The Kannur Dist. Co-op Bank Ltd, Kannur V. The DCIT, Kannur

ITA 183/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77457 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2014
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: RADHESH BHAT
• Keywords: Bad and doubtful debts
• Section: 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NOS.182&183 /COCH/2014 ASSESSMENT YEARS : 2009-10 & 2010-11 THE KANNUR DISTRICT CO-OPERATIVE BANK LTD., 545A, JILA BANK BUILDING, KANNUR-670 001. [PAN: AAACT 9127C] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KANNUR RANGE, KANNUR. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI RADHESH BHAT, CA REVENUE BY SMT. LATHA V KUMAR, JR. DR DATE OF HEARING 17/06/2014 DATE OF PRONOUNCEMENT 27/06/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE DIFFERENT ORDERS OF THE CIT(A), KANNUR. 2. SINCE THE ISSUE IN BOTH THE APPEALS IS IDENTICAL IN NATURE, THEY WERE GROUPED TOGETHER, HEARD TOGETHER AND ARE BEING DISP OSED OF BY THIS COMMON CONSOLIDATED ORDER. 3. THE ASSESSEE RAISED THE GROUND IN BOTH THE APPEA LS THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION OF 10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY ITS RURAL BRANCH ES U/S. 36(1)(VIIA) OF THE I.T. ACT. I.T.A. NOS.182&183/2014 2 4. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OP INION THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE IN I.T.A. NOS. 179/2012, 33,37,238,241,243 ,254&258 OF 2013 VIDE ITS JUDGMENT DATED 3RD APRIL, 2014. THE HONBLE JURISD ICTIONAL HIGH COURT HELD AS UNDER: 8. SECTION 36 OF THE ACT DEALS WITH VARIOUS DEDUCT IONS THAT COULD BE ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 O F THE ACT. SECTION 36 HAS VARIOUS CLAUSES AND EACH CLAUSE REFERS TO DEDUCTION ALLOWABLE TO A PARTICULAR ASSESSEE LIKE AMOUNT OF PREMIUM PAID IN RESPECT OF INSURANCE AGAINST RISK OF DAMAGES, FEDERAL MILK CO-OPERATIVE SOCIETY, GENERAL INSURANCE ETC. WE ARE CONCERNED WITH SUB-CLAUSE (A) OF CLAUSE (VIIA) TO S ECTION 36(1). THIS CLAUSE MAKES PROVISION FOR BAD AND DOUBTFUL DEBTS. IN OTH ER WORDS, DEDUCTION COULD BE CLAIMED BY BANKS REFERRED TO IN CLAUSE (VIIA) IN RESPECT OF BAD AND DOUBTFUL DEBTS. IT PROVIDES CERTAIN TERMS AND CONDITIONS UN DER WHICH SUCH DEDUCTIONS COULD BE CLAIMED BY A PARTICULAR BANK. SECTION 36( 1)(VIIA) COMMENCES WITH FOLLOWING WORDS IN RESPECT OF ANY PROVISION FOR BA D AND DOUBTFUL DEBT MADE BY AND SUB-CLAUSE (A) READS AS UNDER: A SCHEDULED BANK NOT BEING A BANK APPROVED BY CEN TRAL GOVERNMENT FOR THE PURPOSES OF CLAUSE (VIIIA) OR A BANK INCORPORA TED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA OR A NON-SCHEDULED BANK OR A CO-OPERATIVE BANK OTHER THAN A BANK OR A CO-OPERATIVE BANK OTHER THA N A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTU