THE ISLAMPUR URBAN CO-OP BANK LTD.,,SANGLI vs. INCOME-TAX OFFICER,,

The brief facts of the case as emanating from records are : The assessee is a Co-operative Bank. During the course of scrutiny assessment proceedings, the Assessing Officer observed that the assessee has claimed deduction of Rs.15,03,993/- (Rs.31,860/- + Rs.14,72,133/-) u/s. 36(1)(viia) of the Act. The Assessing Officer after examination of the books observed that the assessee has not created Reserve for Rural Advances. The Assessing Officer restricted the assessee’s claim of deduction u/s. 36(1)(viia) to Rs.13,05,466/- i.e. the amount equal to 10% of the average advance of Bahe branch. Thus, the Assessing Officer made disallowance of Rs.1,66,667/- and Rs.31,860/- u/s. 36(1)(viia) of the Act.

Smt. Deepa Khare appearing on behalf of the assessee submitted that the authorities below have recorded wrong finding of fact that the assessee has not created Reserve for Rural Advances. The assessee is having only one branch located in Village-Bahe, Tal.-Walwa. The said branch is a rural branch and the assessee has created provision u/s. 36(1)(viia) in respect of aforementioned rural branch. The ld. AR pointed that in the consolidated P & L Account as on 31-03-2010 (at page 44 of the paper book), the assessee has created provision for bad and doubtful reserve amounting to Rs.15,10,000/-. The ld. AR further in support of her submissions referred to consolidated Balance sheet for the Financial Year

On the other hand Dr. Vivek Aggarwal representing the Department vehemently defended the findings of Commissioner of Income Tax (Appeals) in confirming disallowance u/s. 36(1)(viia) of the Act.

We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The only dispute in appeal by the assessee is the quantum of deduction available to the assessee u/s. 36(1)(viia) of the Act. It is an admitted position that the assessee is having only one branch located at Village-Bahe, Tal.-Walva. The said branch is rural branch. A perusal of Balance sheet for the Financial Year 2009-10 and the consolidated P & L Account as on 31-03- 2010 clearly indicates that the assessee has created provision for Bad and Doubtful reserves amounting to Rs.15,10,000/-. The revised computation of total income placed on record at page 26 of the paper book further shows that in the computation of income the assessee had clearly shown Reserve for Bad and Doubtful Debts at Rs.15,10,000/-. The assessee has claimed deduction in accordance with the provisions of section 36(1)(viia) in respect of only rural branch. The authorities below have erred in

In the result, the appeal of assessee is allowed.