THE DCIT, CIRCLE-2(2),, SURAT vs. THE SURAT DISTRICT CO.OPERATIVE BANK LTD.,, SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND Dr. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 16/AHD/2015 (AY 2010-11) (Hearing in Physical Court) Deputy Commissioner of The Surat District Co- Income Tax Circle-2(2), Room Operative Bank Ltd. Vs No. 309, 3rd Floor Aayakar Kanpith, Lalgate, Bhavan, Majura Gate, Surat- Surat-395003 395001 PAN : AAAAT 2985 Q Appellant / Revenue Respondent / assessee

Assessee by Sh. Mitish S. Modi, & Akshay Modi, CA’s /AR Revenue by Shri H. P. Meena, CIT-DR Date of hearing 25.03.2022 Date of pronouncement 17.05.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income tax (Appeals)-1,Surat [for short to as “CIT(A)”] dated 06.10.2014 for assessment year 2010-11, which in turn arise out assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 20.03.2013. The Revenue has raised the following grounds of appeal:- “1. On the facts and circumstances of the case and in Law, the Ld. CIT(A) has erred in deleting the disallowance of Rs.3,66,25,000/- out of deduction claimed by the assessee u/s 36(1)(viia) of the Act.

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. account of centenary celebration fund, gift distribution fund amounting to Rs.7,72,099/- and society relief fund to the tune of Rs.8,83,239/-.

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. The assessment was completed under section 143(3) of the Act on 20.03.2013. The Assessing Officer while passing the assessment order made disallowance of deduction under section 36(1)(viia) of Rs.3.66 crore, disallowed Rs.46,77,004/- on account of centenary celebration fund, disallowed Rs.7,72,099/- for gift distribution fund expense and disallowed Rs.8,83,239/- for society relief fund. The relevant fact leading to the above disallowances are that during the assessment, Assessing Officer noted that assessee has claimed deduction under section 36(1)(via) of Rs.7.16 crores, bifurcation of which is recorded by Assessing Officer in para 9.1 of assessment order. On show cause notice, the assessee explained that assessee is eligible for claiming deduction @ 10% of aggregate average advance of rural branches of assessee-bank. The assessee-bank has advanced of Rs.158.92 crores. Thus, the assessee is eligible for an amount of Rs.15.89 crores; however, assessee has claimed only Rs.7.16 crores as provision made of bad and doubtful debts. 3. The Assessing Officer noted that the assessee had claimed following amount under section 36(1)(viia),-

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. a) Provision for bad and doubtful Rs.1,00,00,000 debts (societies) Provision for bad and doubtful Rs.2,50,00,000 b) debts (individual) Provision for bad and doubtful Rs.1,16,25,000/- c) debts made in pursuance to section 67(2) of the Gujarat Co-Op. Society Act (out of net profit) Provision for bad and doubtful Rs. 50,00,000/- d) debts against standard assets Provision for bad and doubtful e) debts security depreciation fund Rs.1,50,00,000/- Provision for bad and doubtful Rs. 50,00,000/- f) debts investment depreciation fund TOTAL 7,16,25,000/- As per section 36(1)(viia) of the I.T.Act 4. The assessing officer noted that out of the above provisions claimed under the provision for bad and doubtful debts, the following four components are not allowable as deduction under section 36(1)(viia) of the Act  (i) Provision for bad and doubtful debts made in pursuance to section 67(2) of the Gujarat Co-Op. Society Act (out of net profit) Rs.1,16,25,000/-  (ii) Provision against standard assets Rs.50,00,000/-  (iii) Provision against security depreciation fund Rs.1,50,00,000/- and 4

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd.  (iv) Provision against investment depreciation fund Rs.50,00,000/- Total: 3,66,25,000/- 5. The Assessing Officer was of the view that the amount of Rs.3.66 crores is not provision for bad and doubtful debts. For the reasons that the deduction are allowable only for provision and not for allocation of fund. Therefore, an amount of Rs.1.16 crores does not qualify for bad and doubtful debts. For provision of standard assets of Rs.50 lakh, the Assessing Officer held that standard assets are performing assets in respect of which no default in repayment of principal or payment of interest is perceived and which does not disclose any problem nor carry more than normal risk attached to the business and does not qualify for provision for bad and doubtful debts. For provision against security depreciation fund of Rs.1.50 crores, the Assessing Officer held that this provision is contingent in nature and is not in the nature of bad and doubtful debts. For provision against investment depreciation fund, the Assessing Officer held that investments are not debts. The diminution in the market value of investment. Therefore, do not for under bad or doubtful debts. The Reserve Bank of India (for short to as ‘RBI’) has issued

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. separate guidelines for valuation for investment, like stock-in- trade in different from debtors, the loans & advance in case of banks are similar to debtors in normal business and the provision for bad and doubtful debtors are different from the valuation of closing stock at cost or market value whichever is less. Thus, the provision of Rs.50 lakh made for covering the risk of value of investment does not qualify for the deduction under section 36(1)(viia) of the Act. Accordingly, the Assessing Officer disallowed Rs.3.66 crores and added to the income of assessee. 6. The assessee also claimed expenses of Centenary Year Celebration fund of Rs.46,77,004/-, Gift Distribution expenses fund of Rs.7,72,099/- and Society Relief Fund of Rs.8,83,239/-. The assessing officer before making disallowance recorded that on show cause notice on these various expenses, the assessee submitted that they are ready to produce the relevant vouchers/bills for the expenses debited for centenary year celebration. The Assessing Officer held that the assessee failed to produce the necessary evidence, thus in absence of evidence, the expenses of all three items disallowed and added to the income of assessee. 6

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. 7. On appeal before Ld. CIT(A), the assessee filed detailed written submission on both the additions. Against the additions / disallowances claimed under section 36(1)(viia) of the Act. The assessee stated that provisions of section 36(1)(viia) clearly provides that any provision for bad and doubtful debts is allowable as deduction against the total income of the bank subject to the limit @ 7½ % of the total income before making deduction under this clause of Chapter VIA and as aggregate average not exceeding @ 10% of aggregate average advances made by rural branches of the assessee-bank. The aggregate average advances given by assessee during the year is Rs.158.92 crores and @ 10% which comes to Rs.15.89 crores which is much more than the deduction of Rs.7.16 crores claimed by assessee as the provision for bad and doubtful debts. The Assessing Officer wrongly drawn his conclusion in respect of provision made under different head against the special provisions of Rs.1.16 crores made against the provision of bad and doubtful debts in pursuance under section 67A(2) of the Gujarat Co- Operative Society Act, the assessee submitted that these are the statutory requirement under statute, unless the legal obligation 7