RAL AND RURAL DEVELOPMENT BANK, AN AMOUNT NOT EXCEEDING SEVEN AND ONE-HALF P ERCENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING TEN PERCE NT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUC H BANK COMPUTED IN THE PRESCRIBED MANNER. UNDER EXPLANATION TO SECTION 36 FOR BETTER UNDERSTA NDING OF CERTAIN TERMS USED IN SUB-CLAUSE 9A) OF CLAUSE (VIIA) DEFINITIONS AR PROVIDED. FOR THE PURPOSE OF THE ABOVE APPEALS, WE NEED TO KNOW WHAT EXACTLY NON-SCHEDULED BANK, RURAL BRANCH CO-OPERATIVE BANK AND SCHEDULED BANK MEAN AS PER THE EXPLANATION WHICH READ AS UNDER: NON-SCHEDULED BANK MEANS A BANKING COMPANY AS DE FINED UNDER CLAUSE (C) OF SECTION 5 OF THE BANKING REGULATION ACT, 19 49, WHICH IS NOT A SCHEDULED BANK. I.T.A. NOS.182&183/2014 3 RURAL BRANCH MEANS A BRANCH OF A SCHEDULED BANK OR A NON-SCHEDULED BANK SITUATED IN A PLACE WHICH HAS A POPULATION OF NOR MORE THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIRST DAY O F THE PREVIOUS YEAR. CO-OPERATIVE BANK, PRIMARY AGRICULTURAL CREDIT S OCIETY AND PRIMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN THE EXPLA NATION TO SUB-SECTION (4) OF SECTION 80P. SCHEDULED BAND MEANS A BANK FOR THE TIME BEING IN CLUDED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT. IN ORDER TO UNDERSTAND WHAT IS A BANKING COMPANY, O NE HAS TO REFER TO BANKING REGULATION ACT AND TO UNDERSTAND WHETHER A PARTICULAR BANK IS A SCHEDULED BANK, ONE HAS TO SEE WHETHER SUCH BANK FI NDS A PLACE IN THE SECOND SCHEDULE TO RESERVE BANK OF INDIA ACT. CO-O PERATIVE BANK MEANS A BANK AS EXPLAINED UNDER SUB-SECTION (4) OF SECTION 80P OF THE ACT. SECTION 5(C) OF BANKING REGULATION ACT DEFINES BANKING COMP ANY AS UNDER: BANKING COMPANY MEANS ANY COMPANY WHICH TRANSACTS THE BUSINESS OF BANKING IN INDIA. U/S. 80P, IT AGAIN REFERS TO SECTION 56 OF BANKING REGULATION ACT. U/S. 56, FALLING UNDER CHAPTER V OF BANKING REGULATION ACT, ENTIRE PROVISIONS DEAL WITH CO-OPERATIVE SOCIETIES. SECTION 56 SAYS, AFTER CLA USE (CC) CLAUSE (CCI), DEFINITION OF CO-OPERATIVE BANK, IS TO BE INCLUDED. SECTION 56(C) OF BANKING REGULATION ACT SAYS: IN SECTION 5:- (I) AFTER CLAUSE (CC), THE FOLLOWING CLAUSE SHALL BE INSERTED, NAMELY:- (CCI) CO-OPERATIVE BANK MEANS A STATE CO-OPERATI VE BANK, A CENTRAL CO- OPERATIVE BANK AND A PRIMARY CO-OPERATIVE BANK. MEANING OF DIFFERENT TERMS USEFUL FOR THE PURPOSE O F DECIDING THE CONTROVERSY, ONE HAS TO SEE HOW PRESENCE OF A PARTICULAR TERM IN A PARTICULAR PROVISION AND SIMULTANEOUSLY BEING ABSENT IN THE EXPLANATION TO T HE SAID PROVISION WOULD CHANGE THE POSITION OF THE APPELLATE BANKS WITH REF ERENCE TO THE CONTEXT. 