TMI Blog2016 (7) TMI 1413X X X X Extracts X X X X X X X X Extracts X X X X ..... very clear that the two deductions provided in clause (viia)(a), viz. 7.5% of the total income (computed before making any deduction under this clause and Chapter VIA) and 10% of the aggregate average advances made by the rural branches are distinct and independent. The intention of the legislature was to give the benefit of deduction of 7.5% of the total income to the scheduled, non-scheduled and co-operative banks under clause (viia) while a similar benefit of deduction of a specified percentage of the total income was extended to the foreign banks and public financial institutions under clauses (viia) (b) and (viia)(c) respectively, apart from the benefit available to them under clause (vii). The proposal to deny the benefit of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 263 of the Act (notice dated 12.3.2015) proposing to revise the assessment order passed u/s 143(3) of the Act. The CIT, in the proposed revision, was of the view that allowing deduction by the AO amounting to ₹ 35,45,667/- being 7.5% of the total income, is erroneous and prejudicial to the interest of the revenue in view of the judgment of the Hon ble Apex Court in the case of Catholic Syrian Bank Ltd vs CIT reported in 343 ITR 270. According to the Commissioner, the Hon ble Apex Court had held that section 36(1)(viia)(a) applies only to rural advances and since the assessee s bank was not having any rural branch, deduction allowed u/s 36(1)(viia)(a) amounting to ₹ 35,45,667/- was not in order. To the proposed revision, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the assessee reiterated the submissions made before the CIT. Further, the ld counsel argued that the issue is squarely covered by the judgment of the Hon be jurisdictional High Court in assessee s own case in ITA No.37 of 2013 (judgment dated 24.8.2012), which is identical to the facts for the current assessment year. 6 The ld DR present was duly heard. 7 We have heard the rival submissions and perused the material on record. The judgment of the Hon ble Supreme Court in the case of Catholic Syrian Bank Ltd (supra) relied by the CIT while invoking his revisionary jurisdiction does not apply to the facts of the present case. The Hon ble Supreme Court had essentially considered the issue whether the deduction available to sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of actual bad debts written off under clause (vii) and deduction in respect of rural advances provided under the second part of clause (viia). The Hon ble Apex Court has not held that the first part of clause (viia) providing for deduction of 7.5% of the total income applies only to rural advances. The CBDT in Clause 5 of its Circular No.464 dated July 18, 1986 referred to by the Hon ble Apex Court in Catholic Syrian Bank's case makes it very clear that the two deductions provided in clause (viia)(a), viz. 7.5% of the total income (computed before making any deduction under this clause and Chapter VIA) and 10% of the aggregate average advances made by the rural branches are distinct and independent. The intention of the legislatu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in sub-clause (a) so far as provisions for bad and doubtful debts. With effect from 1.4.2007, cooperative bank was included under sub clause (a) of clause (viia) of section 36(1). It is further clarified that only such cooperative bank other than a primary agriculture credit society, etc., is included in sub clause (a) of clause (viia). The provision is a beneficial one. No doubt, plain reading of main section 36(1) (viia)(a) and Explanation under said section present certain difficulties, but situation is not without possibilities. The object and intention of the legislature is to be understood by harmonious construction of the provisions. The policy was to include cooperative banks as well, as they could not take shelter under section 80P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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