Sant Sopankaka Sahakari Bank Ltd., Saswad, Pune V. Deputy Commissioner of Income-tax,

ITA 215/PUN/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0692 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 11-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HOUSHANG BOMAN IRANI
• Assessee Lawyers: MAYURI KULKARNI
• Keywords: Bad and doubtful debts; Set aside
• Section: 143(3); 80P; 201; 263

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.215/PUN/2016 / ASSESSMENT YEAR : 2012-13 SANT SOPANKAKA SAHAKARI BANK LTD., SOPANKAKA BHAVAN, 1039, SHUKRAWAR PETH, OPP: PMC REGIONAL OFFICE, TILAK ROAD, PUNE 411 002. PAN : AAAAS5435L. . / APPELLANT V/S THE DY.COMMISSIONER OF INCOME TAX, WARD 1(3), PUNE. . / RESPONDENT ASSESSEE BY : MS. MAYURI KULKARNI REVENUE BY : SHRI HOUSHANG BOMAN IRANI. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 2, PUNE DATED 25.1 0.2015 FOR THE ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RE CORD ARE AS UNDER :- ASSESSEE IS A CO-OPERATIVE BANK REGISTERED UNDER THE MAHARASHTRA STATE CO-OPERATIVE SOCIETIES ACT AND BANKIN G REGULATION ACT WITH THE R.B.I. ACT. THE ASSESSEE FILED ITS RETURN OF INC OME FOR A.Y. / DATE OF HEARING : 20.12.2019 / DATE OF PRONOUNCEMENT: 20.12.2019 2 2012-13 ON 28.09.2012 DECLARING TOTAL INCOME OF RS.4,30,43,8 59/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSES SMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 12.02.2015 A ND THE TOTAL INCOME WAS DETERMINED AT RS.5,29,79,140/-. AGGRIEVED BY T HE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DATED 25.10.2015 (IN APPEAL NO.PN/CIT(A)-2/DCIT CIR.5/PN/605/2014- 15) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY TH E ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISE D THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A)-2, PUNE ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE OF RS.35,22,475/- (BEING 7.50% OF THE TOTAL INCOME) U/S 36(1)(VIIA) OF THE ITA, 1961 MADE BY LEARNED DC IT, CIRCLE 5, PUNE (HEREINAFTER REFERRED TO AS THE LEARNED AO). 2. THE LEARNED CIT(A)-2 AND THE LEARNED AO ERRED IN LAW AND ON FACTS IN HOLDING THAT, PROVISION OF SECTION 36(1)(VIIA) OF T HE ITA, 1961 IS APPLICABLE ONLY IF ADVANCES ARE MADE BY RURAL BRANC HES OF A BANK. LEARNED CIT(A)-2 OUGHT TO HAVE APPRECIATED THE FACT THAT THERE ARE TWO COMPONENTS OF DEDUCTION U/S 36(1)(VIIA) OF THE ITA, 1961. 3. BOTH THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGE THER. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTIC ED THAT ASSESSEE HAD CLAIMED DEDUCTION OF RS.35,22,475/- U/S 36(1)(V IIA) OF THE ACT. AO NOTICED THAT ASSESSEE WAS NOT HAVING ANY RURAL ADVANCES AND HENCE, THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 36(1)(VIIA) OF THE ACT. HE AFTER RELYING ON THE DECISION OF HONBLE APE X COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD., VS. CIT REPORTED IN 343 ITR 270 (SC) HELD THAT THE CLAIM OF DEDUCTION U/S 36(1)(VIIA) OF THE AC T CANNOT BE ALLOWED TO ASSESSEE AND ACCORDINGLY DENIED THE CLAIM. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.C IT(A), WHO UPHELD THE ORDER OF AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW BEFORE US. 3 5. BEFORE US, LD.A.R. AT THE OUTSET SUBMITTED THAT THE ISS UE IS COVERED IN ASSESSEES FAVOUR BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2013-14 IN ITA NO.1600/PUN/2017 VIDE ORDER DATED 20.08.2019 AS IDENTICAL ISSUE WAS DECIDED BY THE ITAT IN A.Y . 