Irinjalakuda Town Co-op Bank Ltd, Thrissur V. ITO, Trichur

ITA 200/COCH/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4589 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 14-08-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 18-04-2013
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: ANAS MUHAMMED SHAMNAD R
• Keywords: Principle of natural justice; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 200/COCH/2013 ASSESSMENT YEAR : 2009-10 IRINJALAKUDA TOWN CO-OP BANK LTD., TANA SOUTH, IRINJALAKUDA-680 121, THRISSUR. [PAN: AAAAJ 1040H] VS. THE INCOME TAX OFFICER, WARD-2(2), TRICHUR. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI ANAS MUHAMMED SHAMNAD R, ADV. REVENUE BY SHRI K.K. JOHN, SR. DR DATE OF HEARING 14/08/2013 DATE OF PRONOUNCEMENT 16//08/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 18-02-2013 PASSED BY THE LD. CIT(A)-V, KOCHI AND IT RELATES TO THE ASSESSMENT YEAR 2009-10. 2. THE SOLITARY ISSUE URGED IN THIS APPEAL IS WHETH ER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION CLAIMED U/ S. 36(1)(VIIA) OF THE ACT IN RESPECT OF 10% OF AGGREGATE AVERAGE ADVANCES BY THE RURAL B RANCHES OF THE ASSESSEE. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS A CO-OPERATIVE BANK ENGAGED IN THE BANKING BUSINESS. IN THE RETUR N OF INCOME, IT CLAIMED DEDUCTION U/S. 36(1)(VIIA) OF THE ACT TO THE TUNE OF RS. 2.64 CRORES. THE SAID DEDUCTION CONSISTED OF 7.5% OF PROFIT AMOUNTING TO RS. 0.24 CRORE AND 1 0% OF ADVANCES MADE BY THE RURAL BRANCHES AMOUNTING TO RS. 2.40 CRORES. THE ASSESSI NG OFFICER DISALLOWED THE CLAIM OF I.T.A. NO. 200/COCH/2013 2 RS.2.40 CRORES RELATING TO 10% OF ADVANCES MADE BY THE RURAL BRANCHES OF THE ASSESSEE ON THE REASONING THAT NONE OF THE BRANCHES OF THE A SSESSEE-BANK SHALL QUALIFY AS RURAL BRANCH AS PER THE DEFINITION OF RURAL BRANCH GIVEN IN THE INCOME TAX ACT. THE ASSESSEE CHALLENGED THE SAID DECISION OF THE ASSESSING OFFIC ER BY FILING APPEAL BEFORE THE LD. CIT(A). THE FIRST APPELLATE AUTHORITY NOTICED THAT AN IDENTICAL ISSUE WAS COVERED AGAINST THE ASSESSEE BY THE ORDER PASSED BY THE JURISDICTIO NAL ITAT, COCHIN IN THE CASE OF KODUNGALLUR TOWN CO-OPERATIVE BANK LTD. IN I.T.A. N O. 08/COCH/2011 RELATING TO THE ASSESSMENT YEAR 2007-08. BY FOLLOWING THE SAID DEC ISION OF THE TRIBUNAL, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. ADMITTEDLY, AN IDENTICAL ISSUE WAS CONSIDERED BY TH E TRIBUNAL IN THE CASE OF KODUNGALLUR TOWN CO-OPERATIVE BANK LTD., REFERRED SUPRA. THE R ELEVANT OBSERVATIONS MADE IN THAT CASE ARE EXTRACTED BELOW: 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAR EFULLY PERUSED THE RECORD. AS SUBMITTED BY LD D.R, THE ISSUE UNDER CONSIDERATION WAS DEALT BY THIS BENCH OF TRIBUNAL IN THE CASE OF THE KANNUR DIST. CO-OP BANK LTD, REFERRED SUPRA. