2014 (2) TMI 1397 - AT - Income Tax

Excess deduction claimed u/s 36(1)(viia) - excess deduction of 10% of average advances of rural branch is available to rural branches and as per explanation (ia) below section 36(1)(viia) rural branch means a branch of schedule bank or a non schedule bank (and thus rural branch of a cooperative bank is not covered) - CIT-A deleted the addition - HELD THAT - In the present case, it is noticed that the Ld. CIT(A) decided the issue in favour of the assessee in consonance with the decisions taken by the coordinate benches of the ITAT at Jaipur 2014 (1) TMI 833 - ITAT JAIPUR and Cochin 2012 (5) TMI 22 - ITAT COCHIN . He has followed the decision of.Jaipur Central Co-operative Bank Ltd. 2014 (1) TMI 833 - ITAT JAIPUR . We, therefore, do not see any merit in this appeal of the department.

Summary

Issues:
Appeal against deletion of addition on account of excess deduction claimed u/s 36(1)(viia) of the IT Act.

Analysis:
1. The department appealed against the order of the ld. CIT (A) regarding the deletion of an addition made on account of excess deduction claimed under section 36(1)(viia) of the IT Act. The Assessing Officer disallowed the claim of the cooperative bank and made an addition of Rs. 86,05,115, considering it excessive.

2. The assessee contended that similar issues had been decided in favor of cooperative banks by the ITAT Jaipur Bench and ITAT Cochin Bench in previous cases. The assessee argued that cooperative banks are entitled to deduction under section 36(1)(viia) up to 7.5% of total income and 10% of aggregate average advances of rural branches. The assessee claimed that the disallowance made by the Assessing Officer was not justified and was against the law.

3. The ld. CIT (A) considered the submissions and previous judgments, including those of the ITAT Jaipur Bench and ITAT Cochin Bench, which held that cooperative banks are non-schedule banks for the purpose of section 36(1)(viia) and are entitled to the claimed deductions. Consequently, the ld. CIT (A) deleted the disallowance of Rs. 86,05,115, leading to the department filing an appeal.

4. During the appeal, the department's representative supported the Assessing Officer's order, while the assessee's counsel reiterated their earlier submissions and supported the CIT (A)'s decision. The ITAT, after considering the arguments and precedents, upheld the decision of the ld. CIT (A) and dismissed the department's appeal.

5. The ITAT found that the ld. CIT (A) had correctly decided the issue in line with previous judgments and, therefore, saw no merit in the department's appeal. Consequently, the appeal of the department was dismissed, affirming the decision of the ld. CIT (A) in favor of the assessee.