Borrowed statutory definitions must be read strictly; co-operative banks were outside the bad-debt deduction provision for the relevant year.

A co-operative bank was held not to fall within the exhaustive definition of "non-scheduled bank" in Explanation (i) to section 36(1)(viia), because the borrowing from the Banking Regulation Act had to be read strictly within section 5(c) and could not be enlarged by section 56, which operates in a different regulatory context. The later amendment including co-operative banks from 1 April 2007 was treated as confirming that they were not covered earlier. As a result, the bank was not entitled to deduction for provision for bad and doubtful debts for the relevant assessment year.

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Issues: Whether a co-operative bank was a non-scheduled bank within the meaning of Explanation (i) to section 36(1)(viia) of the Income-tax Act, 1961 and was therefore entitled to deduction for provision for bad and doubtful debts under that provision.

Analysis: The definition of "non-scheduled bank" in Explanation (i) to section 36(1)(viia) was held to be exhaustive, since it uses the word "means". The Court held that the enquiry must stop with section 5(c) of the Banking Regulation Act, 1949, which defines "banking company" as a company transacting banking business in India. The reference to "company" in that definition could not be enlarged by resorting to section 56 of the Banking Regulation Act, 1949, because that provision operates in the limited regulatory context of that Act and does not expand the Income-tax Act's definition. The subsequent amendment bringing co-operative banks within section 36(1)(viia) from 1 April 2007 was treated as indicating that such banks were not covered earlier.

Conclusion: A co-operative bank was not a non-scheduled bank for the relevant assessment year and was not entitled to deduction under section 36(1)(viia).

Ratio Decidendi: Where the Income-tax Act adopts a definition from another statute, the borrowed definition must be applied strictly within its own terms and cannot be enlarged by a different provision of the other statute operating in a separate context.

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