9. ADMITTEDLY, APPELLANTS/ASSESSEES ARE CO-OPERATIV E BANKS. WITH INTRODUCTION OF FINANCE ACT OF 2007, COMING INTO EF FECT FROM 01.04.2007, ONE HAS TO UNDERSTAND WHAT WAS THE POSITION PRIOR TO 01 .04.2007 AND AFTER I.T.A. NOS.182&183/2014 4 01.04.2007, THEY WERE ENJOYING THE BENEFITS PROVIDE D U/S. 80P. WITH THE INTRODUCTION OF FINANCE ACT 2007 WITH EFFECT FROM 0 1.04.2007, THEY COULD CLAIM DEDUCTIONS AS PROVIDED U/S. 36(1) OF THE ACT. WE ARE CONCERNED WITH SUB-CLAUSE(A) OF CLAUSE (VIIA) TO SECTION 36(1). P RIOR TO FINANCE ACT OF 2007, CO-OPERATIVE BANK WAS NOT INCLUDED INSUB-CLAUSE (A) SO FAR AS PROVISIONS FOR BAD AND DOUBTFUL DEBTS. WITH EFFECT FROM 01.04.200 7, CO-OPERATIVE BANK WAS INCLUDED UNDER SUB-CLAUSE 9A) OF CLAUSE (VIIA) OF S ECTION 36(1). IT IS FURTHER CLARIFIED THAT ONLY SUCH CO-OPERATIVE BANK OTHER TH AN A PRIMARY AGRICULTURE CREDIT SOCIETY, ETC. IS INCLUDED IN SUB-CLAUSE (A) OF CLAUSE (VIIA). THE PROVISION IS A BENEFICIAL ONE. NO DOUBT, PLAIN READING OF MA IN SECTION 36(1) (VIIA)(A) AND EXPLANATION UNDER SAID SECTION PRESENT CERTAIN D IFFICULTIES, BUT SITUATION IS NOT WITHOUT POSSIBILITIES. THE OBJECT AND INTENTIO N OF THE LEGISLATURE IS TO BE UNDERSTOOD BY HARMONIOUS CONSTRUCTION OF THE PROVIS IONS. THE POLICY WAS TO INCLUDE CO-OPERATIVE BANKS AS WELL, AS THEY COULD N OT TAKE SHELTER U/S. 80P OF THE INCOME TAX ACT ANY MORE. BY RESTRICTING THE SC OPE OF THE PROVISIONS, THE VERY PURPOSE OF INCLUSION OF CO-OPERATIVE BANK WOUL D BE LOST. SUB-CLAUSE 9A) CONSISTS OF TWO TYPES OF DEDUCTIONS. ONE REFERS TO DEDUCTION OF AN AMOUNT NOT EXCEEDING 7.5% OF THE TOTAL INCOME. ONLY CONDI TION IS, THERE SHOULD BE A PROVISION FOR BAD AND DOUBTFUL DEBTS. TILL 01.04.2 007, THERE WAS NO NEED TO MAKE ANY PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER THIS CLAUSE SO FAR AS CO- OPERATIVE BANK AND THEY WERE CLAIMING BENEFITS APPL ICABLE TO THEM U/S. 80P. DURING THE ASSESSMENT YEAR IN QUESTION THEY CLAIMED DEDUCTIONS U/S. 36(1)(VIIA)(A) OF THE ACT. ONLY WITH REFERENCE TO THE ASSESSMENT YEAR IN QUESTION APPELLANTS/ASSESSEES HAVE CREATED PROVISIO N FOR BAD AND DOUBTFUL DEBTS IN THE BOOKS OF ACCOUNTS. SO FAR AS THIS IS SUE IS CONCERNED, OPINION OF THE ASSESSING OFFICER AND TWO APPELLATE AUTHORITIES IS JUSTIFIED AND WE NEED NOT INTERFERE WITH THE OPINION OF THE AUTHORITIES I N RESTRICTING DEDUCTIONS ONLY TO 7.5% OF THE TOTAL INCOME AS PROVIDED UNDER SUB-C LAUSE (VIIA) OF SECTION 36(1). 10. THEN COMING TO THE OTHER CONTROVERSIAL ISSUE WH ETHER A CO-OPERATIVE BANK, IRRESPECTIVE OF HAVING RURAL BRANCH AS EXPLAINED UN DER EXPLANATION, IS ENTITLED TO HAVE THE BENEFIT OF SECOND PART OF SECTION 36(1) (VIIA)(A), WE HAVE TO SEE, IN THE ABSENCE OF CO-OPERATIVE BANK IN THE DEFINITI ON OF RURAL BRANCH UNDER EXPLANATION TO SECTION 36(1) WOULD IT MAKE ANY DIFF ERENCE. LEARNED COUNSEL APPEARING FOR APPELLANTS TRIED TO CONVINCE THE COUR T THAT ADJECTIVE OF RURAL WOULD MEAN IN RELATION TO