Tribunal upholds disallowance of deduction for rural bank advances under section 36(1)(viia)

The Tribunal upheld the decision of the Ld. CIT(A) to disallow the deduction claimed under section 36(1)(viia) of the Act for advances made by rural branches of a co-operative bank. The Tribunal determined that the definition of "rural branch" applied to co-operative banks based on statutory definitions and previous case precedents, dismissing the appeal and confirming the disallowance. The judgment was delivered on 16-08-2013.

---

---

Issues:
- Disallowance of deduction claimed u/s. 36(1)(viia) of the Act in respect of 10% of aggregate average advances by rural branches.

Analysis:
1. The appeal challenged the disallowance of deduction claimed u/s. 36(1)(viia) of the Act related to the assessment year 2009-10. The primary issue was whether the disallowance of 10% of advances made by rural branches of the co-operative bank was justified.
2. The Assessing Officer disallowed the claim based on the definition of "rural branch" as per the Income Tax Act, stating none of the branches qualified. The Ld. CIT(A) upheld this decision, citing a similar case precedent. The assessee contended that the definition of "rural branch" should not apply to co-operative banks.
3. The Tribunal examined the definitions of "non-scheduled bank" and "Co-operative bank" under the Banking Regulation Act, 1949. It concluded that a co-operative bank falls under the definition of a "non-scheduled bank," making the definition of "rural branch" applicable. The alternative plea of the assessee was rejected.
4. The Tribunal followed the decision of a similar case involving the Kannur Dist. Co-op Bank Ltd. and upheld the decision of the Ld. CIT(A) regarding the disallowance of the deduction. The appeal of the assessee was dismissed, aligning with the previous decisions and statutory definitions.
5. The judgment was pronounced on 16-08-2013, confirming the disallowance of the deduction claimed by the assessee under section 36(1)(viia) of the Act for advances made by rural branches, based on the statutory definitions and previous case precedents.

---