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. is fulfilled by the assessee-bank, the financial statements of assessee-bank are not approved by the Government of Gujarat Authorities including Registrar of the Co-Operative Society, Government Auditor appointed by National Bank for Agriculture and Rural Development (for short to as ‘NABARD’). Therefore, the statutory requirement on the part of assessee to make the provision under Section 67A(2) of the Act. Against the provision of standard assets of Rs.50 lakh. The assessee submitted that assessee-bank is required to make standard assets at a minimum of 0.25% of total outstanding in this category. Thus, this provision has been made. Against the security depreciation fund and investment depreciation fund of Rs.1.50 crores and Rs.50 lakh respectively, the assessee submitted that in view of the Master Circular dated 01.07.2011 (revised) of NABARD/RBI on investment fluctuation reserve and investment depreciation reserve mandates to create the investment depreciation fund/provision for charging diminution investment value to profit and loss account. Thus, in view of the statutory requirement, the assessee made these provisions. The assessee-bank made this provision as per statutory requirement of RBI and other 8

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. Government agencies viz; NABARD, therefore is allowable expenditure under section 36(1)(viia). 8. On the other expenses of Rs.46,77,004/- on centenary year celebration expenses, gifts distribution expenses of Rs.7,72,099/- and various members expenses for relief and for expense for relief to various members of Rs.8,83,239 on account of Society Relief Fund, the assessee-bank submitted that assessee furnished details in ledger accounts of all these funds. The expenses were duly supported by the resolutions of bank, office notes, bills/invoices etc., It was submitted that it was a centenary year celebration of the assessee-bank, various expenses on account of preparation and presentation of mementos, seminar expenses, banquet expenses, mandap expenses, stationary expenses were incurred. The centenary year celebration was presided over by the Governor of Gujarat Government as Chief Guest of the said function. The assessee also incurred expenses in appreciation of voluntary services given by the past chairmen and directors, retired officers and staff of the assessee-bank, the officers of Government Departments, Member mandalies, customers over the area of operation etc., all the expenses were incurred wholly 9

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. and exclusively for the purpose of business on the special occasion of completion of 100 years with progressive growth and achievements in different facets of the activities of banking for the benefit of the customers and their mandalies. The assessee- bank also relied on the case laws in Karjan Co.Operative Cotton Ginning and Pressing Society Vs. CIT (1993) 69 Taxmann 304 (Guj)(FB)/1993) 199 ITR 17 (Gul) and CIT Vs Mehsana District Co-operative Milk Producers Union Ltd. (1995) 78 Taxmann 563 (Guj)(1994) 207 ITR 140 (Guj). 9. The Ld. CIT(A) after considering the submission of assessee, on the disallowance of deduction under section 36(1)(via) held that assessee is not allowed the provision amounting to Rs.3.66 crores out of the total claim of assessee-bank at Rs.7.16 crores. The Ld. CIT(A) held that the statutory provision under section 36(1)(via) required only two conditions to be fulfilled for allowing such deduction under the clause-(via) of sub-section of Section 36(1) as per sub-section sub-clause (via) of section 36(1). The deduction in respect of any provision for bad and doubtful debts, made by co-operative bank is allowable if does not exceed 7½% of the total income, computed before making deduction under 10

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. Chapter VIA, and an amount not exceeding 10% of aggregate average advance made by rural branches of such assessee-bank computed in the prescribed manner. The assessee has claimed Rs.7.16 crores as per the computation of total income of assessee filed with return of income, the total income before deduction under Chapter-VIA is Rs.20.20 crores. Thus, 7½% comes to Rs.1.15 crores. The Assessing Officer in assessment order mentioned that the aggregate average advance made by rural branches of assessee-bank is Rs.158.92 crores, thus, 10% of which comes to Rs.15.89 crores. Therefore, as per the condition prescribed by this aforesaid clause, the deduction claimed by assessee cannot exceed the amount of Rs.1.51 crores + Rs.15.89 crores total of Rs.17.40 crores as provision for bad and doubtful debts, against which the assessee has claimed an amount of Rs. 7.16 Crore. Thus, the assessee is clearly eligible for deduction claimed by it. The assessee fulfilled both the conditions, thus allowable for deduction of Rs.7.16 crores. 10. On the other disallowance of centenary year celebration expenses, the ld. CIT(A) after considering the submission of assessee held that the assessee has debited expenses of Rs.2.03 11

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. crores under the head “any other income claimed to be allowable as deduction”. Out of these expenses, the Assessing Officer has not allowed centenary year celebration fund of Rs.46,77,004/-; gifts distribution expense of Rs.7,72,099/- and Society Relief Fund of rs.8,83,239/- respectively. The assessing officer disallowed these expenses on the ground that assessee failed to produce the relevant bills/vouchers. As per assessing officer the business expediency of these expenses were not verifiable for allowable under section 37(1) of the Act. The Ld. CIT(A) held that the assessee claimed to have furnished the detailed ledger accounts of centenary year celebration fund out of which centenary year celebration expenses were incurred and supported by relevant resolutions, office notes, bills/invoices. The Ld. CIT(A) held that it was a centenary year celebration of the assessee-bank and the expense was incurred wholly and exclusively under various heads. The Assessing Officer has not doubted the purpose of incurring of these expenses on the reasons stated by him was that relevant vouchers / bills were not actually produced. The ld CIT(A) recorded that the assessee claimed that relevant details with necessary documents 12

