28 Bad debts (Computation of) – U/s.36(1)(viia) read with rule 6ABA aggregate average advance made by rural branches of scheduled bank would be computed by taking amount of advances made by each rural branch as outstanding at end of last day of each month comprised in previous year which had to be aggregated separately

The assessee was a regional
rural bank and its main business was banking activity. The assessee claimed
deduction u/s. 36(1)(viia)(a) from its total income. The case of the assessee
was that it had 71 rural branches. 10 per cent of aggregate monthly average
advance u/s. 36(1)(viia) read with Rule 6ABA, 1962 Rules came to Rs. 22.25
crore. The Assessing Officer, however calculated the sum at Rs. 81.88 lakh on
the basis of aggregate of monthly average advances of Rs. 8.18 crore being the
sum total of advances made during the financial year relevant to A. Y. 2009-10.

The Appellate Authority
confirmed the action of the ITO. The Tribunal allowed assessee’s appeal holding
that as per Rule 6ABA of 1962 Rules, for the purpose of section 36(1)(viia),
the aggregate average advance made by the rural branches of scheduled bank
would be computed by taking amount of advances made by each rural branch as outstanding
at the end of the last day of each month comprised in the previous year which
had to be aggregated separately.

The Tribunal thus directed
the Assessing Officer to compute 10 per cent of the aggregate monthly average
advances made by the rural branch of such Bank by taking the amount of advances
by each rural branch of such Bank by taking the amount of advances by each
rural branch as outstanding at the end of the last day of each month comprised
in the previous year and aggregate the same separately as given under Rule
6ABA.

On appeal by the Revenue,
the Calcutta High Court upheld the decision of the Tribunal and held as under:

“The amended direction made
by the Tribunal is in terms of Rule 6ABA. The ITO had made the computation of
aggregate monthly advances taking loans and advances made during only the
previous year relevant to assessment year 2009-10 as confirmed by CIT (A). The
Tribunal amended such direction, correctly applying the rule.”