2015 (7) TMI 1280 - AT - Income Tax

Deduction u/s 36(1)(viia) - whether deduction be calculated considering the loans and advances made during the year only by rural branches and not on the cumulative balances of loans and advances of the bank over the years? - Held that - For the purpose of section 36(1)(viia), the aggregate average advances made by the rural branches of a scheduled bank shall be computed by taking the amounts of advances made by each rural branch as outstanding at the end of the last day of each month comprised in the previous year has to be aggregated separately. CIT(A) instead of giving the direction to the AO to take the amount of advances as outstanding at the end of the last day of each month in the previous year di rec ted the Assessing Officer to take loans and advances made during the year only. We, therefore, set aside the order of CIT(Appeals) on this issue and amend the direction of the CIT(Appeals) and direct the Assessing Officer to compute 10% of the aggregate monthly average advances made by the rural branch of such Bank by taking the amount of advances by each rural branch as outstanding at the end of the last day of each month comprised in the previous year and aggregate the same separately as given under Rule 6ABA of the Income Tax Rules, 1962. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Appeal against orders of Commissioner of Income Tax (Appeals) for assessment years 2008-09 and 2009-10. Interpretation of deduction under section 36(1)(viia) of the Income Tax Act, 1961.

Analysis:
The appeals were filed against the orders of the Commissioner of Income Tax (Appeals) for the assessment years 2008-09 and 2009-10. The only surviving ground for adjudication in both appeals was related to the interpretation of deduction under section 36(1)(viia) of the Income Tax Act, 1961. The issue revolved around the calculation method for deduction under this section, specifically concerning the loans and advances made by rural branches of a scheduled bank. The key contention was whether the deduction should be based on the cumulative balances of loans and advances over the years or only on the advances made during the year by rural branches.

Upon careful consideration of the submissions and relevant provisions, the Tribunal noted that the Commissioner of Income Tax (Appeals) had incorrectly directed the Assessing Officer to calculate the deduction based on loans and advances made during the year only, contrary to the provisions of Rule 6ABA of the Income Tax Rules, 1962. Rule 6ABA specifies the method for computing the aggregate average advances made by rural branches of a scheduled bank, emphasizing the aggregation of outstanding advances made by each rural branch at the end of each month in the previous year.

The Tribunal, therefore, set aside the order of the Commissioner of Income Tax (Appeals) on this issue and directed the Assessing Officer to calculate 10% of the aggregate monthly average advances made by rural branches by considering the outstanding advances at the end of each month in the previous year, as prescribed under Rule 6ABA. Consequently, the appeal filed by the assessee was allowed for statistical purposes. The order was pronounced in the open court on July 8, 2015.