2013- 14. SHE POINTED TO THE SIMILARITIES ON THE GROUND RAISED IN A.Y. 2013- 14 AND THE FINDINGS OF THE TRIBUNAL ON THE ISSUE. SHE SUB MITTED THAT SINCE THE FACTS OF THE CASE IN THE YEAR UNDER CONSIDERAT ION ARE IDENTICAL TO THAT OF A.Y. 2013-14, THEREFORE FOLLOWING THE ORDER OF T RIBUNAL FOR A.Y. 2013-14 IN ASSESSEES OWN CASE, THE CLAIM OF THE ASSE SSEE BE ALLOWED. 6. LD. D.R. ON THE OTHER HAND PLAING RELIANCE ON THE DECISION IN THE CASE OF CATHOLIC SYRIAN BANK LTD., VS. CIT (SUPRA) AND CB DT CIRCULAR NO.464 DATED 18.07.1986 SUBMITTED THAT AO WAS FULLY JUS TIFIED IN DENYING THE CLAIM OF DEDUCTION. 7. LD.A.R. IN THE REJOINDER SUBMITTED THAT WHILE DECIDING THE ISSUE IN A.Y. 2013-14, THE CO-ORDINATE BENCH OF THE TRIBUNAL HAD FOLLOWED THE DECISION OF TRIBUNAL IN THE CASE OF BHAGINI NIVEDITA SAHA KARI BANK LTD., VS. DCIT REPORTED IN 100 TAXMANN.CO 375 (PUNE-TRIB) WHEREIN THE DECISION RENDERED BY THE HONBLE APEX COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD., (SUPRA) AND THE CBDT CIRCULAR NO .464 DATED 18.07.1986 WAS ALSO CONSIDERED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPEC T TO DENIAL OF CLAIM OF DEDUCTION U/S 36(1)(VIIA) OF THE ACT. WE FIND THAT IDENT ICAL ISSUE AROSE IN ASSESSEES OWN CASE FOR A.Y. 2013-14 AND THE CO- ORDINATE BENCH OF THE TRIBUNAL BY FOLLOWING THE DECISION OF TH E 4 TRIBUNAL IN THE CASE OF BHAGINI NIVEDITA SAHAKARI BANK LTD., (S UPRA) HAD DECIDED THE ISSUE IN ASSESSEES FAVOUR BY OBSERVING AS UNDER : 7. WE FIND THAT SIMILAR ISSUE OF CLAIM OF DEDUCTION U/S. 36(1)(VIIA) OF THE ACT IN THE ABSENCE OF ANY RURAL BRANCHES, AROSE BEF ORE THE TRIBUNAL IN BHAGINI NIVEDITA SAHAKARI BANK LTD. VS. DEPUTY COMM ISSIONER OF INCOME TAX (SUPRA) AND RELYING ON THE DECISION OF H ONBLE KERALA HIGH COURT IN THE CASE OF THE KODUNGALLUR TOWN CO-OP. BA NK LTD. VS. ACIT IN ITA NO. 37 OF 2013 VIDE JUDGMENT DATED 03.04.2014 A ND THE AMENDED PROVISIONS OF THE ACT, THE ISSUE WAS CONSIDERED AND THE ASSESSEE WAS HELD TO BE ENTITLED TO THE AFORESAID CLAIM OF DEDUC TION U/S. 36(1)(VIIA) OF THE ACT. THE FINDINGS OF TRIBUNAL ARE IN PARA 14 TO 27, WHICH READS AS UNDER : 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGA INST CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT. UND ER THE SAID SECTION, DEDUCTION IS ALLOWABLE ON ACCOUNT OF PROVI SION FOR BAD AND DOUBTFUL DEBTS. IN OTHER WORDS, DEDUCTION COULD BE CLAIMED IN RESPECT OF BAD AND DOUBTFUL DEBTS SUBJECT TO THE TERMS AND CONDITIONS WHICH ARE PROVIDED IN THE ACT ITSELF. EX PLANATION TO SECTION 36 OF THE ACT DEFINES THE TERMS USED IN SUB -CLAUSE (A) OF CLAUSE (VII), WHEREIN IT WAS DEFINED AS NON-SCHEDUL ED BANKS, RURAL BRANCHES, CO-OPERATIVE BANKS AND SCHEDULED BA NKS. THE ASSESSEE BEFORE US IS A CO-OPERATIVE BANK. IN THE I NITIAL YEARS, CO- OPERATIVE BANKS WERE ENTITLED TO THE BENEFIT OF DED UCTION UNDER SECTION 80P OF THE ACT. HOWEVER, THE SAID DEDUCTION HAS BEEN WITHDRAWN BY THE FINANCE ACT, 2007 W.E.F. 01.04.200 7. THEREAFTER, THE LEGISLATURE HAS EXTENDED THE BENEFI T OF SECTION 36(1)(VIIA) OF THE ACT TO CO-OPERATIVE BANKS ALSO. INITIALLY, ONLY SCHEDULED BANKS WERE ENTITLED TO THE AFORESAID DEDU CTION BUT W.E.F. 01.04.2007, THE BENEFIT HAS BEEN EXTENDED TO CO-OPERATIVE BANKS AND THEY ARE ENTITLED TO CLAIM THE DEDUCTION ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS, SUBJECT TO TH E CONDITION THAT PROVISION TO THAT EXTENT IS MADE IN THE BOOKS OF AC COUNT. SUB- CLAUSE (A) REFERS TO DEDUCTION OF AN AMOUNT NOT EXC EEDING 7.5% OF TOTAL INCOME, BEFORE ALLOWING ANY DEDUCTION UNDER T HE CHAPTER VI- A AND SECONDLY, IT ALSO REFERS TO A DEDUCTION OF AN AMOUNT NOT EXCEEDING 10% OF AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES OF SUCH BANKS, WHICH HAVE BEEN COMPUTED IN PRESCRIBED MANNER. 