आयकर अपील(cid:10)य अ(cid:11)धकरण, ’बी’ (cid:16)यायपीठ, चे(cid:16)नई।

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI सु(cid:3)ी प(cid:7)ावती एस, लेखासद(cid:16)के सम(cid:19)

(cid:3)ीमनुकु मारिग(cid:24)र, tiाियकसद(cid:16) एवं

BEFORE MS. PADMAVATHY S, ACCOUNTANT MEMBER AND SHRI MANU KUMAR GIRI, JUDICIAL MEMBER आयकरअपीलसं/.ITA Nos.: 2699/Chny/2025 &2700/Chny/2025 by Revenue C.O.No.92/Chny/2025 (in ITA No.: 2699/Chny/2025)&

C.O.No.93/Chny/2025 (in ITA No.: 2700/Chny/2025)

by Assessee (cid:28)नधा(cid:29)रणवष (cid:29) / Assessment Years: 2013-14 & 2015-16 DCIT, Non Corp Circle II, v. VIRUDHUNAGAR DISTRICT Madurai, CENTRAL CO-OPERATIVE V.P. Rathinasamy Nadar Road, BB BANK LIMITED Kulam Madurai-625002, 104/1, Madurai Road, Madurai, Tamil Nadu Kamaraj Nagar, S.O.

Virudhunagar,Virudhunagar-

626001. Tamil Nadu [PAN:AAAAV 0147 N (अपीलाथ!/Assessee) ("#यथ!/Respondent)

अपीलाथ!क$ओरस/े /Assessee by : Mr. R. Prasanna Venkatesan, F.C.A.

"#यथ!क$ओरसे Respondent/Revenue by : Mr. Shiva Srinivas, CIT सुनवाईक$तार(cid:10)ख/Date of Hearing : 20.01.2026 घोषणाक$तार(cid:10)ख /Date of Pronouncement : 28.01.2026 आदेश / O R D E R PER MANU KUMAR GIRI, JM:

These appeals filed by the Revenue and the corresponding cross- objections filed by the assessee arise out of the orders passed by the learned Commissioner of Income Tax (Appeals), NFAC, Delhi [“Ld. CIT(A)”] dated 10.06.2025 for AY 2013-14 and dated 17.07.2025 for AY 2015-16. Since the issues involved are common, both the appeals and cross-objections were heard together and are disposed of by this consolidated order.

2. Facts of the Case are that the assessee is a co-operative bank engaged in banking activities. For AY 2013-14, it filed its return of income electronically on 30.09.2013 declaring Nil income and claiming carry forward of loss of Rs.19,55,44,786/-. The return was selected for scrutiny under CASS, initially to examine large interest expenditure relatable to exempt income u/s. 14A. After examination, the Assessing Officer (“AO”) accepted the assessee’s explanation and made no disallowance u/s. 14A.

However, the assessment culminated in disputes on two issues:

1. Quantum of deduction allowable u/s.36(1)(viia) of the Income-

tax Act, 1961 (“the Act”); and

2. Non-allowance of brought forward losses of earlier assessment years on the ground that reassessment proceedings for those years were pending.

During the assessment proceedings, the assessee originally claimed deduction of Rs.21,03,27,765/-u/s.36(1)(viia), computed at 7.5% of total income plus 10% of aggregate average rural advances, as per the statutory formula. The AO observed that the actual provision created in the books of account for bad and doubtful debts was only Rs.3,19,12,660/-.

Upon being confronted, the assessee furnished a revised computation of income restricting the deduction u/s. 36(1)(viia) to the amount of provision actually made in the books. The AO accepted the revised computation and allowed deduction of Rs.3,19,12,660/-, while disallowing set-off of brought forward losses. The assessment was completed determining a net profit of Rs.7,31,89,990/- from banking business.

Aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the appeal. Against the relief so granted, the Revenue is in appeal before the Tribunal, while the assessee has filed cross-objections.

3. The issues arising for our consideration are:

Whether the deduction u/s. 36(1)(viia) is to be allowed strictly with reference to the provision actually made in the books of account, subject to the statutory ceiling, or whether it can be allowed independently based on the statutory percentages, irrespective of the quantum of provision made ?

4. The learned counsel for the assessee submitted that section 36(1)(viia) provides for a statutory deduction, the quantum of which is determined by the prescribed percentages of total income and aggregate average rural advances. According to the assessee, the deduction is an incentive provision, independ