Appeal allowed by ITAT on deduction under Income Tax Act - Cooperative Bank entitled to deductions

The ITAT allowed the appeal of the assessee, reversing the decision of the CIT (A) regarding the deduction under section 36(1)(viia) of the Income Tax Act. The ITAT held that the cooperative bank was entitled to a deduction of 7.5% of the total income and an additional deduction of 10% of the aggregate average rural advances, based on the provisions of the Act, a CBDT circular, and a previous decision of the ITAT Jaipur bench. Consequently, the disallowance of the deduction was overturned, and the assessee's appeal was successful.

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Issues:
- Late filing of appeal by the assessee
- Non-allowance of full deduction under section 36(1)(viia) of the Income Tax Act

Analysis:

Late filing of appeal by the assessee:
The appeal was filed late by 9 days, and the assessee submitted an application for condonation of delay citing a change in counsel as the reason for the delay. The delay was condoned by the ITAT as the reasons explained by the assessee were deemed reasonable, and the delay was admitted without objection from the Departmental Representative (DR).

Non-allowance of full deduction under section 36(1)(viia) of the Income Tax Act:
The dispute revolved around the interpretation of section 36(1)(viia) concerning the deduction available to a cooperative bank. The assessing officer disallowed a deduction of &8377; 41,12,596/- being 7.5% of the total income, citing that only 7.5% of total income or 10% of average rural advances, whichever is higher, is allowable. The CIT (A) upheld this decision. However, the appellant argued that the bank should be allowed a deduction of 7.5% of the total income and an additional deduction of 10% of the aggregate average rural advances of the bank. The appellant relied on the amended provisions of the Income Tax Act, a CBDT circular, and a decision of the ITAT Jaipur bench to support their claim.

The ITAT analyzed the provisions of section 36(1)(viia) and the CBDT circular, which clarified that a cooperative bank is entitled to a deduction of 7.5% of the total income and a further deduction of 10% of the aggregate average rural advances. The ITAT also considered the decision of the Jaipur bench of ITAT in a similar case. Based on the provisions of the Act and the circular, the ITAT concluded that the assessee was entitled to the additional deduction of 7.5% of the total income over and above 10% of the aggregate average rural advances. Consequently, the order disallowing the deduction was reversed, and the appeal of the assessee was allowed.

In conclusion, the ITAT ruled in favor of the assessee, allowing the appeal and reversing the decision of the CIT (A) regarding the deduction under section 36(1)(viia) of the Income Tax Act.

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