2012 (12) TMI 1079 - AT - Income Tax

Summary

Issues involved: Appeal against disallowance of provision for bad and doubtful debts u/s 36(1)(viia) of the Act for assessment year 2007-08. Interpretation of the term "rural branch" in relation to Co-operative banks.

Issue 1: Disallowance of provision for bad and doubtful debts u/s 36(1)(viia) of the Act:

The assessee claimed deduction for provision for bad and doubtful debts u/s 36(1)(viia) at 7.5% of Gross total income and 10% of aggregate advances made by rural branches. The AO disallowed the claim as no provision was made as required u/s 36(1)(viia). The appeal before Ld CIT(A) was unsuccessful. The Tribunal referred to a previous case regarding the definition of "rural branch" and decided in favor of the assessing officer, setting aside the order of Ld CIT(A).

Issue 2: Interpretation of "rural branch" in relation to Co-operative banks:

The alternative plea raised by the assessee contended that the definition of "rural branch" under sec. 36(1)(viia) does not apply to Co-operative banks. The Tribunal analyzed relevant provisions of the Banking Regulation Act, 1949, and concluded that a Co-operative bank falls under the category of a "non-scheduled bank" as per the definition provided. Therefore, the decision of the Jurisdictional High Court regarding the definition of "rural branch" was held to apply to the assessee, and the alternative plea was rejected. The Tribunal upheld the decision of the assessing officer on this issue.

In conclusion, the appeal of the assessee against the disallowance of provision for bad and doubtful debts u/s 36(1)(viia) was dismissed. The Tribunal also affirmed the interpretation of "rural branch" in relation to Co-operative banks, following the decision of the Jurisdictional High Court.