Tribunal allows appeal on bad debts, remands gratuity fund issues, dismisses S.154 appeal.

The Tribunal allowed the appeal, deleting the disallowance on bad debts written off, citing Supreme Court rulings that post-1.4.1989, it is not necessary to establish irrecoverability. The issues regarding gratuity fund and ADWDRS bad debts were remanded to the Assessing Officer for fresh consideration. The appeal under S.154 was dismissed as infructuous.

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Issues Involved:
1. Disallowance of Rs. 70,96,83,398 on account of bad debts written off covered by State Government Guarantee.
2. Disallowance of Rs. 21,55,72,052 on account of amount paid to LIC towards Employees Gratuity Fund.
3. Disallowance of Rs. 173,15,46,253 on account of bad debts written off under the Agricultural Debt Waiver and Debt Relief Scheme, 2008 (ADWDRS).
4. Inclusion of investment depreciation and profit on sale of investments in taxable income.
5. Rectification application under S.154.

Issue-wise Detailed Analysis:

1. Disallowance of Rs. 70,96,83,398 on Account of Bad Debts Written Off:
The assessee, a state-level Apex Cooperative Credit institution, claimed a deduction for bad debts written off. The Assessing Officer disallowed Rs. 70,96,83,398, reasoning that the debts were covered by State Government guarantees and had not actually become bad. The CIT(A) partly sustained this disallowance, stating that the decision to write off some debts was not bona fide as the debts were recoverable. The Tribunal, however, referred to the Supreme Court rulings in Vijaya Bank V/s. CIT and TRF Limited V/s. CIT, which clarified that post-1.4.1989, it is not necessary to establish that debts have become irrecoverable; writing off in the books is sufficient. The Tribunal concluded that the assessee is entitled to the deduction and deleted the addition made by the Assessing Officer and sustained by the CIT(A).

2. Disallowance of Rs. 21,55,72,052 on Account of Amount Paid to LIC towards Employees Gratuity Fund:
The Assessing Officer disallowed the amount paid to LIC towards Employees Gratuity Fund as the fund was not approved by the prescribed authority. The CIT(A) confirmed this disallowance. However, the Tribunal noted that the fund was approved with effect from 1.3.2009. Both parties agreed to remand the matter to the Assessing Officer for fresh consideration in light of the approval. The Tribunal set aside the CIT(A)'s order and restored the issue to the Assessing Officer.

3. Disallowance of Rs. 173,15,46,253 on Account of Bad Debts Written Off under ADWDRS:
The assessee claimed a deduction for its share in the waiver of interest and other charges under ADWDRS. The Assessing Officer disallowed this, arguing that the relief was to be reimbursed by the Central Government, making the claim premature. The CIT(A) agreed that the amount represented debts written off but held that the deduction was subject to S.36(2)(v). The Tribunal modified the CIT(A)'s direction, instructing the Assessing Officer to verify the fulfillment of conditions under S.36(2)(v), considering that S.36(1)(viia) applies to cooperative banks only from 1.4.2007.

4. Inclusion of Investment Depreciation and Profit on Sale of Investments in Taxable Income:
The assessee contended that investment depreciation and profit on sale of investments should not be included in taxable income. The CIT(A) directed the Assessing Officer to verify the claim. The Tribunal restored the issue to the Assessing Officer for fresh consideration, following the same directions as in the assessee's case for the assessment year 2008-09.

5. Rectification Application under S.154:
The assessee's appeal against the CIT(A)'s order under S.154 was based on the same issues as grounds Nos. 5 to 7 of ITA No.1481/Hyd/2013. Since these issues were already addressed by the Tribunal, the appeal under S.154 was deemed infructuous and dismissed.

Conclusion:
The Tribunal partly allowed the appeal in ITA No.1481/Hyd/2013, deleting the disallowance on bad debts written off and remanding the issues of gratuity fund and ADWDRS bad debts to the Assessing Officer. The appeal in ITA No.88/Hyd/2014 was dismissed as infructuous. The order was pronounced on 9th October, 2014.

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