TaxTMI 
TaxTMI 
2013 (11) TMI 1696
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.... "1) The on the facts and in the circumstances of the case, the order passed by the ld. CIT(A) is bad in law and bad on fact. 2) That on the facts and in the circumstances of the case, the ld. CIT(A) erred in upholding the addition of Rs. 1081779/- being Provision for Standard Assets Rs. 68000/-, Provision for NPA Rs. 5,80,900/- and Provision for Impaired Assets Rs. 432879/- holding that provision made in accordance with the RBI Guidelines are not provision for doubtful debts. The same may kindly be deleted. 3) That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in upholding the disallowance of Rs. 19,57,916/- being Provision for investment depreciation reserve without assigning any reason fo....
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....deduction u/s 36(1)(viia) is allowable in respect of any provision for bad and doubtful debts made by a Cooperative Bank, an amount not exceeding seven and half percent of the total income computed before making any deduction under this clause and Chapter VIA and an amount not exceeding 10% of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner. On analysis of the provision, it can be said that the first condition to become eligible for deduction is that there should be a "provision for bad and doubtful debts" whereas, in the appellant's case, the appellant has made provision for "non performing asset" (NPA) and it cannot be said that it was a provision for bad and doubtful debts. Cla....
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....s, the appellant is Banking company and eligible for deduction u/s 36(1)(viia) is not acceptable in view of the decision of the Hon'ble Supreme Court in case of Southern Technologies Ltd, vs. JCIT, reported in 320 ITR 577 which states that there is deviation between RBI directions, 1998 and Companies Act in presentation of financial statement, recognization of the income and particularly in creating a provision for all NPAs summarily as against creating a provision only when the debt is doubtful of recovery under the norms of the accounting standard issued by the ICAI. Thus, it can be said that the provision for NPA is not equal to provision for bad and doubtful debts. The provision for bad and doubtful debts means the debt is either be....
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.... as under :- "G.A. No.2 AO Order page 1 - 2 CIT(A) Order 1 - 7 PB Page 2 - 7 (WS CIT(A)), 20 - 21 (CBDT Instruction No.17/2008) Decision relied on 1. The Vellore District Central Cooperative Bank Ltd. vs. CIT [ITAT Chennai Bench ITA No.914/Mds/2013 dated 17/07/2013] [PB page 22 - 32 (31 - 32) G.A. No.3 AO Order page 1 - 2 CIT(A) Order 4 - 5 Para 5.2.2 (Discussion only No Conclusion finding) PB 7 - 11 (WS CIT(A)), 20 - 21 (CBDT Instruction No.17/2008) Decision relied on 1. M/s Krishna Gramin Bank vs. Addl. CIT in ITA No.146/Bang/2011 dated 15/06/2012 [PB page 33 - 42 (39-42)]" 9. On the other hand, ld. Departmental Representative has supported the fi....
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....le the assessee for claiming deduction under the provisions of Section 36(1)(viia(a). The purpose for creation of reserve for NPA is same i.e., creating provision towards bad and doubtful debts. In view of the above, we find that the assessment order dated 09.09.2010 is neither erroneous nor prejudicial to the interest of the Revenue. The impugned order of CIT passed u/s. 263 is set aside and the appeal of the assessee is allowed." 11. Therefore, by respectfully following the ratio decidendi of the above Tribunal Order we allow ground no.(2) of this appeal in favour of the assessee. These provisions which are in line with the RBI guidelines become allowable. 12. The facts apropos ground no.(3) are that the A.O. has disallowed....
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....expenditure was not an actual expenditure and is only a provision. It is seen that the provision was made as per the accounting standard as well as per the RBI guidelines. The CBDT's instruction no.17/2008 dated 26.11.2008 helps the case of the assessee. We reproduce this instruction as under :- "As per RBI guidelines dated 16th 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 amortized over the period remaining t....