OR CHARACTERISTIC OF THE COUNTRYSIDE RATHER THAN THE TOWN; REMOTE RURAL AREAS. URBAN, NO DOUBT, IS OPPO SITE TO RURAL. URBAN IS IN RELATION TO OR CHARACTERISTIC OF A TOWN OR CITY. 11. ACCORDING TO US, THERE IS NO NECESSITY TO FIND OUT THE GENERIC MEANING OF EITHER URBAN OR RURAL FOR THE SIMPLE REASON THAT EX PLANATION UNDER SECTION 36(1) ITSELF DEFINES WHAT COULD BE CONSIDERED AS A RURAL BRANCH SO FAR AS SECTION 36(1) OF THE ACT. IN THE LIGHT OF GIVING A PARTICULAR DEFINITION FOR THE I.T.A. NOS.182&183/2014 5 PURPOSE OF UNDERSTANDING RURAL BRANCH WITH REFERENC E TO SUB-CLAUSE (A) OF CLAUSE (VIIA) TO SECTION 36(1) ONE NEED NOT TO GO I N SEARCH OF THE MEANING OF RURAL OR WHAT EXACTLY WOULD CONSTITUTE RURAL BRANCH . THIS COURT HAD AN OCCASION TO DECIDE THE SAID CONTROVERSY PERTAINING TO BAD AND DOUBTFUL DEBTS OF A RURAL BRANCH. WHILE EXPLAINING THE MEANING OF PLACE IN EXPLANATION (IA) TO SECTION 36(1)(VIIA), THEIR LORDSHIPS OPINED AS U NDER: NEXT QUESTION RAISED PERTAINS TO THE ASSESSEES C LAIM 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 THE BANK AS RURAL BRANCHES AND OTHER BRANCHES. RUR AL BRANCH IS DEFINED UNDER EXPLANATION (IA) TO SECTION 36(1)(VIIA) AS FOLLOWS: RURAL BRANCH MEANS A BRANCH OF A SCHEDULED BANK OR A NON- SCHEDULES BANK SITUATED IN A PLACE WHICH HAS A POP ULATION OF NOR MORE THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FI RST DAY OF THE PREVIOUS YEAR.. WHAT IS CLEAR FROM THE ABOVE IS THAT THE CLASSIFICA TION BETWEEN RURAL AND OTHER BRANCHES OF A BANK IS MADE BASED ON THE POPULATION IN THE PLACE WHERE THE CONCERNED BRANCH IS LOCATED. WHILE THE ASSESSEES CASE THAT FOUND ACCEPTANCE WITH THE TRIBUNAL IS THAT PLACE REFERR ED TO IN THE ABOVE DEFINITION CLAUSE IS THE WARD OF A PANCHAYAT OR MUNICIPALITY, THE ASSESSING OFFICER TOOK THE VIEW THAT PLACE CONTAINED IN THE DEFINITION C LAUSE SHOULD MEAN A REVENUE VILLAGE. NO DOUBT, AS SUCH IS NOT DEFINED IN THE DEFINITION CLAUSES AND SO MUCH SO, WE HAVE TO FIND OUT THE SCOPE AND M EANING OF PLACE REFERRED TO IN THE SECTION. STANDING COUNSEL FOR T HE DEPARTMENT PRODUCED BEFORE US LAST PUBLISHED CENSUS REPORT OF 2001. EVE N 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 VIL LAGE WITH DEFINITE SURVEYED BOUNDARIES. THE RURAL AREA IS, HOWEVER, TAKEN AS THE RESIDUAL PORTION EXCLUDING THE URBAN AREA AND FOR THAT NO STRICT DE FINITION IS FOLLOWED. IN OUR VIEW, THE DEFINITION CLAUSE DOES NOT EXCLUDE THE LITERAL MEANING OF RURAL BRANCH WHICH NECESSARILY EXCLUDES URBAN AREAS. IF THE ASSESSEES CASE ACCEPTED BY THE TRIBUNAL THAT POPULATION IN A WARD HAS TO BE RECKONED FOR DECIDING AS TO WHETHER THE LOCATION OF A PANCHAYAT IS IN A RURAL AREA OR NOT IS ACCEPTED, THEN PROBABLY EVEN IN MUNICIPAL AREAS THE RE MAY BE WARDS WITH LESS THAN 10000 POPULATION THEREBY ANSWERING THE BR ANCH LOCATED IN SUCH MUNICIPAL AREA ALSO AS A RURAL BRANCH. GOING BY TH E ORDINARY MEANING OF RURAL I.T.A. NOS.182&183/2014 6 BRANCH, WE FEEL ONLY BRANCHES OF THE BANK LOCATED I N RURAL AREAS ARE COVERED. WHEN THE LEGISLATURE ADOPTS POPULATION AS THE BASIS FOR CLASSIFICATION OF RURAL BRANCHES, THAT TOO, WITH REFERENCE TO THE LAST CENS US 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 A BOVE MEANING OF RURAL AREA CONTAINED IN THE CENSUS REPORT WHEREIN REVENUE VILLAGE IS TREATED AS A UNIT OF RURAL AREA, CAN BE RIGHTLY ADOPTED. SO MUC H SO, PLACE REFERED TO IN THE ABOVE DEFINITION CLAUSE FOR THE PURPOSE OF IDEN TIFYING THE BRANCH OF A BANK AS A RURAL BRANCH WITH REFERENCE TO ITS LOCATI ON IS THE REVENUE VILLAGE. THEREFORE, IN OUR VIEW, THE FINDING OF THE TRIBUNAL THAT PLACE REFERRED TO IN THE DEFINITION IS THE WARD OF A LOCAL AUTHORITY LIK E PANCHAYAT OR MUNICIPALITY IS INCORRECT AND, IN OUR VIEW, A RURAL BRANCH HAS TO B E 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, MUN ICIPALITY OR PANCHAYATS. THERE CAN BE NO VILLAGE IN A MUNICIPAL OR CORPORATI ON AREA WHERE THE POPULATION IS LESS THAN 10000. SO MUCH SO, RURAL B RANCHES ARE SUCH OF THE BRANCHES LOCATED IN A VILLAGE WHERE THE POPULATION IN THE VILLAGE AS A UNIT IS LESS THAN 10000. IT IS CLEAR FROM THE ABOVE JUDGMENT THAT THIS COURT HAD ALREADY AN OCCASION TO CONSIDER THE MEANING OF PLACE WITH REFERENCE TO ABO VE SECTION. THEREFORE, RURAL BRANCH IS A BRANCH WHICH FALLS UNDER EXPLANAT ION (IA) TO SECTION 36(1) (VIIA). TRIBUNAL HAD TO REVERSE THE JUDGMENT OF CI T(APPEALS) IN THE LIGHT OF THE DECISION IN LORD KRISHNA BANKS CASE (SUPRA). 12. THEN COMING TO THE CONTROVERSY WHETHER CO-OPE RATIVE BANK COULD CLAIM DEDUCTION OF 10% OF THE AGGREGATE AVERAGE ADVANCES WHILE COMPUTING THE INCOME IRRESPECTIVE OF FALLING UNDER RURAL BRANCH A S PER EXPLANATION, IN ORDER TO CONSIDER A COMPANY AS A BANKING COMPANY IT MUST TRANSACT BUSINESS OF BANKING IN INDIA AS DEFINED U/S. 5(C) OF BANKING RE GULATION ACT. EXPLANATION TO SECTION 5(C) CLEARLY INDICATES WHICH ARE THE TRA NSACTIONS WHICH WOULD NOT COME WITHIN THE MEANING OF BANKING BUSINESS. NON-S CHEDULE BANK MEANS A BANKING COMPANY AS DEFINED U/S. 5(C) WHICH IS NOT A SCHEDULED BANK. AS ALREADY STATED ABOVE, CO-OPERATIVE BANK CANNOT BE C ONSIDERED AS A SCHEDULED BANK AS SECOND SCHEDULE TO RESERVE BANK OF INDIA AC T DOES NOT INCLUDE ANY OF THE CO-OPERATIVE BANKS. READING OF SECTION 5(C) ALONG WITH EXPLANATION, CLEARLY INDICATES THOUGH ANY COMPANY WHICH TRANSACT S BUSINESS OF BANKING IN INDIA WOULD COME WITHIN THE MEANING OF NON-SCHEDULE D BANK, BY VIRTUE OF EXPLANATION (1) UNDER THIS CLAUSE SCHEDULED BANK IS EXCLUDED. SO FAR AS SUB- CLAUSE(A) OF CLAUSE (VIIA) TO SECTION 36(1), TWO TY PES OF DEDUCTIONS