INCOME TAX ACT, 1961

Section 36(1)(viia)

Business deduction under section 36(1)(viia) - Allowability - Co-operative bank not having any rural advances -

Assessee, a co-operative bank, claimed deduction under section 36(1)(viia). AO denied assessee's claim on the ground that assessee was not having any rural advances and hence, was not eligible for deduction under section 36(1)(viia).Held: With effect from 1-4-2007, Cooperative Bank was included under sub-clause (a) of clause (viia) of section 36(1). It is further clarified that only such Co-operative Bank other than a primary agriculture credit society, etc., is included in sub clause (a) of clause (viia). The provision is a beneficial one. No doubt, plain reading of main section 36(1)(viia)(a) and explanation under said section present certain difficulties, but situation is not without possibilities. The object and intention of the legislature is to be understood by harmonious construction of the provisions. The policy was to include Co-operative Banks as well, as they could not take shelter under section 80P any more. By restricting the scope of the provisions, the very purpose of inclusion of Co-operative Bank would be lost. Sub-clause (a) consists of two types of deductions. One refers to deduction of an amount not exceeding 7.5% of total income [computed before making any deduction under this clause and Chapter VI-A]. Section one refers to deduction of an amount not exceeding 10% of aggregate average advances made by rural branches of such bank while computing in the prescribed manner. So far as benefit of 7.5% of the total income, there is no condition that it should be in respect of any rural branch. All types of banks described under sub-clause (a) of clause (viia) are entitled to seek deduction of an amount of exceeding 7.5% of total income. Only condition is there should be a provision for bad and doubtful debts. Accordingly, AO was not justified in denying deduction to assessee.

Followed:Bhagini Nivedita Sahakari Bank Ltd. v. Dy. CIT (2018) 100 Taxmann.com 375 (Pune-Trib) : 2018 TaxPub(DT) 7669 (Pune-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

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