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TMI Blog2016 (7) TMI 1413X X X X Extracts X X X X X X X X Extracts X X X X ..... eted vide order dated 5.3.2013 fixing the total income at Rs. 4,37,29,894/-. The assessee had claimed deduction in respect of 'provision for bad and doubtful debts' amounting to Rs. 6,88,42,638/- u/s 36(1)(viia)(a) of the Act. When the assessment u/s 143(3) was completed, deduction amounting to Rs. 35,45,667/- was allowed u/s 36(1)(viia)(a) of the Act being 7.5% of the total income and the balance claim being 10% of aggregate average advances made by the assessee's rural branches was disallowed by the AO on the ground that the rural branches as declared by the bank were not actually rural branches as defined under Explanation (ia) to section 36(1)(viia) of the I T Act. 3 Subsequent to the completion of the assessment, the CIT issued notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirm the rural advances. 5 Since the eligibility of th3 deduction u/s 36(1)(viia)(a) had not been examined as discussed above during the scrutiny, I am convinced that the assessment order u/s 143(3) dated 5.3.2013 made by the Asst Commissioner of Income Tax, Circle 2 Thrissur is erroneous and prejudicial to the interest of the revenue within the meaning of section 263 of the I T act, 1961. Therefore, the aforesaid order dated 5.3.2013 is set aside with direction to examine the issue of deduction u/s 36(1)(viia)(a) in respect of provision for bad and doubtful debts afresh in accordance with law after providing reasonable opportunity to the assessee." 5 The assessee being aggrieved is in appeal before us. The ld counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation that would have persuaded the legislature to include co-operative banks also in the category of beneficiaries under clause (viia) of sub-sec.(1) of Sec.36 of the Act. The deduction provided in the first part of clause (viia)(a) of 7.5% of the total income, hitherto enjoyed by the assessee since the inclusion of cooperative banks within the ambit of clause (viia)(a) by Finance Act, 2007, is unconcerned with advances made by the rural branches of the banks. A reading of paragraph 27 of the judgment of the Hon'ble Apex Court would show that while making the observation "indisputably, clause (viia)(a) applies only to rural advances", the Hon'ble Apex Court was examining the issue if there would be double deduction of actual bad debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Admittedly, appellants/assessees are cooperative banks. With introduction of Finance Act of 2007, coming into effect from04.2007, one has to understand what was the position was prior to 1.4.2007 and after 1.4.2007. During the relevant assessment year, admittedly the appellants/assessees were not entitled for any deduction provided under section 80P of the Act. Prior to 1.4.2007, they were enjoying the benefits provided under section 80P. With the introduction of Finance Act 2007 with effect from 1.4.2007, they could claim deductions as provided under section 367(1) of the Act. We are concerned with sub-clause(a) of clause (viia) to section36(1). Prior to Finance Act of 2007, cooperative bank was not included in sub-clause (a) so far as pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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