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. bills/vouchers were produced. The Ld. CIT(A) on perusal of details held that the expenses were not incurred by assessee- bank or office-holders for their personal purposes, gift items and other expenses were incurred for valued customers and other persons as a token of appreciation of their contribution in helping to boost the business of assessee-bank. These expenses were incurred wholly and exclusively for the purpose of business and are allowable under section 37(1) of the Act. Accordingly, the Ld. CIT(A) deleted the aforesaid additions. Aggrieved by the order of Ld. CIT(A), the Revenue has filed this present appeal before the Tribunal. 11. We have heard the submission of Ld. Commissioner of Income- Tax-Departmental Representative (Ld. CIT-DR) for the Revenue and Ld. Authorized Representative (AR) for the assessee. We have also gone through the orders of lower authorities carefully. Ground No.1 relate to deleting the disallowances under section 36(1)(viia). The Ld. CIT-DR for the revenue supported the order of assessing officer. The ld CIT-DR for the revenue further submits that the provision the provisions made in pursuance of section 67(2) of Gujarat Co-operative Society Act are not the provision. It 13

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. is a reserve created only if society makes profit. The provision is made from income and not profit. Therefore the amount of Rs.1.16 crores does not qualify for provision of bad and doubtful debts. Similarly, the provision of standard assets, cannot be settled as for allowing deduction under section 36(1)(viia). On security depreciation, the ld CIT-DR for revenue submits that reserve is eligible for contingency and not for provision of debts. For the provision of under investment depreciation, Ld. CIT-DR submits that this fund is covered value of trade of the assessee- bank which is not contingent in nature. The Assessing Officer thus rightly disallowed the amount of Rs.1.16 crores being not for provision of bad and doubtful debts. The Ld. CIT-DR for the Revenue retreated that the amount provided as per Gujarat Co- Operative Society Act is not provision. It is a reserve created of a society next profit. Therefore, it is a distribution/allocation of profit fund and not a provision which is chargeable to profit and loss account provision for made for income and not for profit more than reserve is more separately from the profit so that it does not distribute the entire amount identified by Assessing Officer does not forming part of provision for bad and doubtful 14

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. debts and therefore deduction under section 36(1)(via) is not allowable and is rightly disallowed and added back to the income of assessee by Assessing Officer. To support his contention Ld. CIT-DR relied on the decision of ITAT Indore Bench in the case of M/s Jhabua Dhar Kshetriya Gramin Bank Vs DCIT, in ITA No.106 to 114/Ind/2017 dated 06.09.2018. 12. On the other hand, Ld. AR for the assessee supported the order of Ld. CIT(A). The Ld. AR for the assessee submits that as per the statutory requirement, the assessee is eligible for deduction against the total income of the assessee-bank subject to limit of 7½% of total income computing before making any deduction under Chapter-VIA and the amount not exceeding @ 10% of aggregate average advance made by rural branches of assessee- bank that there is no dispute that assessee made average advance of Rs.159 crores (rounded) and 10% of which is about Rs.16 crores ( rounded) which is much more than the deduction of Rs.7.16 crores claimed by the assessee-bank during the year. The Assessing Officer disallowed Rs.3.66 crores claimed under four heads consisting number statutory provision for bad and doubtful debts in observance of under section 67A(2) of the 15

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. Gujarat Co-Operative Society Act, of Rs.1.16 crores, Rs.50 lakh for provision of bad and doubtful debts against standard assets of Rs.1.50 crores for provision of bad and doubtful debts against security depreciation fund of Rs.50 lakh for bad and doubtful debts against investment depreciation. 13. The Ld. AR for the assessee submits that this similar provisions were made by the assessee in its books and was allowed by Assessing Officer in scrutiny assessment in assessment years 2008-09 and 2009-10 passed under section 143(3), a copy of those assessment orders is placed on record. Further, in assessment years 2015-16 and 2016-17 similar provisions were considered and is allowed in the assessment order passed under section 143(1), which includes provision for bad and doubtful debts against standard assets as per RBI’s directives/guidelines and also provision for bad and doubtful debts in compliance of statutory provision of under section 67A(2) of the Gujarat Co- Operative Societies Act. Further, in assessment year 2017-18 in the assessment order passed under section 143(3), the Assessing Officer allowed deduction under section 36(1)(via) for aggregate amount of Rs.6.33 crores, which includes provision for bad and 16

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. doubtful debts against standard assets s per RBI’s directives/guidelines for Rs.1 crores allowed as claim. Further, in assessment year 2018-19, the Assessing Officer in assessment order under section 143(3) has allowed deduction under section 36(1)(viia) for aggregating of Rs.7.03 crores which includes provision for bad and doubtful debts against standard assets as per RBI’s directives/guidelines for Rs.1.00 crores and provision for bad and doubtful debts made in compliance of provision of under section 67A(2) of the Gujarat Co-Operative Societies Act. The Ld. AR for the assessee finally submits that in assessment year 2012-13, the Assessing Officer disallowed deduction under section 36(1)(viia)(a) for provision of bad and doubtful debts against standard assets. However, on appeal before Ld. CIT(A), the assessee was granted relief and on further appeal by Revenue before Tribunal, the appeal of Revenue is dismissed. The ld AR for the assessee carried us through section 66 & 67A of Gujarat Co-Op. Society Act (State Co-op Act) and submits that conjoint readings of these provisions makes it clear that a mandatory obligation is casted on the assess-bank to make a provision for bad debts and doubt full debts at least 15% of the net profit of 17

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. the year. The provisions made under section 67A(1) & (2) of State Co-op Bank is not for the distribution or allocation of profit of the relevant year, but it is the appropriation of profit of the year. It is the specific provision retained to meet the specific purpose of adjusting the write off of the actual bed debts in future and in the eventuality , the assess-bank is not eligible for actual bed debts as business expenditure as enough restrictions are laid down in section 36(2) of the Act. There is no adverse reporting by the statutory auditors and the same is in conformity with the Act Rules and by-laws of the assessee-bank. The accounts of the assess-bank are approved by the statutory authority of the State of Gujarat and no adverse remarks were made while accepting the books of accounts of the assessee. The ld AR for the assessee submits that the ration in case law relied by the ld CIT-DR for the revenue in Jhabua Dhar Kshetriya Gramin Bank Vs DCIT (supra) is not applicable on the facts of the present case. In the said case the Tribunal relied on the earlier case law in Narmada Malwa Gramin Bank Vs ACIT (ITA No. 162/Ind/2011 dated 16.04.2013), wherein the issue was restored to the file of assessing officer to recomputing the claim of deduction to the 18

