CITIZEN CREDIT CO OPERATIVE BANK LTD, MUMBAI V. ASST CIT CIR 1(2), MUMBAI

ITA 1504/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88625 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 11-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-02-2013
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI VK;DJ VIHYH; VF/KDJ.K] LH U;K;IHB EQACBZ BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K 1504 /MUM/2013 ASSESSMENT YEAR: 2009 - 10 5491/MUM/2014 ASSESSMENT YEAR: 2010 - 11 CITIZEN CREDIT CO - OPERATIVE BANK LIMITED, HELENA APARTMENTS, 57 MOUNT CARMEL ROAD, BANDRA (W) MUMBBA - 400050. VS.` ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 1(2) MUMBAI. PAN: AABCT4143P APPELLANT / VIHYKFKHZ RESPONDENT / IZR;FKHZ ORDER PER VIJAY PAL RAO, JM THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE TWO SEPARATE ORDERS OF CIT(A) DATED 17.02.2012 AND 30.05.2014 FOR THE A.Y. 2009 - 10 AND 2010 - 11 RESPECTIVELY. THE ASSESSEE HAS RAISED COMMON GROUNDS IN THIS APPEAL. THE GROUND RAISED FOR A.Y. 2009 - 10 ARE AS UNDER: - ASSESSEE BY / FU/KKZFJRH FD VKSJ LS SHRI VIJAY KOTHARI REVENUE BY / JKTLP DH VKSJ LS SHRI PREMANAND J. DATE OF HEARING 1 1 .03.2015 DATE OF PRONOUNCEMENT 18 .03.2015 CITIZEN CREDIT CO - OPERATIVE BANK LIMITED, 2 | P A G E 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON THE FACTS AND IN LAW IN DENYING TO THE APPELLANT THE DEDUCTION U/SEC. 36(1)(VIIA) BY NOT A CCEPTING THE FACT THAT THE BRANCH AT NAIGAON - JUHCHANDRA, WHICH IS A RURAL PLACE HAS A POPULATION OF ONLY 4,679 IN SUPPORT WHEREOF THE APPELLANT HAD FURNISHED BEFORE THE LEARNED ASSESSING OFFICER. (A) THE LETTER FROM THE TEHSILDAR CONFIRMING THE POPULATION OF NAIGAON - JUHCHANDRA AS PER PULISHED CENSUS REPORT. (B) HAD PRODUCED RECORD OF PROPERTY TAXES PAID TO THE GRAM PANCHAYAT JUH CHANDARA; AND (C) HAD GIVEN A COPY OF THE CENSUS OF INDIA SPECIFIC TO JUHCHANDRA. 2. THE COMMON ISSUE RAISED IN BOTH THE APPEALS OF THE ASSESSEE IS WHETHER THE ASSESSEES BRANCH AT NAIGAON - JUHCHANDRA, IS A RURAL BRANCH FOR THE PURPOSE OF DEDUCTION U/S 26(1)(VIIA) OF THE INCOME TAX ACT. 3. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2008 - 09 IN ITA NO. 338/2012 VIDE ORDER DATED 25.7.2014 IN PARA 5 TO 7 AS UNDER : - 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE JUHUCHANDRA NAIGAON BRANCH OF THE ASSESSEE BANK IS SITUATED IN VILLAGE JUHUCHANDRA AND UNDER THE VILLAGE PANCHAYAT OF JUCHANDRA NAIGOAN. IT IS ALSO NOT DI SPUTED BY THE REVENUE THAT THE POPULATION OF THE VILLAGE JUCHANDRA NAIGOAN IS 5911 AND THE ENTIRE POPULATION IS RURAL AS PER CENSUS REPORT OF CENSUS INDIA 2001. THE AO HAS DENIED THE DEDUCTION UNDER SECTION 36(1)(VIIA) ON THE GROUND THAT THE AREA OF CATERI NG THE SERVICES BY THE SAID BRANCH IS SPREAD OVER TO TWO OTHER PANCHAYATS ALSO AND ACCORDINGLY THE POPULATION OF THE AREA OF ALL THREE PANCHAYATS WAS TAKEN INTO CONSIDERATION FOR DETERMINING THE CLASSIFICATION OF THE SAID BRANCH AS RURAL BRANCH. AT THE OUT SET WE NOTE THAT AN IDENTICAL QUESTION FELL FOR CONSIDERATION OF HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. LORD KRISHNA BANK LTD. (SUPRA), WHEREIN THE HON'BLE HIGH COURT HAS DISCUSSED AND DECIDED THE ISSUE IN PARA - 4 TO 6 AS UNDER : - 4. NEXT