ARE PROVIDED TO NON-SCHEDULED BANK, A SCHEDULED BANK AN D A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY, E TC. IT IS TO BE NOTED THAT APPELLANTS/ASSESSEES ARE NOT PRIMARY AGRICULTURAL C REDIT CO-OPERATIVE SOCIETY OR OTHER KIND OF BANK SO AS TO GO OUT OF THE DEFINI TION OF CO-OPERATIVE BANK I.T.A. NOS.182&183/2014 7 UNDER SUB-CLAUSE (A) TO CLAUSE (VIIA) OF SECTION 36 (1). NO DOUBT, EXPLANATION (IA) TO SECTION 36(1)(VIIA) DEFINES WHAT IS A RURAL BRANCH. IT IS WITH REFERENCE TO A PLACE AND CERTAIN NUMBER OF POPULATION. IT RE FERS TO BRANCH OF A SCHEDULED BANK OR A NON-SCHEDULED BANK. APPARENTLY , WE DO NOT FIND THE TERM CO-OPERATIVE BANK. SECTION 5(CCI) OF BANKING REGULATION ACT THOUGH HAS BROUGHT IN DEFINITION OF CO-OPERATIVE BANK, VIRTUAL LY EVERY BANK WHICH IS NOT A SCHEDULED BANK WOULD FALL UNDER THE DEFINITION OF N ON-SCHEDULE BANK. READING OF DEFINITION OF NON-SCHEDULE BANK ALONG WI TH MEANING OF RURAL BRANCH UNDER EXPLANATION TO SECTION 36(1) OF THE ACT , CLEARLY INDICATE THAT CO- OPERATIVE BANK ALSO FALLS UNDER THE CATEGORY OF NON -SCHEDULE BANK FOR THE PURPOSE OF THIS SECTION. THEREFORE, READING OF ENT IRE SECTION 36(1)(VIIA)(A) ALONG WITH EXPLANATION WOULD MEAN TWO KINDS OF DEDU CTIONS REFERRED TO IN THE SECTION WILL BE ALLOWED TO ALL THOSE BANKS ONLY IF THEY SATISFY THE TERMS AND CONDITIONS REFERRED TO IN THE PROVISION. 13. THEREFORE, WE ARE OF THE OPINION, AUTHORITIES B ELOW WERE JUSTIFIED IN OPINING THAT BENEFIT OF DEDUCTION OF 10% OF THE AGG REGATE AVERAGE ADVANCES IS APPLICABLE TO CO-OPERATIVE BANK ALSO PROVIDED TH EIR RURAL BRANCHES HAVE ADVANCED SUCH AMOUNTS. SUCH RURAL BRANCH MEANS A B RANCH AS EXPLAINED UNDER EXPLANATION (IA), AS OPINED IN THE DECISION OF LORD KRISHNA BANKS CASE (SUPRA). IN THE LIGHT OF ABOVE OBSERVATIONS AND REASONING, NONE OF THE CONTENTIONS RAISED BY APPELLANTS ARE SUSTAINABLE. HENCE, THESE APPEALS ARE DISMISSED ANSWERING SUBSTANTIAL QUESTIONS OF LAW IN FAVOUR OF REVENUE. 5. IN VIEW OF THE ABOVE JUDGMENT OF THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE, WE ARE INCLINED TO DECIDE THE ISSUE AGAINST THE ASSESSEE. ACCORDINGLY, THIS GROUND RAISED BY THE A SSESSEE IN BOTH THE APPEALS IS DISMISSED. I.T.A. NOS.182&183/2014 8 6. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE IN I.T.A. NOS. 182&183/COCH/2014 ARE DISMISSED. - PRONOUNCED ACCORDINGLY ON 27-06-2 014. SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 27TH JUNE, 2014 GJ COPY TO: 1. THE KANNUR DISTRICT CO-OPERATIVE BANK LTD., 545A , JILA BANK BUILDING, KANNUR-670 001. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1 , KANNUR RANGE, KANNUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KANNUR. 4. THE COMMISSIONER OF INCOME-TAX, KANNUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN