% of the total income and 10% of the aggregate advances given by the rural branches, I direct the AO to allow the deduction u/s 36(1)(viia) after considering the provision made by the assessee bank and as per the provisions of 36(1)(viia)”. As it is manifest from the finding of the CIT(A) that the claim of the
assessee was examined by the CIT(A) as per the provision of Sec.36(1)(viia)
and accordingly, the AO was directed to allow the claim under the said
provision after verification of the provisions made by the assessee and
compliance of conditions provided u/s 36(1)(viia) of the IT Act, 1961.
Accordingly, we do not find any reason to interfere with the impugned order
of the CIT(A) on this issue and the AO is directed to consider and examine
this claim u/s 36(1)(viia) of the Act, 1961.
In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open Court on the 9th March, 016.
Sd/- Sd/- (INTURI RAMA RAO) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER D a t e d : 09-03-2016 Place: Bangalore am* Copy to : 1 Appellant 2 Respondent 3 CIT(A)-II Bangalore 4 CIT 5 DR, ITAT, Bangalore. 6 Guard file By order
AR, ITAT, Bangalore