15. THE CBDT VIDE CIRCULAR NO.464, DATED 18.07.1986 HAD CLARIFIED THE POSITION FOR BAD AND DOUBTFUL DEBTS M ADE BY THE BANKS THAT UNDER THE EXISTING PROVISIONS INSERTED B Y FINANCE ACT, 1979 PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY SC HEDULED OR NON-SCHEDULED INDIAN BANK WAS ALLOWED AS DEDUCTION WITHIN PRESCRIBED LIMITS. THE LIMIT PRESCRIBED AT THE RELEVA NT TIME WAS 10% OF TOTAL INCOME OR 2% OF AGGREGATE AVERAGE ADVA NCES MADE BY THE RURAL BRANCHES OF SUCH BANKS, WHICHEVER WAS HIGHER. THERE WAS REPRESENTATION TO THE GOVERNMENT THAT FOR EIGN BANKS WERE NOT ENTITLED TO ANY SUCH DEDUCTION AND FURTHER IT WAS ALSO FELT THAT EXISTING CEILING AT THE RELEVANT TIME, SH OULD BE MODIFIED. ACCORDINGLY, BY AMENDING ACT, THE DEDUCTION PRESENT LY AVAILABLE UNDER SECTION 36(1)(VII) OF THE ACT WAS SPLIT INTO TWO SEPARATE PROVISIONS. ONE OF THESE LIMBS WAS THE DEDUCTION TO AN AMOUNT NOT EXCEEDING 2% OF AGGREGATE AVERAGE ADVANCES MADE TO BY RURAL BRANCHES OF THE BANK CONCERNED; IN THIS REGAR D, IT WAS CLARIFIED THAT FOREIGN BANKS DO NOT HAVE RURAL BRAN CHES, HENCE 5 THIS AMENDMENT WOULD NOT BE RELEVANT IN THE CASE OF FOREIGN BANKS. THE CIRCULAR FURTHER PROVIDED THAT THE OTHER PROVISIONS SECURE THAT A FURTHER DEDUCTION SHALL BE ALLOWED IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY ALL BA NKS, NOT JUST THE BANKS INCORPORATED IN INDIA, LIMITED TO 5% OF TO TAL INCOME. THE CIRCULAR THEN CONCLUDED BY SAYING THAT THIS WILL IM PLY THAT ALL SCHEDULED OR NON-SCHEDULED BANKS HAVING RURAL BRANC HES WOULD BE ALLOWED THE DEDUCTION UPTO 2 PERCENT OF THE AGGR EGATE AVERAGE ADVANCES MADE BY SUCH BRANCHES AND A FURTHER DEDUCT ION UPTO 5 PERCENT OF THEIR TOTAL INCOME IN RESPECT OF PROVISI ON FOR BAD AND DOUBTFUL DEBTS. IN OTHER WORDS, THE CIRCULAR VERY C LEARLY PROVIDED THAT TWO TYPES OF DEDUCTIONS HAVE TO BE ALLOWED TO SCHEDULED OR NONSCHEDULED BANKS I.E. IN CASE THEY HAD RURAL BRAN CHES, THEN DEDUCTION OF 2% OF AGGREGATE AVERAGE ADVANCES WAS T O BE ALLOWED AND IN ADDITION TO THAT DEDUCTION UPTO 5% O F THEIR TOTAL INCOME IN RESPECT OF PROVISION FOR BAD AND DOUBTFUL DEBTS WAS TO BE ALLOWED. THE SECOND PART OF DEDUCTION WAS ALSO M ADE AVAILABLE TO FOREIGN BANKS, WHICH ADMITTEDLY WOULD NEVER HAVE RURAL BRANCHES IN INDIA. IN SUCH SCENARIO, THE INTE NT OF THE LEGISLATURE WAS TO PROVIDE DEDUCTION TO THE SCHEDUL ED OR NON- SCHEDULED BANKS; FIRST ON ACCOUNT OF RURAL ADVANCES AND SECOND ON ACCOUNT OF TOTAL INCOME OTHER THAN THE RURAL ADV ANCES AND TWO DIFFERENT TYPES OF DEDUCTIONS WERE PROVIDED. IT MAY BE CLARIFIED HEREIN ITSELF THAT THE CIRCULAR WHICH IS DATED 18.0 7.1986 WAS IN RESPECT OF SCHEDULED OR NON-SCHEDULED BANKS AND EXT ENDING TO THE FOREIGN BANKS BUT THE CO-OPERATIVE BANKS WERE N OT INCLUDED AT THAT RELEVANT POINT FOR THE AFORESAID DEDUCTION. IT WAS ONLY W.E.F. 01.04.12007, AMENDMENT WAS MADE TO SECTION 3 6(1)(VIIA) OF THE ACT IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS. IT WAS PROVIDED THAT SCHEDULED BANKS OR NON-SCHEDUL ED BANKS, ALL CO-OPERATIVE BANKS OTHER THAN PRIMARY AGRICULTU RAL CREDIT SOCIETY OR PRIMARY CO-OPERATIVE AGRICULTURAL AND RU RAL DEVELOPMENT BANKS, DEDUCTION WAS ALLOWABLE TO THE E XTENT OF AN AMOUNT NOT EXCEEDING 7.5% OF TOTAL INCOME COMPUTED BEFORE MAKING ANY DEDUCTION