Section 80P deduction for regional rural banks upheld, while unclaimed tax relief may still be examined on verification.

A regional rural bank was treated as a co-operative society for the purpose of section 80P(2)(a)(i), so the exclusion in section 80P(4) for co-operative banks did not bar the deduction. The Tribunal also noted that additional claims for floating provision for NPA, loss on redemption of securities and bad debts written off can be examined even if not originally claimed in the return, provided their admissibility and genuineness are verified. The principle applied was that lawful relief should not be denied merely because it was omitted from the return.

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Issues: (i) Whether a regional rural bank was entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 on the footing that it was a co-operative society and not a co-operative bank. (ii) Whether the assessee's additional claims relating to floating provision for NPA, loss on redemption of securities and bad debts written off could be examined and decided even though they were not originally claimed in the return.

Issue (i): Whether a regional rural bank was entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 on the footing that it was a co-operative society and not a co-operative bank.

Analysis: The earlier coordinate bench decisions were followed. The statutory scheme of the Regional Rural Banks Act, 1976 was read with section 80P of the Income-tax Act, 1961, and it was held that the assessee had to be treated as a co-operative society. The exclusion in section 80P(4) applied to co-operative banks, but the assessee did not fall in that category for the purpose of denial of deduction under section 80P(2)(a)(i).

Conclusion: The Revenue's challenge failed and the deduction under section 80P(2)(a)(i) remained allowable to the assessee.

Issue (ii): Whether the assessee's additional claims relating to floating provision for NPA, loss on redemption of securities and bad debts written off could be examined and decided even though they were not originally claimed in the return.

Analysis: The assessee's claims were raised during assessment proceedings and were not adjudicated by the first appellate authority on the view that there was no tax implication. The Tribunal applied the principle reflected in CBDT Circular No. 14 of 1955 that lawful relief should not be denied merely because it was not claimed in the return, and directed verification of admissibility and genuineness before decision in accordance with law.

Conclusion: The matter was sent back for verification and fresh decision on merits; the assessee succeeded only to that extent.

Final Conclusion: The common issue on deduction under section 80P was decided in favour of the assessee, while the remaining monetary claims for the later assessment year were reopened for examination and appropriate relief after verification.

Ratio Decidendi: A regional rural bank entitled in law to be treated as a co-operative society cannot be denied deduction under section 80P(2)(a)(i) merely by invoking the co-operative bank exclusion, and a legitimate claim may be considered even if not made in the return, subject to verification of its admissibility and genuineness.

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