Deduction under section 36(1)(viia) must be computed on aggregate average rural advances per Rule 6ABA, not a single month.

Deduction under section 36(1)(viia) must be computed by applying the 10% rate to the aggregate average advances of rural branches calculated under Rule 6ABA, not on a single month's advances; Rule 6ABA requires aggregating month end outstanding advances for each month of the previous year and averaging them, and CBDT Instruction No.17/2008 confirms that computation method. The Tribunal found the assessee's month end averaging aligned with the rule and instruction and rejected the Revenue's contrary monthly advances approach, resulting in the assessee's computation being upheld.

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Issues: Whether deduction under section 36(1)(viia) of the Income-tax Act, 1961 for rural advances must be computed on the basis of aggregate average advances of rural branches as prescribed by Rule 6ABA of the Income Tax Rules, 1962, or on advances of the month alone.

Analysis: The Tribunal examined Rule 6ABA of the Income Tax Rules, 1962 which prescribes that amounts of advances outstanding at the end of the last day of each month for the previous year are to be aggregated and then averaged to arrive at aggregate average advances by rural branches. The Tribunal also considered CBDT Instruction No. 17/2008 dated 26-11-2008 which clarifies that the deduction under section 36(1)(viia) is to be computed by taking aggregate average advances made by rural branches in the manner prescribed by the Rules. The Tribunal compared the competing computations: the assessee's method of working aggregate average outstanding advances at month-end versus the Revenue's approach of taking advances of the month, and found the assessee's method aligned with the text of Rule 6ABA and the CBDT Instruction. The Tribunal further relied on earlier Tribunal precedent applying the same construction to hold that 10% is to be worked on the aggregate average outstanding advances and distinguished an authority cited by the Revenue as addressing a different sub-clause.

Conclusion: Deduction under section 36(1)(viia) is to be computed on the basis of aggregate average advances of rural branches computed under Rule 6ABA of the Income Tax Rules, 1962; the assessee's computation is correct and the Revenue's appeal is dismissed (decision in favour of the assessee).

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