UNDER CHAPTER VI-A AND AN AMOU NT NOT EXCEEDING 10% OF AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES OF SUCH BANKS, COMPUTED IN THE PRESCRIBED MANNER. THE SCOPE OF SAID SECTION HAS THUS BEEN ENLARGED W.E.F. 01.04.2007 AND DEDUCTION IS AVAILABLE NOT ONLY TO THE SCHEDULE D OR NON- SCHEDULED BANKS BUT TO THE CO-OPERATIVE BANKS ALSO I.E. THE ASSESSEE BEFORE US. 16. THE ISSUE WHICH ARISES BEFORE US IS IN RELATION TO CO-OPERATIVE BANKS WHICH DO NOT HAVE ANY RURAL BRANCHES. THE QUE STION WHICH IS TO BE ADDRESSED IS WHETHER IN THE ABSENCE OF ANY RURAL BRANCHES, CAN THE BENEFIT OF DEDUCTION BE ALLOWED U NDER SECTION 36(1)(VIIA) OF THE ACT AND THAT ALSO TO THE EXTENT OF 7.5% OF TOTAL INCOME. 17. WE FIND THAT THIS ISSUE HAS BEEN ELABORATELY CO NSIDERED AND ADDRESSED BY THE HONBLE HIGH COURT OF KERALA IN TH E KODUNGALLUR TOWN CO-OP. BANK LTD. VS. ACIT (SUPRA) AND IT HAS BEEN HELD AS UNDER:- 9. ADMITTEDLY, APPELLANTS/ASSESSEES ARE COOPERATIV E BANKS. WITH INTRODUCTION OF FINANCE ACT OF 2007, CO MING INTO EFFECT FROM 01.04.2007, ONE HAS TO UNDERSTAND WHAT WAS THE POSITION PRIOR TO 1.4.2007 AND AFTER 1.4.20 07. DURING THE RELEVANT ASSESSMENT YEAR, ADMITTEDLY THE APPELLANTS/ASSESSEES WERE NOT ENTITLED FOR ANY DEDU CTION PROVIDED UNDER SECTION 80P OF THE ACT. PRIOR TO 1.4 .2007, 6 THEY WERE ENJOYING THE BENEFITS PROVIDED UNDER SECT ION 80P. WITH THE INTRODUCTION OF FINANCE ACT 2007 WITH EFFECT FROM 1.4.2007, THEY COULD CLAIM DEDUCTIONS AS PROVI DED UNDER SECTION 36(1) OF THE ACT. WE ARE CONCERNED WI TH SUBCLAUSE(A) OF CLAUSE (VIIA) TO SECTION36(1). PRIO R TO FINANCE ACT OF 2007, COOPERATIVE BANK WAS NOT INCLU DED IN SUB-CLAUSE (A) SO FAR AS PROVISIONS FOR BAD AND DOU BTFUL DEBTS. WITH EFFECT FROM 1.4.2007, COOPERATIVE BANK WAS INCLUDED UNDER SUB CLAUSE (A) OF CLAUSE (VIIA) OF S ECTION 36(1). IT IS FURTHER CLARIFIED THAT ONLY SUCH COOPE RATIVE BANK OTHER THAN A PRIMARY AGRICULTURE CREDIT SOCIETY, ET C., IS INCLUDED IN SUB CLAUSE (A) OF CLAUSE (VIIA). THE PR OVISION IS A BENEFICIAL ONE. NO DOUBT, PLAIN READING OF MAIN S ECTION 36(1) (VIIA)(A) AND EXPLANATION UNDER SAID SECTION PRESENT CERTAIN DIFFICULTIES, BUT SITUATION IS NOT WITHOUT POSSIBILITIES. THE OBJECT AND INTENTION OF THE LEGI SLATURE IS TO BE UNDERSTOOD BY HARMONIOUS CONSTRUCTION OF THE PROVISIONS. THE POLICY WAS TO INCLUDE COOPERATIVE B ANKS AS WELL, AS THEY COULD NOT TAKE SHELTER UNDER SECTION 80P OF THE INCOME TAX ACT ANY MORE. BY RESTRICTING THE SCO PE OF THE PROVISIONS, THE VERY PURPOSE OF INCLUSION OF CO OPERATIVE BANK WOULD BE LOST. SUB CLAUSE (A) CONSISTS OF TWO TYPES OF DEDUCTION. ONE REFERS TO DEDUCTION OF AN AMOUNT NOT EXCEEDING 7.5% OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA). SECTION ONE REFERS TO DEDUCTION OF AN AMOUNT NOT EXCEEDING10% OF THE AGGREGATE AVERAGE ADVANCES MADE BY RULE BRANCHES OF SUCH BANK WHILE COMPUTING IN TH E PRESCRIBED MANNER. SO FAR AS BENEFIT OF 7.5% OF THE TOTAL INCOME, THERE IS NO CONDITION THAT IT SHOULD BE IN RESPECT OF ANY RURAL BRANCH. ALL TYPES OF BANKS DESCRIBED UNDE R SUB CLAQUE (A) OF CLAUSE (VIIA) ARE ENTITLED TO SEEK DE DUCTION OF AN AMOUNT OF EXCEEDING 7.5% OF THE TOTAL INCOME. ON LY CONDITION IS THERE SHOULD BE A PROVISION FOR BAD AN D DOUBTFUL DEBTS.. 10. 11. 