QUESTI ON RAISED PERTAINS TO THE ASSESSEE'S CLAIM FOR DEDUCTION OF PROVISION FOR BAD DEBTS IN TERMS OF SECTION 36(1)(VIIA) OF THE INCOME - TAX ACT. HERE THE ONLY QUESTION RAISED IS AS TO BASIS OF CLASSIFYING BRANCHES OF CITIZEN CREDIT CO - OPERATIVE BANK LIMITED, 3 | P A G E THE BANK AS RURAL BRANCHES AND OTHER BRANCHES . RURAL BRANCH IS DEFINED UNDER EXPLANATION (IA) TO SECTION 36(1)(VIIA) AS FOLLOWS : ' 'RURAL BRANCH' MEANS A BRANCH OF A SCHEDULED BANK OR A NONSCHEDULED BANK SITUATED IN A PLACE WHICH HAS A POPULATION OF NOT MORE THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR.' 5. WHAT IS CLEAR FROM THE ABOVE IS THAT THE CLASSIFICATION BETWEEN RURAL AND OTHER BRANCHES OF A BANK IS MADE BASED ON THE POPULATION IN THE P LACE WHERE THE CONCERNED BRANCH IS LOCATED. WHILE THE ASSESSEE'S CASE THAT FOUND ACCEPTANCE WITH THE TRIBUNAL IS THAT 'PLACE' REFERRED TO IN THE ABOVE DEFINITION CLAUSE IS THE WARD OF A PANCHAYAT OR MUNICIPALITY, THE ASSESSING OFFICER TOOK THE VIEW THAT 'P LACE' CONTAINED IN THE DEFINITION CLAUSE SHOULD MEAN A REVENUE VILLAGE. NO DOUBT, 'PLACE' AS SUCH IS NOT DEFINED IN THE DEFINITION CLAUSES AND SO MUCH SO, WE HAVE TO FIND OUT THE SCOPE AND MEANING OF 'PLACE' REFERRED TO IN THE SECTION. STANDING COUNSEL FOR THE DEPARTMENT PRODUCED BEFORE US LAST PUBLISHED CENSUS REPORT OF 2001. EVEN THOUGH THE PREVIOUS CENSUS REPORT MAY BE THE RELEVANT ONE, WE FEEL THE SCOPE OF 'PLACE' AS REFERRED TO IN THE CENSUS REPORT PRODUCED COULD BE ADOPTED FOR THE PURPOSE OF THIS CASE . WHAT IS WRITTEN IN THE CENSUS REPORT 2001 IS AS FOLLOWS : 'THE BASIC UNIT FOR RURAL AREAS IS THE REVENUE VILLAGE WITH DEFINITE SURVEYED BOUNDARIES. THE RURAL AREA IS, HOWEVER, TAKEN AS THE RESIDUAL PORTION EXCLUDING THE URBAN AREA AND FOR THAT NO STRIC T DEFINITION IS FOLLOWED.' 6. IN OUR VIEW, THE DEFINITION CLAUSE DOES NOT EXCLUDE THE LITERAL MEANING OF RURAL BRANCH WHICH NECESSARILY EXCLUDES URBAN AREAS. IF THE ASSESSEE'S CASE ACCEPTED BY THE TRIBUNAL THAT POPULATION IN A WARD HAS TO BE RECKONED FOR DECIDING AS TO WHETHER THE L OCATION OF A PANCHAYAT IS IN A RURAL AREA OR NOT IS ACCEPTED, THEN PROBABLY EVEN IN MUNICIPAL AREAS THERE MAY BE WARDS WITH LESS THAN 10000 POPULATION THEREBY ANSWERING THE BRANCH LOCATED IN SUCH MUNICIPAL AREA ALSO AS A RURAL BRANCH. GOING BY THE ORDINARY MEANING OF RURAL BRANCH, WE FEEL ONLY BRANCHES OF THE BANK LOCATED IN RURAL AREAS ARE COVERED. WHEN THE LEGISLATURE ADOPTS POPULATION AS THE BASIS FOR CLASSIFICATION OF RURAL BRANCHES, THAT TOO, WITH REFERENCE TO THE LAST CENSUS REPORT, WE FEEL THE BASIC UNIT AS AVAILABLE FOR IDENTIFICATION OF RURAL AREA IN THE CENSUS REPORT CAN BE LEGITIMATELY ADOPTED. SO MUCH SO, WE FEEL THE ABOVE MEANING OF RURAL AREA CONTAINED IN THE CENSUS REPORT WHEREIN REVENUE VILLAGE IS TREATED AS A UNIT OF RURAL AREA, CAN BE RIGHT LY ADOPTED. SO MUCH SO, 'PLACE' REFERRED TO IN THE ABOVE DEFINITION CLAUSE FOR THE PURPOSE OF IDENTIFYING THE BRANCH OF A BANK AS A RURAL BRANCH WITH REFERENCE TO ITS LOCATION IS THE REVENUE VILLAGE. CITIZEN CREDIT CO - OPERATIVE BANK LIMITED, 4 | P A G E THEREFORE, IN OUR VIEW, THE FINDING OF THE TRIBUNAL THAT 'PLACE' REFERRED TO IN THE DEFINITION IS THE WARD OF A LOCAL AUTHORITY LIKE PANCHAYAT