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2018 (6) TMI 1710 - KERALA HIGH COURTAdvances made to rural branches u/s 36(1)(viia) - Deduction of provision for bad debts in terms of Section 36(1)(viia) - definition of “Rural branch” for the purpose of arriving at deduction u/s. 36(1)(viia) - HELD THAT:- The definition of non-scheduled bank as noticed from the Banking Regulation Act was “any bank which is not included in the second schedule to the Act”. Though there was a separate definition of co-operative banks in the Banking Regulation Act, the Division Bench held that the co-operative banks for the purpose of section 36(1)(viia) would be treated as included and entitled to such benefit. A reading of clause (a) under section 36 (1)(viia) would dispel any doubts regarding such inclusion. The deduction in respect of any provision for bad and doubtful debts to the extent of 7½% of the total income is applicable to scheduled banks not being one incorporated outside India, a non scheduled bank or a co-operative bank other than those specified. Under the second limb the deduction is to the extent of 10% of the aggregate average advances by the rural branches of such bank. The rural branches of the category of banks referred to in the first limb would be entitled under the second limb. We agree with the decision and there is no reason for us to take a different view in the present case especially in an appeal instituted by another assessee. The question raised is also as to the sustainability of the dictum in Kannur District Co-operative Bank [2014 (8) TMI 635 - KERALA HIGH COURT]that while identifying the 'rural branches', the co-operative banks are also to be brought under the rigour of the definition of a "Rural Branch". The Division Bench found that the view was covered by the earlier judgment in Lord Krishna Bank Ltd.[2010 (10) TMI 860 - KERALA HIGH COURT]. - Also see MALAPPURAM DISTRICT CO-OP. BANK LTD VERSUS INCOME TAX OFFICER, WARD-2, TIRUR. [2014 (10) TMI 1023 - KERALA HIGH COURT] - Decided against assessee.
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