12. ..SO FAR AS SUB-CLAUSE (A) OF CLAUSE (VIIA) TO SECTION 36(1), TWO TYPES OF DEDUCTIONS ARE PROVIDED TO NON- SCHEDULED BANK, A SCHEDULED BANK AND A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL SOCIETY, ETC. IT IS TO BE NOTED THAT APPELLANTS/ASSESSEES ARE NOT PRIMARY AGRICULTURAL CREDIT CO-OPERATIVE SOCIETY OR OTHER K IND OF BANK SO AS TO GO OUT OF THE DEFINITION OF CO-OPERAT IVE BANK UNDER SUB-CLAUSE (A) TO CLAUSE (VIIA) OF SECTION 36 (1). NO DOUBT, EXPLANATION (IA) TO SECTION 36(1)(VIIA) DEFI NES WHAT IS A RURAL BRANCH. IT IS WITH REFERENCE TO A PLACE AND CERTAIN NUMBER OF POPULATION. IT REFERS TO BRANCH OF A SCHE DULED BANK OR A NONSCHEDULED BANK. APPARENTLY, WE DO NOT FIND THE TERM CO-OPERATIVE BANK. SECTION 5(CCI) OF BANKI NG REGULATION ACT THOUGH HAS BROUGHT IN DEFINITION OF CO- OPERATIVE BANK, VIRTUALLY EVERY BANK WHICH IS NOT A SCHEDULED BANK WOULD FALL UNDER THE DEFINITION OF N ON- SCHEDULED BANK. READING OF DEFINITION OF NON-SCHEDU LE BANK ALONG WITH MEANING OF RURAL BRANCH UNDER EXPLANATION TO SECTION 36(1) OF THE ACT, CLEARLY IN DICATE THAT CO-OPERATIVE BANK ALSO FALLS UNDER THE CATEGOR Y OF NON- SCHEDULE BANK FOR THE PURPOSE OF THIS SECTION. THER EFORE, 7 READING OF ENTIRE SECTION 36(1)(VIIA)(A) ALONG WITH EXPLANATION WOULD MEAN TWO KINDS OF DEDUCTIONS REFE RRED TO IN THE SECTION WILL BE ALLOWED TO ALL THOSE BANK S ONLY IF THEY SATISFY THE TERMS AND CONDITIONS REFERRED TO I N THE PROVISION. 13. THEREFORE, WE ARE OF THE OPINION, AUTHORITIES B ELOW WERE JUSTIFIED IN OPINING THAT BENEFIT OF DEDUCTION OF 10% OF THE AGGREGATE AVERAGE ADVANCES IS APPLICABLE TO CO- OPERATIVE BANK ALSO PROVIDED THEIR RURAL BRANCHES H AVE ADVANCED SUCH AMOUNTS. SUCH RURAL BRANCH MEANS A BRANCH AS EXPLAINED UNDER EXPLANATION (IA), AS OPIN ED IN THE DECISION OF LORD KRISHNA BANKS CASE (SUPRA). (UNDERLINE PROVIDED BY US FOR EMPHASIS) 18. THE HONBLE HIGH COURT OF KERALA THUS, LAID DOW N THE PROPOSITION THAT EXISTING CO-OPERATIVE BANKS WHICH DO NOT ENJOY THE BENEFIT OF DEDUCTION PROVIDED UNDER SECTION 80P OF THE ACT AFT ER 01.04.2007 BUT WOULD BE ENTITLED TO THE BENEFIT PROVIDED UNDER SEC TION 36(1)(VIIA) OF THE ACT, THEN THE PROVISIONS HAVE TO BE UNDERSTOOD TAKI NG INTO CONSIDERATION THE AMENDMENT MADE BY THE LEGISLATURE. THE HONBLE HIGH COURT HAS CLEARLY NOTED THE FACT THAT FOR AVAILING THE BENEFI T OF 7.5% OF TOTAL INCOME, THERE IS NO CONDITION THAT IT SHOULD BE IN RESPECT OF ANY RURAL BRANCHES. IT HAS FURTHER OBSERVED THAT ALL TYPES OF BANKS DESCRI BED UNDER SUB-CLAUSE (A) OF CLAUSE (VIIA) ARE ENTITLED TO SEEK DEDUCTION OF AN AMOUNT NOT EXCEEDING 7.5% OF TOTAL INCOME AND ONLY CONDITION I S THAT THERE SHOULD BE PROVISION FOR BAD AND DOUBTFUL DEBTS IN THE BOOK S OF ACCOUNT. THE SECOND LINKED ISSUE WHICH WAS CONSIDERED WAS WHETHE R CO-OPERATIVE BANK IN RESPECT OF HAVING RURAL BRANCHES WAS ENTITL ED TO HAVE THE BENEFIT OF SECOND PART OF SECTION 36(1)(VIIA)(A) OF THE ACT. THE HONBLE HIGH COURT CLEARLY HELD THAT READING THE DEFINITION OF NON-SCHEDULED BANK ALONG WITH MEANING OF RURAL BRANCH UNDER EXPLA NATION TO SECTION 36(1) OF THE ACT CLEARLY INDICATE THAT COOPERATIVE BANK ALSO FALLS UNDER THE CATEGORY OF NON-SCHEDULED BANK FOR THE PURPOSE OF SAID SECTION. IT FURTHER GOES ON TO HOLD THAT READING THE ENTIRE SEC TION ALONG WITH EXPLANATION WOULD MEAN TWO KINDS OF DEDUCTIONS REFE RRED TO IN SECTION WOULD BE ALLOWED TO ALL THOSE BANKS ONLY IF THEY SA TISFY THE TERMS AND CONDITIONS REFERRED TO IN THE PROVISION. SINCE THE ASSESSEE BANK IN THE SAID CASE DID NOT HAVE ANY RURAL BRANCHES, IT WAS H ELD THAT THE BENEFIT OF DEDUCTION OF 10% OF AGGREGATE AVERAGE ADVANCES W AS NOT AVAILABLE TO THEM. HENCE, APPEAL OF REVENUE WAS DECIDED IN THEIR FAVOUR