OR MUNICIPALITY IS INCORRECT AND, IN OUR VIEW, A RURAL BRANCH HAS TO BE ALWAYS IN RURAL AREAS AND THE PLACE REFERRED CAN EASILY BE TAKEN AS A VILLAGE. SEVERAL WARDS MAY COME WITHIN A VILLAGE, WHETHER IT BE IN CORPORATION, MUNICIPALITY OR PANCHAYATS. THERE CAN BE NO VILLAGE IN A MUNICIPAL OR CORPORATION AREA WHERE THE POPULATION IS LESS THAN 10000. SO MUCH SO, RURAL BRANCHES ARE SUCH OF THE BRANCHES LOCATED IN A VILLAGE WH ERE THE POPULATION IN THE VILLAGE AS A UNIT IS LESS THAN 10000. WE, THEREFORE, ALLOW THE APPEAL ON THIS ISSUE BY REVERSING THE ORDER OF THE TRIBUNAL AND BY RESTORING THE ASSESSMENT. 6. THE HON'BLE HIGH COURT HAS ANALYSED THE PROVISION OF SECTION 36(1)(VII A) AND WAS OF THE VIEW THAT THE MEANING OF RURAL AREA CONTAINED IN THE CENSUS REPORT WHEREIN THE REVENUE VILLAGE IS TREATED AS A UNIT OF RURAL AREA, CAN BE, RIGHTLY ADOPTED . IT HAS BEEN FURTHER OBSERVED THAT THE PLACE REFERRED TO IN THE DEFINITION CLAUSE FOR THE PURPOSE OF IDENTIFYING THE BRANCH OF A BANK IS RURAL BRANCH WITH REFERENCE TO ITS LOCATION AS THE REVENUE VILLAGE AND ACCORDINGLY THE HON'BLE HIGH COURT HAS REJECTED THE FINDING OF THE TRIBUNAL THAT PLACE REFERRED TO IN THE DEFINITION IS THE WARD OR LOCAL AUTHORITY LIKE PANCHAYAT OR MUNICIPALITY. THUS IT IS CLEAR FROM THE ABOVE DECISION OF THE KERALA HIGH COURT THAT A RURAL BRANCH HAS TO BE ALWAYS IN THE RURAL AREA AND THE PLACE REFERRED CAN EASILY BE TAKEN AS VILLAGE. IN VIEW OF THE ABOVE DECISIO N THE SCOPE OF DEFINITION OF A PLACE WHERE THE BRANCH OF THE BANK IS SITUATED CANNOT BE EXTENDED BEYOND THE RURAL UNIT BEING VILLAGE AS RECOGNIZED IN THE CENSUS REPORT. IT IS NOT THE CASE OF THE AO THAT THOUGH THE BRANCH IN QUESTION IS SITUATED IN A RURAL VILLAGE HOWEVER, THE ENTIRE OR MAJORITY PART OF THE ADVANCES ARE GIVEN TO THE CUSTOMERS BELONGING TO THE NEIGHBORING URBAN AREA SO AS TO DEFEAT THE VERY PURPOSE AND OBJECT OF THE INCENTIVE IN THE SHAPE OF DEDUCTION UNDER SECTION 36(1)(VIIA) GRANTED UNDER T HE ACT. 7. IN VIEW OF THE ABOVE DISCUSSION AND FACTS AND CIRCUMSTANCES OF THE CASE, AS WELL AS FOLLOWING THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. LORD KRISHNA BANK LTD. (SUPRA), WE HOLD THAT JUCHANDRA NAIGAON, BRANCH SITUATED AT VI LLAGE JUHCHANDRA NAIGAON IS A RURAL BRANCH IN TERMS OF SECTION 36(1)(VIIA) OF THE INCOME TAX ACT AND ACCORDINGLY ENTITLED FOR DEDUCTION UNDER THE SAID SECTION. 4. IN VIEW OF THE ABOVE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE THE ISSUE INVOLVED IN THE BOTH APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE AND CONSEQUENTLY THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 36(1)(VIIA) IN RESPECT OF NAIGAON - JUHCHANDRA BRANCH SITUATED AT VILLAGE JUHCHANDRA NAIGAON BEING A RURAL BRANCH. ACCORDINGLY BOTH APPEALS OF THE ASSESSEE ARE ALLOWED . CITIZEN CREDIT CO - OPERATIVE BANK LIMITED, 5 | P A G E 5 . IN THE RESULT, BOTH THE APPEAL S OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 18 TH DAY OF MARCH 2015 VKNS'K DH ?KKS'K.KK [KQYS U;K;KY; ES FNUKAD 18 EKPZ 2015 DKS DH XBZA SD/ - SD/ - ( RAJENDRA ) (VIJAY PAL RAO) ( ACCOUNTANT MEMBER / YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; ) MUMBAI DATED 18 .03.2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI