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TMI Blog2022 (9) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... computed in the prescribed manner, as is stipulated in section 36(1)(viia)(a) of the 1961 Act. While including 'Co-operative Bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank' in section 36(1)(viia)(a) effective from 1-4-2007, law makers have brought eligible Co-operative Banks to be entitled for deduction under first limb, and while referring to 'such bank' in the second limb, in our considered view by literal reading and interpretation, eligible Co-operative Banks shall also be entitled to claim deduction under second limb. As the use of the term 'such bank' in the second limb of section 36(1)(viia)(a), will relate back to the banks as specified in the first limb which, inter-alia, will include eligible Co-operative Banks. In Explanation to section 36(1)(viia), it is provided that rural branches means a branch of a scheduled bank or a non-scheduled bank situated in a place which has a population of not more than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year. The inclusion of Co-ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, to the extent disputed herein, is wholly against the law and facts of the case and hence not sustainable. 3. Brief facts of the case are that the assessee is a Distt. Cooperative Bank engaged in the business of banking. The ld. Counsel first informed that ground no. 1 is not pressing. Only we are adjudicating the ground no. 2 for addition of Rs.64,29,240/- related to provision for bad and doubtful debt. The assessee has made provision of Rs.80 lac against the standard loan (contingent liability). The AO restricted the allowance u/s 36(1)(vii)(a) of the Act to 7.5% (Income + Provision) and disallowed excess provision of Rs.64,29,240/-. The ld. AO had referred the order of Hon ble ITAT Amritsar Bench in assessee s own case for A.Y. 2007-08 bearing ITA No. 47/Asr/2011 . The assessee filed an appeal before the ld. CIT(A) against the order of ld. AO. The addition of Rs.64,29,240/- was upheld by the ld. CIT(A). Aggrieved assessee filed an appeal before us. 4. The ld. Counsel for the assessee filed a paper book which is containing page nos. 1 to 77 which is kept in the record. The ld. Counsel argued that assessee made the provision for rural advanced amount of Rs.80 lac for pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s 36(1)(viia) of the Act. Under the second limb wherein the deduction claimed @ 10% of aggregate average advanced made by the rural branch assessee, is too disallowed. The assessee has claimed deduction to the tune of Rs.80 lac u/s 36(1)(viia) of the Act while filing return of income with the revenue. The said amount is reflected by the assessee as deduction in the audited P L account of the assessee. The ld. AO has allowed deduction of Rs.15,70,760/- computed @ 7.5% at the total income. First limb of section 36(1)(viia), while the AO did not allow deduction to the tune of Rs. 80 lac which stood allowed by the AO. The ld. CIT(A) upheld disallowance of the deduction to tune of Rs.64,29,240/-. While confirming the disallowance as made by the AO, the ld. CIT(A) observed that the assessee is not eligible in deduction of the second limb of section 36(1)(viia) of the Act which concerns itself with deduction computed @ 10% of aggregate average advance made rural branches of the assessee. To keeping in view, amended provision to section 36(1)(vii) as amended by 01.04.2007. The ld. CIT(A) only relied on the order of the ITAT Amritsar Bench, (supra). The assessee is holding the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has been disclosed in the return of income under the head Profits and gains of business or profession. ] [Explanation. -For the purposes of this sub-clause, relevant assessment years means the five consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005;] (b) a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VIA);] [(c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) :] [ Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, deduction in respect of any provision made by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation to sub-section (4) of section 80P as it stood at relevant time, which is reproduced hereunder: (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation. For the purposes of this sub-section,- (a) co-operative bank and primary agricultural credit society shall have meanings respectively assigned to them in Part V of the Banking Regulation 1949 (10 of 1949); (b) primary co-operative agricultural and rural development bank means a having its area of operation confined to a taluk and the principal object of which to provide for long-term credit for agricultural and rural development activities. 6.2. It will also appropriate for this stage to reproduce Rule 6ABA of Income Tax Rules, 1962 which is reproduced hereunder:- [Computation of aggregate average advances for the purposes of clause ( viia ) of subsection (1) of section 36. 6ABA. For the purposes of clause ( viia ) of sub-section (1) of section 36, the aggregate average advances made by the rural branches of a scheduled bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment bank. This amendment will take effect retrospectively from 1st April 2007 and will, accordingly, apply in relation to the assessment year 2007-2008 and subsequent years. 6.5. The perusal of Notes to Clauses and Memorandum to Finance Act, 2007, clearly stipulate that the benefit of deduction u/s 36(1)(viia) which was available to a Scheduled and a Non-scheduled bank is sought to be extended to Co-operative Banks other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank , with effect from 1-4-2007, as the deduction erstwhile available to such eligible co-operative banks u/s 80P stood withdrawn by Finance Act, 2006 w.e.f. 1-4-2007. Thus, there was an amendment by Finance Act, 2007 to section 36(1)(viia), applicable w.e.f. 1-4-2007, wherein the Co-operative Banks other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, were brought under the provisions of section 36(1)(viia) for claiming deductions in respect of provisions made for bad and doubtful debts . Prior to this amendment, Cooperative Banks were entitled to claim deduction of Profits and Gains of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in a place which has a population of not more than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year. The inclusion of Co-operative Bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank were brought within the ambit of section 36(1)(viia) by way of inserting in sub-clause (a) to clause (viia) to sub-section (1) to section 36 by Finance Act, 2007 w.e.f. 1-4-2007, but there was no corresponding amendment in Explanation to section 36(1)(viia), and Co-operative Banks are not included here for ascertaining the manner to identify Rural Branches of Co-operative Bank. Further, section 36(1)(viia)(a) stipulates that the deduction under second limb towards aggregate average advances made by Rural Branches of such bank shall be computed in prescribed manner. The Revenue has heavily relied on the decision of ITAT, Amritsar Bench inassessee s own case. The explanation for accepting the limb of section 36(1)(viia)(a) is differing with the coordinate bench. Thus, the matter is remitted back to the file of the AO for fresh adjudication, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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