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. extent of amount written off in the books of accounts. Thus, the finding in the said is not at all applicable on the facts of his case. 14. To buttress his various submissions, the ld. AR for the assessee relied on the following decision;  Catholic Syrian Bank Ltd. vs. Commissioner of Income Tax (2012) 18 taxmann.com 282 (SC).  DCIT vs. Punjab Gram Bank (ITA No.731/Asr/2017 dated 05.04.2019  Dy.CIT vs. The Nawanshahr Central Co.op. Bank Ltd. (ITA No.61/Asr/2017 dated03.01.2018  Tamilnadu State Apex Co-Operative Bank Ltd. vs. ACIT (2014) 43 taxmann.com 111 (Chennai-Trib.)  Dy.CIT vs. ING Vysya Bank Ltd. (2014) 42 taxmann.com 303 (Bangalore-Trib.)  Nanded District Central Co-Op. Bank Ltd. vs. Dy.CIT (2015) 57 taxmann.com 422 (Pune-Trib.)  Dy.CIT vs. Sarvodaya Sahakar Bank Ltd., (2014) 48 taxmann.com 82 (Ahmedabad-Trib.)  Power Finance Corpn. Ltd. vs. JCIT (2006) 10 SOT 190 (Delhi-Trib.) (ITA No.994 & 1062/Del/2000 dated 11.08.2006)  Vellore Dist. Central Co-Operative Bank Ltd. Vs. CIT (2013) 37 taxmann.com 247 (Chennai-Trib.)  Pali Central Co-Operative Bank Ltd. Vs. CIT (2017) 88 taxmann.com 875 (Jodhpur-Trib.) 19

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd.  Nagar Urban Co-Operative Bank Ltd. vs. ACIT (ITA No.240/Jodh/2013 dated 29.11.2013) 15. We have considered the rival submission of the parties and have gone through the orders of lower authorities and above cited case laws carefully. Before adverting to the facts and the observation of lower authorities, we may reproduce the relevant provision of section 36(1)(viia) reads as under:

'(viia) in respect of any provision for bad and doubtful debts made by - (a) a scheduled bank not being a bank incorporated by or under the laws of a country outside India or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, an amount not exceeding seven and one-half per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) and an amount not exceeding ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner: Explanation: - In this clause, (vi) "co-operative bank", "primary agricultural credit society" and "primary co- operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P ;'

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. under section 36(1)(viia) by taking view that the aforesaid amount under four heads are not provision for bad and doubtful debts for reserve the amount provided as per Gujarat Co-Operative Society, Act, is not the provision, rather it is a reserve created only if the society makes profit and provision for standard assets, the Assessing Officer held that standard assets cannot be treated to have provided against bad and doubtful debts under the standard assets a performing assets. Though it is mandatory in provision for standard assets as per RBI’s norm but it cannot be categorized as doubtful debts for allowing deduction under section 36(1)(viia)(a). For the provision of bad and doubtful debts against standard asset of Rs. 50 Lakhs, the assessing officer held that this is a performing asset, which is governed by 2(1)(xv) of Non-banking financial companies prudential norms (Reserve Bank) directions 1998. It was held that though it is mandatory but cannot be categorised as ‘bed debts’ For security depreciation of Rs.1.50 crores the Assessing Officer held that this reserve for contingency and not a provision for bad and doubtful debts. For fourth provision of Rs.50 lakh, Assessing Officer held that investment depreciation fund is also provision to cover the value 21

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. of stock-in-trade which is also contingent in nature. We find that Ld. CIT(A) after examining the statutory provision and held that assessee has a rural advance of Rs.159 Crore (rounded) against which the assessee has claimed only Rs.7.16 crores though they are entitled to claim @ 10% of the aggregate of average advance by rural branches of assessee-bank. Thus, the Ld. CIT(A) allowed all the claim under four various heads by holding that the assessee is clearly eligible for the deduction under section 36(1)(viia) as it fulfilled the two condition that any provisions for bad and doubtful debts made by Co-operative bank is allowable if it does not exceed 7 ½ of total income (computed before making deduction under this clause under chapter VIA) and an amount not exceeding 10% of aggregate average advances made by rural branch. 17. We find that the assessing officer has not doubted the number of rural branches as defined under section 36(1) (viia) (d)(ia) or the total of the advances made by rural branches of assessee-bank and the computation made in the prescribed manner. 18. We further find that the assessee claimed that similar deduction was allowed in assessment years 2008-09, 2009-10 in 22

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. assessment passed under section 143(3) and in assessment years 2015-16 & 2016-17 in accepted in assessment order under section 143(1). However again in assessment year 2017-18 it was allowed in assessment order passed under section 143(3). The Assessing Officer disallowed the deduction under section 36(1)(viia)(a) in assessment year 2012-13. However, on appeal before Ld. CIT(A) the assessee was granted relief and on further appeals of the Revenue is pending before Tribunal. These facts were not controverted by Revenue. Thus, the assessee is liable to be succeeded on the principles of consistency. 19. The Hon’ble Supreme Court in Catholic Syrian Bank Vs CIT (supra) after discussing the scope of section 36(1)(vii) and (viia) held that both the provisions are separate and distinct, the relevant part of the decisions of extracted below for appreciation of the controversy in the case in hand; “17. The provisions of Section 36(1)(vii) would come into play in the grant of deductions, subject to the limitation contained in Section 36(2) of the Act. Any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year is the deduction which the assessee would be entitled to get, provided he satisfies the requirements of Section 36(2) of the Act. Allowing of deduction of bad debts is controlled by the provisions of Section 36(2). The argument advanced on behalf of the Revenue is that it would amount to allowing a double deduction if the provisions of Sections 36(1)(vii) and 36(1)(viia) are 23