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT OBSERVATIONS MADE IN THE ABOVE SAID CASE:- 6. WITH REGARD TO THE INTERPRETATION OF THE WOR D PLACE FOR THE PURPOSE OF ASCERTAINING RURAL BRANCHES, IT WAS SUBMITTED B Y LD D.R THAT THE ORDERS PASSED BY THE ITAT, WHICH WERE RELIED UPON BY THE L D CIT(A), HAVE SINCE BEEN REVERSED BY THE HONBLE KERALA HIGH COURT. TH E LD D.R ALSO PLACED BEFORE US THE ORDER DATED 07-10-2010 PASSED BY HON BLE KERALA HIGH COURT IN ITA NO.234 OF 2009 IN THE CASE OF CIT VS. THE LO RD KRISHNA BANK LTD, WHICH IS REPORTED IN 195 TAXMAN 57. THE RELEVANT O BSERVATIONS MADE BY THE HONBLE JURISDICTIONAL KERALA HIGH COURT ARE EX TRACTED BELOW, FOR THE SAKE OF CONVENIENCE:- IN OUR VIEW, THE DEFINITION CLAUSE DOES NOT EXCLUD E THE LITERAL MEANING OF RURAL BRANCH WHICH NECESSARILY EXCLUDES URBAN AREAS. IF THE ASSESSEES CASE ACCEPTED BY THE TRIB UNAL THAT I.T.A. NO. 200/COCH/2013 3 POPULATION IN A WARD HAS TO BE RECKONED FOR DECIDIN G AS TO WHETHER THE LOCATION OF A PANCHAYAT IS IN A RURAL A REA OR NOT IS ACCEPTED, THEN PROBABLY EVEN IN MUNICIPAL AREAS THE RE MAY BE WARDS WITH LESS THAN 10000 POPULATION THEREBY ANSWE RING THE BRANCH LOCATED IN SUCH MUNICIPAL AREA ALSO AS A RUR AL BRANCH. GOING BY THE ORDINARY MEANING OF RURAL BRANCH, WE F EEL ONLY BRANCHES OF THE BANK LOCATED IN RURAL AREAS ARE COV ERED. 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 IDE NTIFICATION OF RURAL AREA IN THE CENSUS REPORT CAN BE LEGITIMATELY ADOPTED. SO MUCH SO, WE FEEL THE ABOVE MEANING OF RURAL AREA CO NTAINED IN THE CENSUS REPORT WHEREIN REVENUE VILLAGE IS TREATE D AS A UNIT OF RURAL AREA, CAN BE RIGHTLY 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. 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 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 PANCH AYATS. THERE CAN BE NO VILLAGE IN A MUNICIPAL OR CORPORATI ON AREA WHERE THE POPULATION IS LESS THAN 10000. SO MUCH S O, RURAL BRANCHES ARE SUCH OF THE BRANCHES LOCATED IN A VILL AGE WHERE THE POPULATION IN THE VILLAGE AS A UNIT IS LESS THA N 10000. WE, THEREFORE, ALLOW THE APPEAL ON THIS ISSUE BY REVERS ING THE ORDER OF THE TRIBUNAL AND BY RESTORING THE ASSESSMENT. BY RESPECTFULLY FOLLOWING THE DECISION OF JURISDICT IONAL HIGH COURT, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND REST ORE THAT OF THE ASSESSING OFFICER. 7. BEFORE US, THE LD A.R TOOK AN ALTERNATIVE PL EA WITH REGARD TO THE ISSUE OF DETERMINATION OF RURAL BRANCH BY SUBMITTING TH AT THE DEFINITION OF RURAL BRANCH GIVEN IN SEC. 36(1)(VIIA) SHALL NOT APPLY TO THE CO-OPERATIVE BANKS AND HENCE THE ORDER OF HONBLE JURISDICTIONAL HIGH COURT SHALL NOT APPLY TO THE ASSESSEE HEREIN. I.T.A. NO. 200/COCH/2013 4 7.1 IN ORDER TO UNDERSTAND THIS ALTERNATIVE PLEA, IT IS NECESSARY TO EXPLAIN THE RELEVANT PROVISIONS. THE SECTION 36(1)(VIIA) O PENS WITH THE WORDS IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY --- (A) A SCHEDULED BANK NOT BEING A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTSIDE INDIA OR A NON-SCHEDULED BANK OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. UNDER THE EXPLANATION, RURAL BRANCH IS DEFINED AS UNDER:- RURAL BRANCH MEANS A BRANCH OF A SCHEDULED BANK O R A NON-SCHEDULED 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 PREVIOUS YEAR. THE DEFINITION OF RURAL BRANCH GIVEN IN THE EXPLA