I.E. ON THE SECOND ISSUE OF DEDUCTION IN RESPECT OF RURAL BRANC HES. 19. THE COCHIN BENCH OF TRIBUNAL IN A SUBSEQUENT DE CISION RELATING TO ASSESSMENT YEAR 2010-11 IN THE CASE OF KODUNGALLUR TOWN CO-OP. BANK LTD. VS. ACIT (SUPRA) AGAIN DECIDED THE AFORESAID I SSUE OF CLAIM OF DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT, ESPE CIALLY IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CAT HOLIC SYRIAN BANK LTD. VS. CIT (SUPRA) RELIED UPON BY THE COMMISSIONER WHILE INVOKING REVISIONARY JURISDICTION UNDER SECTION 263 OF THE A CT. THE TRIBUNAL HELD THAT THE HON'BLE SUPREME COURT HAD CONSIDERED THE I SSUE WHETHER THE DEDUCTION WAS ALLOWABLE TO SCHEDULED BANKS UNDER SE CTION 36(1)(VII) OF THE ACT IN RESPECT OF BAD DEBTS WRITTEN OFF AND HAD HELD THAT THE SAME SHALL BE LIMITED TO THE EXTENT THE SAID DEBTS CREDI T BALANCE IN THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT MADE U NDER CLAUSE (VIIA). IT WAS FURTHER OBSERVED BY THE TRIBUNAL THAT THE AS SESSMENTS IN THE SAID CASE RELATED TO ASSESSMENT YEAR 2002-03 AND PRIOR Y EARS AND THE APEX COURT HAD CONSIDERED THE LAW WITH REFERENCE TO THE FACT SITUATION; WHEREAS THE ASSESSEE BEFORE THEM WAS CO-OPERATIVE B ANK, WHICH WAS INCLUDED IN THE CATEGORY OF BENEFICIARIES UNDER CLA USE (VIIA) BY THE 8 FINANCE ACT, 2007 W.E.F. 01.04.2007. THE TRIBUNAL F URTHER GOES ON TO HOLD THAT THE DEDUCTION PROVIDED IN THE FIRST PART OF CLAUSE (VIIA)(A) OF 7.5% OF TOTAL INCOME, EITHER TO ENJOYED BY THE ASSE SSEE SINCE INCLUSION OF CO-OPERATIVE BANKS WITHIN AMBIT OF CLAUSE (VIIA)(A) BY THE FINANCE ACT, 2007 IS UNCONCERNED WITH THE ADVANCES MADE BY RURAL BRANCHES OF BANKS. FURTHER, REFERRING TO PARA 27 OF THE JUDGMEN T OF APEX COURT, THE TRIBUNAL HELD AS UNDER:- 7..THE DEDUCTION PROVIDED IN THE FIRST PART OF CL AUSE (VIIA)(A) OF 7.5% OF THE TOTAL INCOME, HITHERTO ENJOYED BY THE A SSESSEE SINCE THE INCLUSION OF COOPERATIVE BANKS WITHIN THE AMBIT OF CLAUSE (VIIA)(A) BY FINANCE ACT, 2007, IS UNCONCERNED WITH ADVANCES MADE BY THE RURAL BRANCHES OF THE BANKS. A READING OF PARAGRAPH 27 OF THE JUDGMENT OF THE HONBLE APEX COURT WOULD SHOW THAT WHILE MAKING THE OBSERVATION 'INDISPUTABLY, CLAUSE (VIIA)(A) APPLIES ONLY TO RURAL ADVANCES, THE HONBLE APEX C OURT WAS EXAMINING THE ISSUE IF THERE WOULD BE DOUBLE DEDUCT ION OF ACTUAL BAD DEBTS WRITTEN OFF UNDER CLAUSE (VII) AND DEDUCT ION IN RESPECT OF RURAL ADVANCES PROVIDED UNDER THE SECOND PART OF CLAUSE (VIIA). THE HONBLE APEX COURT HAS NOT HELD THAT THE FIRST PART OF CLAUSE (VIIA) PROVIDING FOR DEDUCTION OF 7.5% OF THE TOTAL INCOME APPLIES ONLY TO RURAL ADVANCES. (UNDERLINE PROVIDED BY US FOR EMPHASIS) 20. THEN, REFERENCE WAS MADE TO THE DECISION OF JUR ISDICTIONAL HIGH COURT I.E. HONBLE HIGH COURT OF KERALA IN THE KODU NGALLUR TOWN CO-OP. BANK LTD. VS. ACIT (SUPRA), JUDGMENT DATED 03.04.20 14 AND IT WAS HELD THAT INVOKING OF JURISDICTION BY THE COMMISSIONER W AS HELD TO BE NOT JUSTIFIED, RELYING ON THE RATIO LAID DOWN BY THE AP EX COURT IN CATHOLIC SYRIAN BANK LTD., WHICH IS DATED 17.02.2012. 21. THE BANGALORE BENCH OF TRIBUNAL IN DCIT VS. ING VYSYA BANK LTD. (2014) 149 ITD 611 (BANGALORE) VIDE ITS ORDER DATED 25.10.2013 HAD HELD VIDE PARA 32 THAT THE OBJECT OF SUBSTITUTION O F CLAUSE (VIIA) AS EXPLAINED IN PARA 5 OF CBDT CIRCULAR NO.464, DATED 18.07.1986 WAS TO GIVE SEPARATE DEDUCTION. THE FIRST WAS IN RESPECT O F RURAL ADVANCES AND SECOND FOR PROVISION FOR BAD AND DOUBTFUL DEBTS IN GENERAL. 