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. permitted to operate independently. There is no doubt that a statute is normally not construed to provide for a double benefit unless it is specifically so stipulated or is clear from the scheme of the Act. As far as the question of double benefit is concerned, the Legislature in its wisdom introduced Section 36(2)(v) by the Finance Act, 1985 with effect from 01.04.1985. Section 36(2)(v) concerns itself as a check for claim of any double deduction and has to be read in conjunction with Section 36(1)(viia) of the Act. It requires the assessee to debit the amount of such debt or part thereof in the previous year to the provision made for that purpose. Effect of Circulars 18. Now, we shall proceed to examine the effect of the circulars which are in force and are issued by the Central Board of Direct Taxes (for short, ' the Board') in exercise of the power vested in it under Section 119 of the Act. Circulars can be issued by the Board to explain or tone down the rigours of law and to ensure fair enforcement of its provisions. These circulars have the force of law and are binding on the income tax authorities, though they cannot be enforced adversely against the assessee. Normally, these circulars cannot be ignored. A circular may not override or detract from the provisions of the Act but it can seek to mitigate the rigour of a particular provision for the benefit of the assessee in certain specified circumstances. So long as the circular is in force, it aids the uniform and proper administration and application of the provisions of the Act. {Refer to UCO Bank, Calcutta v. CIT [1999] 4 SCC 599 . 19. In the present case, after introduction of Section 36(1)(viia) by the Finance Act, 1979, [(1981) 131 ITR (St.) 88], with effect from 1st April, 1980, Circular No. 258 dated 14th June, 1979 was issued by the Board to clarify the application of the new provisions. The provisions were introduced in order to promote rural banking and assist the scheduled commercial banks in making adequate provision from their current profits to provide for risks in relation to their rural advances. The deductions were to be limited as specified in the Section. A ' rural branch & apos; for the purpose of the Act had meant a branch of a scheduled bank, situated in a place with a population not exceeding 10,000, according to the last preceding census of which the relevant figures have been published. Under clause 13.3, the Circular found it 24

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. relevant to mention that the provisions of new clause (viia) of Section 36(1), relating to the deduction on account of provisions for bad and doubtful debts, is distinct and independent of the provisions of Section 36(1)(vii) relating to allowance of deduction of the bad debts. In other words, the scheduled commercial banks would continue to get the benefit of the write-off of the irrecoverable debts under Section 36(1)(vii) in addition to the benefit of deduction of the provision for bad and doubtful debts under Section 36(1)(viia). 20. The Finance Act, 1985, which was given effect from 1st April, 1985, added the proviso to Section 36(1)(vii), amended Section 36(1)(viia) and also introduced clause (v) to Section 36(2) of the Act. To complete the history of amendments to these clauses, we may also notice that proviso to Section 36(1)(viia)(a) was introduced by Finance Act, 1999 with effect from 1st April, 2000 and explanation to Section 36(1)(vii) was introduced by Finance Act, 2001 with effect from 1st April, 2001. 21. A Circular No.421 dated 12th June, 1985 [(1985) 156 ITR (St.) 130] attempted to explain the amendments made to Section 36 and also explained the provisions of clause (viia) of Section 36(1). It reads as under : "Deduction in respect of provisions made by banking companies for bad and doubtful debts. 17.1 Section 36(1)(vii) of the Income-tax Act provides for a deduction in the computation of taxable profits of the amount of any debt or part thereof which is established to have become a bad debt in the previous year. This allowance is subject to the fulfilment of the conditions specified in sub-section (2) of section 36. 17.2 Section 36(1)(viia) of the Income-tax Act provides for a deduction in respect of any provision for bad and doubtful debts made by a scheduled bank or a non-scheduled bank in relation to advances made by its rural branches, of any amount not exceeding 1½ per cent of the aggregate average advances made by such branches.

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. 17.3 Having regard to the increasing social commitments of banks, section 36(1)(viia) has been amended to provide that in respect of any provision for bad and doubtful debts made by a scheduled bank [not being a bank approved by the Central Government for the purposes of section 36(1)(viiia) or a bank incorporated by or under the laws of a country outside India] or a non- scheduled bank, an amount not exceeding ten per cent of the total income (computed before making any deduction under the proposed new provision) or two per cent of the aggregate average advances made by rural branches of such banks, whichever is higher, shall be allowed as a deduction in computing the taxable profits. 17.4 Section 36(1)(vii) of the Act has also been amended to provide that in the case of a bank to which section 36(1)(viia) applies, the amount of bad and doubtful debts shall be debited to the provision for bad and doubtful debts account and that the deduction admissible under section 36(1)(vii) shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account. 17.5 Section 36(2) has been amended by insertion of a new clause (v) to provide that where a debt or a part of a debt considered bad or doubtful relates to advances made by a bank to which section 36(1)(viia) applies, no such deduction shall be allowed unless the bank has debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debt account made under clause (viia) of section 36(1)." 22. Still another circular being Circular No.464, dated 18th July, 1986 [(1986) 161 ITR(St.) 66] was issued with the intention to explain the amendments made by the Income Tax (Amendment) Act, 1986. Clause 5 of the Circular dealt with the modifications introduced in respect of the deductions on provisions for bad and doubtful debts made by the banks and it stated as follows : "5. Modification in respect of deduction on provisions for bad and doubtful debts made by the banks : 5.1 Under the existing provisions of clause (viia) of sub-section (1) of section 36 of the Income-tax Act inserted by the Finance Act, 1979, provision for bad 26

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. and doubtful debts made by scheduled or a non-scheduled Indian bank is allowed as deduction within the prescribed limits. The limit prescribed is 10% of the total income or 2% of the aggregate average advances made by the rural branches of such banks, whichever is higher. It had been represented to the Government that the foreign banks were not entitled to any deduction under this provision and to that extent, they were being discriminated against. Further, it was felt that the existing ceiling in this regard, i.e., 10% of the total income or 2% of the aggregate average advances made by the rural branches of Indian banks, whichever is higher, should be modified. Accordingly, by the Amending Act, the deduction presently available under clause (viia) of subsection (1) of section 36 of the Income-tax Act has been split into two separate provisions. One of these limits the deduction to an amount not exceeding 2% of the aggregate average advances made by the rural branches of the banks concerned. It may be clarified that foreign banks do not have rural branches and hence this amendment will not be relevant in the case of the foreign banks. The other provisions secure that a further deduction shall be allowed in respect of the provision for bad and doubtful debts made by all banks, not just the banks incorporated in India, limited to 5% of the total income (computed before making any deduction under this clause and Chapter VI-A). This will imply that all scheduled or non-scheduled banks having rural branches would be allowed the deduction up to 2% of the aggregate average advances made by such branches and a further deduction up to 5% of their total income in respect of provision for bad and doubtful debts." 23. Reference usefully can also be made to the Statement of Objects and Reasons for the Finance Act, 1986, wherein, inter alia, it was stated that the amendments were intended to provide a deduction on the provisions for bad debts made by all banks upto 5 per cent of their total income and an additional 2 per cent of the aggregate average advances made by the rural branches of the banks. These percentages stood altered by subsequent amendments in 1993 and 2001. 24. Clear legislative intent of the relevant provisions and unambiguous language of the circulars with reference to the amendments to Section 36 of the Act demonstrate 27

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. that the deduction on account of provisions for bad and doubtful debts under Section 36(1)(viia) is distinct and independent of the provisions of Section 36(1)(vii) relating to allowance of the bad debts. The legislative intent was to encourage rural advances and the making of provisions for bad debts in relation to such rural branches. Another material aspect of the functioning of such banks is that their rural branches were practically treated as a distinct business, though ultimately these advances would form part of the books of accounts of the principal or head office branch. Thus, this Court would be more inclined to give an interpretation to these provisions which would serve the legislative object and intent, rather than to subvert the same. The Circulars in question show a trend of encouraging rural business and for providing greater deductions. The purpose of granting such deductions would stand frustrated if these deductions are implicitly neutralized against other independent deductions specifically provided under the provisions of the Act. To put it simply, the deductions permissible under Section 36(1)(vii) should not be negated by reading into this provision, limitations of Section 36(1)(viia) on the reasoning that it will form a check against double deduction. To our mind, such approach would be erroneous and not applicable on the facts of the case in hand. Interpretation and Construction of Relevant Sections 25. The language of Section 36(1)(vii) of the Act is unambiguous and does not admit of two interpretations. It applies to all banks, commercial or rural, scheduled or unscheduled. It gives a benefit to the assessee to claim a deduction on any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year. This benefit is subject only to Section 36(2) of the Act. It is obligatory upon the assessee to prove to the assessing officer that the case satisfies the ingredients of Section 36(1)(vii) on the one hand and that it satisfies the requirements stated in Section 36(2) of the Act on the other. The proviso to Section 36(1)(vii) does not, in absolute terms, control the application of this provision as it comes into operation only when the case of the assessee is one which falls squarely under Section 36(1)(viia) of the Act. We may also notice that the explanation to Section 36(1)(vii), introduced by the Finance Act, 2001, has to be examined in 28

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. conjunction with the principal section. The explanation specifically excluded any provision for bad and doubtful debts made in the account of the assessee from the ambit and scope of ' any bad debt, or part thereof, written off as irrecoverable in the accounts of the assessee & apos;. Thus, the concept of making a provision for bad and doubtful debts will fall outside the scope of Section 36(1)(vii) simplicitor. The proviso, as already noticed, will have to be read with the provisions of Section 36(1)(viia) of the Act. Once the bad debt is actually written off as irrecoverable and the requirements of Section 36(2) satisfied, then, it will not be permissible to deny such deduction on the apprehension of double deduction under the provisions of Section 36(1)(viia) and proviso to Section 36(1)(vii). This does not appear to be the intention of the framers of law. The scheduled and non-scheduled commercial banks would continue to get the full benefit of write off of the irrecoverable debts under Section 36(1)(vii) in addition to the benefit of deduction of bad and doubtful debts under Section 36(1)(viia). Mere provision for bad and doubtful debts may not be allowable, but in the case of a rural advance, the same, in terms of Section 36(1)(viia)(a), may be allowable without insisting on an actual write off. 26. The Special Bench of the ITAT had rejected the contention of the Revenue that proviso to Section 36(1)(vii) applies to all banks and with reference to the circulars issued by the Board, held that a bank would be entitled to both deductions, one under clause (vii) of Section 36(1) of the Act on the basis of actual write off and the other on the basis of clause (viia) of Section 36(1) of the Act on the mere making of provision for bad debts. This, according to the Revenue, would lead to double deduction and the proviso to Section 36(1)(vii) was introduced with the intention to prevent this mischief. The contention of the Revenue, in our opinion, was rightly rejected by the Special Bench of the ITAT and it correctly held that the Board itself had recognized the position that a bank would be entitled to both the deductions. Further, it concluded that the proviso had been introduced to protect the Revenue, but it would be meaningless to invoke the same where there was no threat of double deduction. 27. As per this proviso to clause (vii), the deduction on account of the actual write off of bad debts would be limited to excess of the amount written off over the 29

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. amount of the provision which had already been allowed under clause (viia). The proviso by and large protects the interests of the Revenue. In case of rural advances which are covered by clause (viia), there would be no such double deduction. The proviso, in its terms, limits its application to the case of a bank to which clause (viia) applies. Indisputably, clause (viia)(a) applies only to rural advances.”

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. bad and doubtful debts and the balance amount of Rs.36,75,000/- was provision against standard assets and the entire amount was claimed as deduction under section 36(1)(viia) of the Act. The Assessing Officer was of the opinion that the provisions made by the assessee against standard assets was a contingent liability and which was not allowable as business expenditure. The ld. CIT(A), however, allowed relief to the assessee by holding that the claim of the assessee fall into the main provisions of section 36(1)(viia). To resolve the dispute it is important to visit the provisions of section 36(1)(viia) of the Act and which for the sake of convenience are reproduced below. “36(1)(viia) In respect of any provision for bad and doubtful debts made by (a)a scheduled bank [not being a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank or a co-operative bank outside India] or a primary co-operative agricultural and rural development bank, an amount not exceeding seven and one-half percent of the total income (computed before making any deduction under this clause and Chapter VI-A) and an amount not exceeding ten percent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five percent of the amount of such assets shown in the books of account of the bank on the last day of the previous year: Provided further that for the relevant assessment years commencing on or after the 1st day of April,2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect as if for the words “five percent”, the words “ten percent” had been substituted: Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government: 31