NATION DOES NOT INCLUDE A CO-OPERATIVE BANK, THOUGH THE CO-OPERATIVE BANK I S INCLUDED IN SECTION 36(1)(VIIA) OF THE ACT. ACCORDINGLY, THE LD A.R CO NTENDED THAT THE DEFINITION OF RURAL BRANCH DOES NOT COVER A CO-O PERATIVE BANK AND HENCE THE ORDINARY MEANING GIVEN TO THE RURAL BRANCH BY THE REGULATORY AUTHORITIES SHOULD BE TAKEN INTO ACCOUNT. ACCORDIN GLY THE LD A.R CONTENDED THAT THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF THE LORD KRISHNA BANK LTD, SUPRA ALSO DOES NOT APPL Y TO THE ASSESSEE HEREIN, SINCE IT IS A CO-OPERATIVE BANK. ACCORDING LY IT IS PRAYED THAT THE MATTER REQUIRES RE-EXAMINATION AT THE END OF AO. 7.2 WE NOTICE THAT THE LD A.R HAS TAKEN THIS AL TERNATIVE PLEA, WHICH IS ENTIRELY A NEW ONE THAT TOO RAISED FOR THE FIRST TI ME, WITHOUT FILING AN ADDITIONAL GROUND ALONG WITH A PETITION PRAYING FOR ITS ADMISSION. THIS PLEA HAS NOT ALSO BEEN RAISED BEFORE THE LOWER AUTHORITI ES. HENCE, THE ALTERNATIVE GROUND SHOULD NOT HAVE BEEN ACCEPTED NORMALLY. HOWE VER, SINCE THE ALTERNATIVE PLEA OF THE ASSESSEE INVOLVES INTERPRE TATION OF THE VARIOUS PROVISIONS/CLAUSES OF THE ACT/OTHER CENTRAL ACT ONL Y, IN THE INTEREST OF I.T.A. NO. 200/COCH/2013 5 NATURAL JUSTICE, WE PROCEED TO ADDRESS THE ALTERNAT IVE PLEA OF THE ASSESSEE IN THE COMING PARAGRAPHS. 8. THE EXPLANATION BELOW SECTION 36(1)(VIIA) DEF INES VARIOUS TERMS. SOME OF THE DEFINITIONS, WHICH ARE RELEVANT TO THE ISSUE UNDER CONSIDERATION, ARE EXTRACTED BELOW:- NON-SCHEDULED BANK MEANS A BANKING COMPANY AS DEFINED IN CLAUSE (C) OF SECTION 5 OF THE BANKING REGULATION ACT, 1949 (1 0 OF 1949), WHICH IS NOT A SCHEDULED BANK. SCHEDULED BANK MEANS THE STATE BANK OF INDIA CONSTITUTED UNDER T HE STATE BANK OF INDIA ACT, 1955 (23 OF 1955), A SUBSI DIARY BANK AS DEFINED IN THE STATE BANK OF INDIA (SUBSIDIARY BANKS) ACT, 195 9 (38 OF 1959), A CORRESPONDING NEW BANK CONSTITUTED UNDER SECTION 3 OF THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS ) ACT, 1970 (5 OF 1970), OR UNDER SECTION 3 OF BANKING COMPANIES (ACQ UISITION AND TRANSFER OF UNDERTAKINGS) ACT, 1980 (40 OF 1980), OR ANY OTH ER BANK BEING A BANK INCLUDED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT, 1934 (2 OF 1934). (VI) CO-OPERATIVE BANK, PRIMARY AGRICULTURAL CREDIT SOCIETY AND PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELO PMENT BANK SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN THE E XPLANATION TO SUB- SECTION (4) OF SECTION 80P. IN THE EXPLANATION TO SUB-SECTION (4) OF SECTION 80 P, THE CO-OPERATIVE BANK IS DEFINED AS UNDER:- I.T.A. NO. 200/COCH/2013 6 CO-OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDI T SOCIETY SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949). 