22. SIMILAR PROPOSITION HAS BEEN LAID DOWN BY THE H YDERABAD BENCH OF TRIBUNAL IN STATE BANK OF HYDERABAD VS. DCIT (2015) 63 TAXMANN.COM 322 (HYDERABAD-TRIB.), ORDER DATED 14.08.2015 AND A LSO BY VISAKHAPATNAM BENCH OF TRIBUNAL IN ACIT VS. CHAITAN YA GODAVARI GRAMEENA BANK (SUPRA), JUDGMENT DATED 04.05.2016). 23. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE HAS POINTED OUT BEFORE US THAT NO OTHER DECISION OF ANY HONBLE HIGH COURT, WHETHER IN FAVOUR OR CONTRARY, IS AVAILABLE. THE LEARNED DE PARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS NOT POINTED OUT ANY CONTRARY DECISION OR ANY DECISION OF JURISDICTIONAL HIGH COU RT ON THE ISSUE. THE POSITION AS SETTLED BY THE HONBLE HIGH COURT IS TH AT DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT IS AVAILABLE TO NON- SCHEDULED BANK I.E. CO- OPERATIVE BANK @ 7.5% OF TOTAL INCOME OR IN CASE TH ERE ARE RURAL BRANCHES, THEN FURTHER DEDUCTION OF 10% OF AGGREGAT E AVERAGE ADVANCES AS PER PRESCRIBED PROCEDURE. 24. THE ISSUE BEFORE US IS SIMILAR TO THE ISSUE BEF ORE THE HONBLE HIGH COURT OF KERALA AND THOUGH THE DECISION IS BY NON-J URISDICTIONAL HIGH COURT BUT IN THE ABSENCE OF ANY DECISION TO THE CON TRARY BY THE JURISDICTIONAL HIGH COURT, THE DECISION OF HIGH COU RT IS BINDING UPON THE 9 TRIBUNAL. IN ANY CASE, NO OTHER DECISION OF ANY HIG H COURT HAS BEEN BROUGHT TO OUR KNOWLEDGE CONTRADICTING OR FAVOURING THE VIEW TAKEN BY THE HONBLE HIGH COURT OF KERALA. IN SUCH CIRCUMSTA NCES, WE ARE GUIDED BY THE PROPOSITION LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. SMT. GODAVARIDEVI SARAF (SUPRA), WHEREIN IT WAS HELD THAT UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER COMPETENT H IGH COURT, WHICH IS BINDING ON TRIBUNAL IN THE STATE OF BOMBAY, IT HAS TO PROCEED ON THE FOOTING WITH THE LAW DECLARED BY THE HIGH COURT, TH OUGH OF ANOTHER STATE, IS THE FINAL LAW OF THE LAND. IN THE FACTS B EFORE THE HONBLE BOMBAY HIGH COURT, THE TRIBUNAL HAD DECIDED THE ISS UE RELYING ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF MADRAS , WHICH WAS NOT JURISDICTIONAL HIGH COURT. HOWEVER, DISMISSING THE APPEAL FILED BY REVENUE, THE HONBLE BOMBAY HIGH COURT FOUND FAVOUR WITH THE VIEW TAKEN BY TRIBUNAL RELYING ON THE LAW DECLARED BY TH E HONBLE HIGH COURT THOUGH OF ANOTHER STATE, WHICH WAS FINAL LAW OF THE LAND. 25. THE PUNE BENCH OF TRIBUNAL IN ACIT VS. AURANGAB AD HOLIDAY RESORTS (P) LTD. (SUPRA) HAS REFERRED TO THE AFORES AID RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS . SMT. GODAVARIDEVI SARAF (SUPRA) AND HELD AS UNDER:- 11. LET US NOW TAKE A LOOK AT THE HON'BLE JURISDIC TIONAL HIGH COURT'S JUDGMENT IN THE CASE OF GODAVARI DEVI SARAF (SUPRA). IN THIS CASE, QUESTION BEFORE. THEIR LORDSHIPS WAS AS FOLLOWS: WHETHER, AN THE FACTS AND CIRCUMSTANCES OF THE CAS E, AND IN VIEW OF DECISION IN THE CASE OF A.M. SALI MARICA R 90 ITR 116, THE PENALTY IMPOSED ON THE ASSESSEE UNDER SECT ION 140A(3) WAS LEGAL? 12. THE SPECIFIC QUESTION BEFORE. THEIR LORDSHIPS W AS WHETHER THE TRIBUNAL, WHILE SITTING IN BOMBAY, WAS JUSTIFIED IN FOLLOWING THE MADRAS HIGH COURT DECISION HOLDING THE RELEVANT SECTION AS UNCONSTITUTIONAL HON'BLE HIGH COURT CONCLUDED AS FOLLOWS: IT SHOULD NOT BE OVERLOOKED THAT INCOME TAX ACT IS AN ALL INDIA STATUTE, AND IF A TRIBUNAL IN MADRAS HAS TO PROCEED ON THE FOOTING THAT SECTION 140A(3) WAS NON EXISTENT, THE ORDER OF PENALTY UNDER THAT SECTION CANNOT BE IMPOSED BY ANY AUTHORITY UND ER THE ACT. UNTIL A CONTRARY DECISION IS GIVEN BY ANY OTHER COM PETENT HIGH COURT, WHICH IS BINDING ON THE TRIBUNAL IN THE STAT E OF BOMBAY (AS IT THEN WAS), IT HAS TO PROCEED ON THE FOOTING THAT THE LAW DECLARED BY THE HIGH COURT, THOUGH OF ANOTHER STATE , IS THE FINAL LAW OF THE LAND...AN AUTHORITY LIKE TRIBUNAL HAS TO RESPECT THE LAW LAID DOWN BY THE HIGH COURT, THOUGH OF A DIFFERENT STATE, SO LONG AS THERE IS NO CONTRARY DECISION ON THAT ISSUE BY A NY OTHER HIGH COURT.... 