TaxTMI 
TaxTMI 
2014 (1) TMI 757
X X X X Extracts X X X X
X X X X Extracts X X X X
....pensed out pertaining to the relevant previous year and hence allowable as business expenditure u/s.36/37 of the Income Tax Act. 2. The assessee is a cooperative society engaged in banking activities, having duly registered under the Maharashtra State Co-operative Societies Act, 1960 and Banking Regulation Act, 1949. The return of income for assessment year under appeal was filed on 30.09.2008 declaring total income at Rs.4,55,50,220/-. In assessment order passed u/s. 143(3), the Assessing Officer has assessed the total income at Rs.5,10,68,176/- by making various disallowances / additions. The matter was carried before first appellate authority. 3. First issue in the appeal is regarding disallowance of Rs.14,50,000/- debited to Profit & Loss Account on account of provision for inter branch and inter bank adjustment. As per compliance report submitted by the assessee to the RBI, the provision was made for pending entries for more than two years. This provision was made on 31.03.2008 pending reconciliation of inter branch and inter bank accounts. As per advise of RBI, the assessee did not taken into account the said entries as income either in current year or in preceding year. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lity of receiving amount back when during pendency of reconciliation of the said entries. It shows that amount in question was not actually return as bad debt or business loss during the year and it was only notional provision or loss for diminution of the value if any, which could not be allowed as deduction either u/s. 37 of the I.T. Act or u/s. 28 of the I.T. Act. 3.3 In appeal CIT(A) held that the Assessing Officer was justified in disallowing the provision made for inter branch and inter bank adjustment, accordingly, addition of Rs.14,50,000/- made by the Assessing Officer on this ground was upheld by the CIT(A) and the same is opposed before us. 3.4 After going through rival submissions and material on record, we are not inclined to interfere in the finding of CIT(A). As per compliance report submitted by assessee to Reserve Bank of India, provision was made for pending entry for more than two years. This provision was made on 31-03-2008 pending reconciliation of inter branch and inter bank accounts. As per advise of Reserve Bank of India, the assessee did not take into account the said entry as income either in current year or in preceding year. Revenue authorities observe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find an identical issue had come up before the Tribunal in the case of Nashik Merchant Cooperative Bank Ltd. (Supra). We find the Tribunal has discussed the issue and dismissed the grounds raised by the Revenue by holding as under : "4. After going through rival submissions and material on record we find that with the advent of section 80P(4) w.e.f. A.Y, 2007-08 has closed the doors for cooperative banks for claiming the benefit of deduction u/s.80P(2)(a)(i) from this total income. However, the cooperative society should now be entitled to be assessed as normal banking company. The clause (4) inserted in section 80P has taken away the benefit of the erstwhile deduction available to cooperative society in carrying on business of banking or providing credit facility to its members. The new clause (4) inserted by the Finance Act, 2006 w.e.f. 01-04-2007 reads as under : "The provision of the section was not in relation to any cooperative bank other than agricultural credit society or primary ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erly or at more frequent intervals. These investments are considered to form stock-in-trade of a bank and therefore are to be valued at cost or NRV, whichever is less. Fall in value below cost, therefore, is to be provided immediately, however any net appreciation in value is ignored and not recognized as income on the basis of conservatism. 3. HFT The individual scrips in the Held for Trading category will be marked to market at monthly or at more frequent intervals and provided for as in the case of those in the Available for Sale category. 7. In para (vii) of the CBDT Instruction No.17 of 2008 dated 26.11.2008, on 'Assessment of Bank - check list for deduction, states as under: "As per RBI guidelines dated i6th October, 2000, the investment portfolio of the banks is required to be classified under three categories viz. Held to Maturity (HTM), Held for Trading (HFT) and Available for Sale (AFS). Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortised over the period remaining to maturity. In the case of HFT and AFS securities forming stock....