Deduction for co-operative banks under section 36(1)(viia) applies in principle, subject to licence and computation verification.

Section 36(1)(viia) was read as extending deduction under its second limb to eligible co-operative banks, with "such bank" referring back to the banks covered by the first limb, and Rule 6ABA was not construed so narrowly as to defeat the statutory benefit. The deduction for 10% of the aggregate average advances of rural branches was therefore available in principle. However, the allowance remained subject to factual verification by the Assessing Officer of the assessee's RBI banking licence, its qualifying status as a co-operative bank, and the correctness of the computation of rural-branch advances before final quantification.

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Issues: Whether a co-operative bank was entitled to deduction under the second limb of section 36(1)(viia) in respect of 10% of the aggregate average advances made by its rural branches, and whether the claim required verification of banking licence status and computation details.

Analysis: The amended text of section 36(1)(viia) was read as extending the deduction to eligible co-operative banks, and the expression "such bank" in the second limb was treated as referring back to the banks covered by the first limb. The manner of computation prescribed in Rule 6ABA was not read so narrowly as to defeat the statutory benefit. At the same time, the record did not conclusively establish whether the assessee held a valid RBI banking licence for the relevant year and whether the computation of rural-branch advances had been properly furnished and verified. The matter therefore required factual verification by the Assessing Officer before the deduction could be finally quantified and granted.

Conclusion: The assessee was held entitled in principle to claim deduction under the second limb of section 36(1)(viia), but the allowance was made subject to verification by the Assessing Officer of the banking licence, the statutory status of the co-operative bank, and the computation of the qualifying rural-branch advances.

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