Rural Advances consolidated and shown in Head Office Accounts are eligible for Deduction as Bad and Doubtful Debts u/s 36(1)(viia): ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chennai has held that rural advances consolidated and shown in Head office accounts are eligible for deduction as Bad and Doubtful Debts u/s 36(1)(viia).

The assessee, Dharmapuri District Central Co-operative Bank Ltd. during assessment proceedings, claimed of deduction of Rs.1199.35 Lakhs u/s 36(1)(viia). The Assessing Officer observed that rural advances at Head Office amounted to Rs.1906.30 Lakhs and which could not be considered at par with rural branches while computing monthly average outstanding as prescribed under Rule 6ABA. The AO computed the eligible deduction as Rs.946.77 Lacs and granted the same to the assessee after excluding rural advances.

The aggrieved assessee approached the first appellate authority and submitted that there were no business transactions at the head office and all transactions were affected at the branch level only. It was only for management control the primary agricultural cooperative societies advance functioning at the village level was consolidated and shown as the Head office account in the financial statements. The CIT(A) confirmed the assessment order.

The assessee sought rectification of the order which was allowed and hold that Such disallowance was not made by AO in any other year, Therefore, the rural branches which were consolidated at Head Office would also fall under rural branch advances and the assessee would be eligible to claim a deduction for these advances also. Aggrieved, the revenue is in further appeal before ITAT.

The Authority observed that the assessee does not make any such advances at the Head Office level and all such transactions were affected at the branch level only. It was only for management control, that the primary agricultural cooperative societies advanced functioning at the village level were consolidated and shown as Head office accounts in the financial statements.

The Coram of Mr. V. Durga Rao, Judicial Member, and Mr. Manoj Kumar Aggarwal, AM dismissed the appeal and held that the assessee would be eligible to claim the deduction on these advances only since these advances are otherwise eligible for deduction.

Adv. Mr. T. Vasudevan appeared on behalf of the assessee and Mr. ARV Sreenivasan appeared on behalf of the revenue.

To Read the full text of the Order CLICK HERE

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