INCOME TAX ACT, 1961

section 36(1)(viia)

Business deduction under section 36(1)(viia) - Allowability - Provision on account of principal NPA claimed by Primary Co-operative Agricultural and Rural Development Bank -

Assessee, Primary Co-operative Agricultural and Rural Development Bank, claimed deduction of provision on account of principal NPA. AO disallowed deduction. Held: Deduction under section 36(1)(viia) is available to 3 categories of bank, namely,-- (i) Scheduled bank subject to exception therein (ii) A non-scheduled bank, and (iii) A cooperative bank. The Cooperative Bank which is eligible for deduction under section 36(1)(vii) does not include a primary agricultural credit society or a primary cooperative agricultural and rural development bank. Accordingly, there are two exclusions from the broad category of cooperative banks which are : (i) a primary agricultural credit society, and (ii) a primary cooperative agricultural and rural development bank. Assessee, being a primary cooperative agricultural and rural development bank, fell in the exception provided in clause (viia) of section 36(1) and therefore, assessee was not entitled for deduction under section 36(1)(viia) of provision on account of principal NPA.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2010-11

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