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head “Profits and gains business or profession.” From the above provisions it can be seen that deduction u/s 36(1)(viia) of the Act is allowed in respect of provisions for bad and doubtful debts This section does not differentiate between provision on bad assets and provision on standard assets. This deduction exclusively allows deduction in respect of provision for bad and doubtful debts to the extent mentioned in the various clauses of sub-section(1) of section 36 of the Act. The deduction under section 36(1)(viia) of the Act is allowed only in respect of certain specific categories of assessee mentioned in the clause like banks, financial institutions, etc. who are in business of lending money. It is not allowed even to non-banking financial institutions since they are not included in this clause. It is seen that though section 36(1)(vii) states that deduction for provision is allowable in respect of provision for bad and doubtful debts, the computation of such deduction is made with reference to total income of the specified Banks based upon quantum of average advances. The deduction of the provisions is neither limited to the quantum of bad debts in the books nor is computed with reference to the quantum of standard assets. The deduction in this clause refers to allowable provisions of anticipated default on the loans and advances made in respect of total assets including standard assets and the claim of the assessee does not fall into the proviso to section 36(1)(viia) as the proviso deals with further deduction for provisions on bad and doubtful debts. The claim of the assessee is covered in the main provisions of section 36(1)(viia) of the Act. The learned CIT(A) has passed a very exhaustive and speaking order and we do not find any infirmity in the same. We have perused the aforesaid order of the Tribunal and finding ourselves to be in agreement with the view therein taken, respectfully follow the same. We thus are of the considered view that as the provision for bad and doubtful debts against standard assets is covered in the main provisions of Sec. 36(1)(viia) of the IT Act, therefore, uphold the order of the CIT(A) who we find had rightly deleted the addition of Rs. 3,53,47,000/- made by the A.O on the said count. The Grounds of Appeal No. 4 to 6 raised by the revenue are dismissed.” 32

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. 21. We find that the coordinate bench of Amritsar Tribunal in DCIT Vs Nawanshahr Central Co-operative Bank Ltd (supra) while considering the grounds related with the provision against standered asset under section under section 36(1)(viia) passed the following order;

“ Now coming to ground no. 2 regarding provisions against the standard assets, we find that the same is also covered in favour of assessee by the order of the Hon'ble Tribunal in the case of Punjab Gramin Cooperative Bank. For the sake of completeness, the findings of the Hon'ble Tribunal are reproduced below:

"12. We have heard the rival parties and have gone through the material placed on record. We find that the issue of provision for doubtful debts on standard assets is covered in favour of assessee by the order of the Tribunal dated 22.06.2016 for Assessment Year: 2008-09, wherein the appeal of the revenue was dismissed which was filed by Revenue on similar grounds. The relevant findings of the Tribunal as contained in para 8 onwards are reproduced below. 8. "We have heard the rival parties and have gone through the material on record. We find that the assessee had created a provision of Rs. 50,00,000/- which included a sum of Rs. 13,25,000/- as provisions for bad and doubtful debts and the balance amount of Rs. 36,75,000/- was provision against standard assets and the entire amount was claimed as deduction under section 36(1)(viia) of the Act. The Assessing Officer was of the opinion that the provisions made by the assessee against standard assets was a contingent liability and which was not allowable as business expenditure. The Ld. CIT(A), however, allowed relief to the assessee by holding that the claim of the assessee fall into the main provisions of section 36(1)(viia). To resolve the dispute it is important to visit the provisions of section 36(1)(viia) of the Act and which for the sake of convenience are reproduced below.

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. "36(1)(viia) In respect of any provision for bad and doubtful debts made by (a) a scheduled bank [not being a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank or a co-operative bank outside India] or a primary co-operative agricultural and rural development bank, an amount not exceeding seven and one- half percent of the total income (computed before making any deduction under this clause and Chapter VI-A) and an amount not exceeding ten percent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. Provided that a schedule bank or a non-scheduled bank referred to in this sub- clause shall, at its option, be allowed in any of the relevant assessment years deduction in respect of any provision made by it for any assets classified by the Assessment Year: 2013-14 Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five percent of the amount of such assets shown in the books of account of the bank on the last day of the previous year. Provided further that for the relevant assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect as if for the words "five percent", the words "ten percent" had been substituted. Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government. Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head "Profits and gains business or profession." From the above provisions it can be seen that deduction u/s 36(1) (viia) of the Act is allowed in respect of provisions for bad and doubtful debts. This section does not differentiate between provision on bad assets and provision on standard assets. This deduction exclusively allows deduction in respect of provision for bad and doubtful debts to the extent mentioned in the various clauses of sub-section (1) of section 36 of the Act. The deduction under section 36(1)(viia) of the Act is allowed only in respect of certain specific categories of assessee mentioned in the clause like banks, financial institutions, etc. who are in business of lending money. It is not allowed even to non-banking financial institutions since they are not included in this clause. It is seen that 34

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. though section 36(1) (vii) states that deduction for provision is allowable in respect of provision for bad and doubtful debts, the computation of such deduction is made with reference to total income of the specified Banks based upon quantum of average advances. The deduction of the provisions is neither limited to the quantum of bad debts in the books nor is computed with reference to the quantum of standard assets. The deduction in this clause refers to allowable provisions of anticipated default on the loans and advances made in respect of total assets including standard assets and the claim of the assessee does not fall into the proviso to section 36(1) (viia) as the proviso deals with further deduction for provisions on bad and doubtful debts. The claim of the assessee is covered in the main provisions of section 36(1)(viia) of the Act. The Ld. CIT(A) has passed a Assessment Year: 2013-14 very exhaustive and speaking order and we do not find any infirmity in the same. Therefore following the above Tribunal order, we do not see any infirmity in the order of Ld. CIT(A). 13. In view of the above fact and circumstances the grounds of appeal raised by Revenue in ITA No. 580 & 569 are dismissed. In view of the above precedents the ground no. 2 is also dismissed.” 22. We find that Chennai Tribunal in Tamilnadu State Apex Co- operative Bank Vs ACIT (supra) while considering the provision for non-performing asset under section 36(1)(viia) held that where the assessee-bank had claimed deduction for 'Provision for Non- Performing Assets' under section 36(1)(viia), in view of fact that taxonomy of provision had been done by assessee to keep it in line with RBI and NABARD guidelines, but in pith and substance provision had been created for 'Bad and Doubtful Debts', deduction was claimed in accordance with section 36(1)(viia) and assessee was entitled to benefit of same. 35

