Section 36(1)(viia) deduction is unavailable to a co-operative bank with no rural branches under the statutory scheme.

Section 36(1)(viia) grants a separate deduction for provision for bad and doubtful debts, distinct from the deduction for bad debts written off under section 36(1)(vii). The statutory scheme links the section 36(1)(viia) benefit to rural branches and rural advances, and the proviso to section 36(1)(vii) is intended to prevent double deduction where clause (viia) applies. On that plain reading, a co-operative bank with no rural branches does not satisfy the condition for the deduction, so the claim under section 36(1)(viia) was disallowed.

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Issues: Whether a co-operative bank having no rural branches is entitled to deduction under section 36(1)(viia) of the Income-tax Act, 1961.

Analysis: Section 36(1)(vii) allows deduction for bad debts written off, while section 36(1)(viia) grants a separate deduction for provision for bad and doubtful debts with reference to rural branch advances. The two provisions operate in distinct fields, and the proviso to section 36(1)(vii) is meant to prevent double deduction where clause (viia) applies. On a plain reading of the statutory scheme, the benefit under section 36(1)(viia) is linked to rural branches and rural advances. Since the assessee had no rural branches, the statutory condition for claiming the deduction was not satisfied.

Conclusion: The deduction under section 36(1)(viia) was rightly disallowed, and the issue was decided against the assessee.

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