8.1 SINCE THE DEFINITION OF NON-SCHEDULED BANK AND CO-OPERATIVE BANK REFER TO THE BANKING REGULATION ACT, 1949, WE HAVE TO REFER THE SAID CENTRAL ACT IN ORDER TO UNDERSTAND THEIR RESP ECTIVE MEANING. WE HAVE ALSO GONE THROUGH THE SAID ACT. FOR UNDERSTANDING THE MEANING OF NON- SCHEDULED BANK WE HAVE TO REFER TO CLAUSE (C) OF S ECTION 5 OF THE BANKING REGULATION ACT, 1949, WHICH READS AS UNDER:- SEC. 5(C): BANKING COMPANY MEANS ANY COMPANY WHIC H TRANSACTS THE BUSINESS OF BANKING IN INDIA. FOR UNDERSTANDING THE MEANING OF CO-OPERATIVE BANK WE HAVE TO REFER TO PART V OF THE BANKING REGULATIONS ACT, 1949. THE S AID PART V STARTS WITH SECTION 56, WHICH READS AS UNDER:- 56:- ACT TO APPLY TO CO-OPERATIVE SOCIETIES SUBJECT TO M ODIFICATIONS:- THE PROVISIONS OF THIS ACT, AS IN FORCE FOR THE TIM E BEING, SHALL APPLY TO, OR IN RELATION TO COOPERATIVE SOCIETIES AS THEY APPLY TO, OR IN RELATION TO BANKING COMPANIES SUBJECT TO THE FOLLOWING MODIFICATIONS NA MELY:- THROUGHOUT THIS ACT, UNLESS THE CONTEXT OTHERWISE R EQUIRES:- REFERENCES TO A BANKING COMPANY OR THE COMPANY OR SUCH COMPANY SHALL BE CONSTRUED AS REFERENCE TO A CO-OP ERATIVE BANK IN SECTION (5), AFTER CLAUSE (CC), THE FOLLOWING CL AUSES SHALL BE INSERTED, NAMELY I.T.A. NO. 200/COCH/2013 7 (CCI) CO-OPERATIVE BANK MEANS A STATE CO-OPERATIV E BANK, A CENTRAL CO-OPERATIVE BANK AND A PRIMARY CO-OPERATIVE BANK. ON A CAREFUL PERUSAL OF RELEVANT PROVISIONS OF PART V OF BANKING REGULATIONS ACT, 1949, WE NOTICE THAT THE TERM BANKING COMPANY ALSO INCLUDES A CO-OPERATIVE BANK . THUS A CO-OPERATIVE BANK FALLS UNDER THE DEFINITION OF BANKING COMPANY. FURTHER AS P ER THE DEFINITION GIVEN IN EXPLANATION UNDER SEC. 36(1)(VIIA) OF THE INCOM E TAX ACT, A BANKING COMPANY AS DEFINED IN SEC. 5(C) OF THE BANKING REG ULATION ACT, WHICH IS NOT A SCHEDULED BANK, IS CLASSIFIED AS A NON-SCHED ULED BANK. CONSEQUENTLY, A CO-OPERATIVE BANK, IN OUR VIEW, WOU LD BE CLASSIFIED AS A NON-SCHEDULED BANK FOR THE PURPOSE OF SEC. 36(1)( VIIA) OF THE ACT. 8.2 IN VIEW OF THE FOREGOING DISCUSSIONS, WE AR E OF THE VIEW THAT THE DECISION RENDERED BY HONBLE JURISDICTIONAL KERALA HIGH COURT IN THE CASE OF THE LORD KRISHNA BANK LTD., SUPRA, SHALL APPLY T O THE ASSESSEE HEREIN. ACCORDINGLY, WE REJECT THE ALTERNATIVE PLEA RAISED BY THE ASSESSEE. THUS, THE APPEAL OF THE REVENUE STANDS ALLOWED. SINCE THE FACTS PREVAILING IN THE INSTANT CASE ARE IDENTICAL WITH THE CASE OF THE KANNUR DIST. CO-OP BANK LTD, REFERRED SUPRA, WE ARE INCLINED TO FOLLOW THE SAID DECISION. WE NOTICE THAT THE DECISION REACHED BY T HE LD CIT(A) IS IDENTICAL WITH THE VIEW TAKEN BY THE TRIBUNAL. ACCORDINGLY, WE UP HOLD HIS DECISION. 5. WE HAVE ALREADY NOTICED THAT THE LD CIT(A) HA S FOLLOWED THE DECISION RENDERED BY THIS BENCH OF TRIBUNAL IN THE CASE OF KODUNGALLUR T OWN CO-OPERATIVE BANK LTD., REFERRED SUPRA IN DECIDING THE IMPUGNED ISSUE AGAINST THE AS SESSEE. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS ORDER. I.T.A. NO. 200/COCH/2013 8 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 16-08-20 13. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 16TH AUGUST, 2013 GJ COPY TO: 1. IRINJALAKUDA TOWN CO-OP BANK LTD., TANA SOUTH, I RINJALAKUDA-680 121, THRISSUR. 2. THE INCOME TAX OFFICER, WARD-2(2), TRICHUR. 3 THE COMMISSIONER OF INCOME-TAX(APPEALS)-V, KOCHI. 4.THE COMMISSIONER OF INCOME-TAX, TRICHUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR ) I.T.A.T, COCHIN