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. 23. Further Bangalore Tribunal in DCIT Vs IGN Vysya Bank (supra) also held that in order to allow assessee's claim under section 36(1)(viia), what has to be seen by Assessing Officer is as to whether provision for bad and doubtful debts is created irrespective of whether it is in respect of rural or non-rural advances by debiting profit and loss account and, to extent provision for bad and doubtful debts is so created, assessee is entitled to deduction subject to upper limit of deduction laid down in said section. In Nanded District Central Co-operative bank Vs DCIT (2015) 57 taxmann.com 422 (Pune Trib) also held that deduction under section 36(1)(viia) is to be restricted to the actual amount of provision for bad and doubtful debts made in the books of account. 24. We also find that Ahmedabad Tribunal in DCIT Vs Sarvodaya Shakari Bank Ltd (supra) also held that that the provisions for bad and doubtful debts should be allowed u/s. 36(1)(viia), to the extent of provision made and available in the books of account, whether made in the current previous year. Thus, in view of the aforesaid factual discussion, we affirm the order of Ld. CIT(A) by adding our aforesaid observation. 36

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. 25. So far as decision relied by Ld. CIT-DR in Jhabua Dhar Kshetriya Gramin Bank (supra), is concerned, we find that ratio of decision is not applicable on the facts of case in hand. In the said the Tribunal relied on its earlier decision in Narmada Gramin Bank Vs ACIT (supra) wherein the issue of provision under section 36(1) (viia) was restore to the file of assessing officer for recomputation of claim of deduction to the extent of amount written back in the books of account. Thus, the facts of that case are in variance. 26. In the result, ground No.1& 3 raised by the Revenue is dismissed. 27. Ground No.2 & 4 relates to deleting various disallowances of centenary celebration expenses of Rs. 46,77,004/-, gift distribution of Rs. 7,72,099/- and interest relief to society expenses of Rs. 8,86,239/-. The Ld. CIT-DR for the Revenue supported the order of Assessing Officer. The ld. CIT-DR for the revenue submits that during the assessment, the assessee failed to produce the relevant bills/vouchers of the expenses incurred for verifiable by Assessing Officer. Though the assessee-bank claimed that they are ready to produce the supporting expenses 37

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. that actually failed to do so the readiness to produce the prove does not entitle for claiming the deduction of expense. The Ld. CIT(A) merely assumed that the assessee has not doubted the purpose of incurring expenses, which is fair from the fact that. 28. On the other hand, the ld. AR for the assessee supported the order of Ld. CIT(A). The ld. AR for the assessee submits that the assessing officer disallowed expenses consist of three claim viz; (i) Centenary year celebration, gift distribution and interest relief to society expenses. For centenary year celebration expense, the ld AR for the assessee submits that the assessee similar expenses of Rs.1.94 crores in preceding year i.e., assessment year 2009-10 by assessing officer in the assessment order under section 143(3). Further similar expenses was disallowed by assessing officer in assessment year 2011-12, however on appeal before ld CIT(A) it was fully allowed, which has been accepted by the Department and not file appeal before the Tribunal. Similarly, the gift distribution expense and society relief expense claimed in all preceding and subsequent years had been allowed as expenditure under section 37(1). The Ld. AR for the assessee submits that assessment order passed either under section 38

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. 143(3) or 143(1) in earlier year is also placed on record. To support his submission, Ld. AR for the assessee relied on the following decision:-  Karjan Co-Operative Sales Ginning & Pressing Society vs. CIT [1993] 69 Taxman 304 (Guj) (FB)  CIT vs. Navsari Cotton & Silk Mills Ltd. [1982] 135 ITR 546(Guj)  CIT vs. Mehsana Dist. Co-Operative Milk Producers Union Ltd.,(1995) 78 Taxmann.com 563 (Guj)  Pr.CIT vs. Nokia India (P) LOtd. (2018) 98 taxmann.com 415 (Del)  Aishka Pharma (P) Ltd. vs. ITO (2019) 106 taxdmann.com 192 (Delhi-Trib.)  Nokioa India Pvt. Ltd. vs. Addl.CIT (ITA No.2160- 2161/Del/2018 dated 26.10.2010) 29. We have considered the rival submission of the parties and have gone through the orders of authorities below and above cited case law carefully. The Assessing Officer disallowed the various claims under appeal by taking view that no details and bills/vouchers were not furnished by assessee despite claiming that they are ready to produce such bills/vouchers. The Ld. CIT(A) deleted the expenses by considering the fact that assessee claimed all evidences were produced before Assessing Officer for verification. 39

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. All the expenses were incurred to celebrate the centenary year. The expense incurred on account of relief fund to celebrate centenary year and are clearly for the purpose of business. There is no personal purpose in making of such expenses, gift items for distributed for valued customers, staff members, and token of appreciation of contribution in helping to boost the business of assessee-bank. Thus all the expenses were incurred wholly and exclusively for the purpose of assessee-bank. Before us Ld. AR for the assessee relied on various case law some of them relate to expense incurred by co-operative societies. 30. We find that in CIT Vs Mehsana Dist. Co-Op. Milk Producers Union Ltd. (supra) Hon’ble Gujarat High Court has allowed the expense incurred on silver jubilee celebration as business expenditure and was treated the expense incurred wholly and exclusively for the purpose of business. 31. Further, in PCIT vs. Nokia India (P) Ltd. (supra) the expenditure incurred in connection with annual day celebration was allowed as business expenditure. Similarly in case of Nokia India Pvt. Ltd. (supra) where the assessee has given phones to its employees and dealers and other service partners and ownership had been 40

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. transferred to employees, dealers and sellers business and were not to be returned to the assessee was held as business expenditure. 32. Further in Karjan Cooperative Vs CIT (supra), the Hon’ble Gujarat High Court allowed the expenditure incurred by assessee- society on giving presents to members on the occasion of its silver jubilee celebration and held that it was incurred wholly and exclusively for the purpose of business. 33. Considering the aforesaid factual and legal discussion, we affirm the order of Ld. CIT(A) with the aforesaid legal view. In the result, ground No.2 relates to three heads raised by Revenue is dismissed. 34. In the result, appeal of Revenue is dismissed. Order pronounced in open court on 17/05/2022 and the result was also placed on notice Board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 17/05/2022 Dkp. Out Sourcing Sr.P.S

ITA No.16/AHD/2015 (A.Y. 10-11) The Surat Dist. Co-Op Bank Ltd. Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order

Assistant Registrar, ITAT, Surat True copy/