26. THE TRIBUNAL HAD ALSO REFERRED TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS. THANA ELECTRICITY SUPPLY LTD. (1994) 206 ITR 727 (BOM), WHEREIN THE LIMITED QUESTION WAS WHETHER OR N OT THE DECISION OF ONE OF THE HIGH COURT WAS BINDING ON ANOTHER HIGH C OURT. THE TRIBUNAL IN THIS REGARD OBSERVED AS UNDER:- 10. IN THIS LIGHT, AND BEARING IN MIND THE FACT TH AT LIMITED QUESTION BEFORE. THEIR LORDSHIPS WAS WHETHER OR NOT DECISION OF ONE OF THE HIGH COURT'S IS BINDING ON ANOTHER HIGH COURT, IT WOULD APPEAR TO US THAT RATIO DECIDENDI IN THANA ELECTRIC ITY CO. LTD. (SUPRA), IS ON THE NON BINDING NATURE OF A HIGH COU RT'S JUDGMENT ON ANOTHER HIGH COURT. IN ANY CASE, THIS DIVISION B ENCH DID NOT, 10 AND AS STATED IN THIS JUDGMENT ITSELF, COULD NOT HA VE DIFFERED WITH ANOTHER DIVISION BENCH OF THE SOME STRENGTH IN THE CASE OF GODAVARI DEVI SARAF (SUPRA). THEREFORE, IT CANNOT B E OPEN TO A SUBORDINATE TRIBUNAL LIKE US TO DISREGARD ANY OF TH E JUDGMENTS OF THE HON'BLE BOMBAY HIGH COURT, WHETHER IN THE CASE OF THANA ELECTRICITY CO. LTD. (SUPRA) OR IN THE CASE OF GODA VARI DEVI SARAF. IT IS INDEED OUR DUTY TO LOYALLY EXTEND UTMOST RESP ECT AND REVERENCE TO THE HON'BLE HIGH COURT, AND TO READ TH ESE TWO JUDGMENTS BY THE DIVISION BENCHES OF EQUAL STRENGTH OF THE HON'BLE JURISDICTION HIGH COURT, I.E. IN THE CASE O F THANA ELECTRICITY CO. LTD. (SUPRA) AND GODAVARI DEVI SARA F (SUPRA), IN A HARMONIOUS MANNER. 27. THEN, ANALYZING THE TWO DECISIONS OF HONBLE BO MBAY HIGH COURT, IT WAS HELD THAT WHERE TWO INTERPRETATIONS ARE POSSIBL E; ONE IN FAVOUR OF ASSESSEE MUST BE ADOPTED, IN TURN, RELYING ON THE D ECISION OF THE HON'BLE SUPREME COURT IN CIT VS. VEGETABLE PRODUCTS LTD. (S UPRA). IT WAS ALSO NOTED THAT THERE WERE VARIOUS OTHER HIGH COURTS WHI CH WERE NOT IN FAVOUR OF VIEW TAKEN IN CIT VS. SMT. GODAVARIDEVI S ARAF (SUPRA). THE TRIBUNAL DECIDED THE ISSUE IN TURN, RELYING ON THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF GAUHATI IN SMT. BANDANA GOGOI VS. CIT & ANR. (2007) 289 ITR 28 (GAU) IN THE ABSENCE OF ANY OTHER DECISION OF ANY HIGH COURT IN OTHER STATE. IN VIEW OF THE ABOVE SAI D POSITION OF LAW, WE ARE DEPARTING FROM THE VIEW TAKEN BY PUNE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 201 0-11, WHEREIN THE ORDER IS DATED 29.05.2015 BUT DECISION OF THE HONB LE HIGH COURT OF KERALA ON THE ISSUE IS DATED 03.04.2014 WAS NEITHER RELIED UPON NOR BROUGHT TO THE KNOWLEDGE OF TRIBUNAL AND THE ISSUE WAS DECIDED AGAINST ASSESSEE. THE ISSUE RAISED IN THE PRESENT APPEAL ST ANDS FULLY COVERED BY THE DECISION OF THE HONBLE HIGH COURT OF KERALA (SUPRA) THOUGH NOT THE JURISDICTIONAL HIGH COURT, BUT THE ONLY DECISIO N AVAILABLE ON THE SAID ISSUE SQUARELY BINDS THE TRIBUNAL AND HENCE, APPLYI NG THE SAID RATIO, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 36(1)(VIIA) OF THE ACT TO THE EXTENT OF 7.5 % OF TOTAL INCOME. THE ASSESSEE CO-OPERATIVE BANK DO NOT HAVE ANY RURAL BR ANCHES, HENCE IS NOT ENTITLED TO THE SECOND PART CLAIM OF 10% OF ADV ANCES MADE BY RURAL BRANCHES. THE DEDUCTION IS ALLOWABLE WITH A RIDER T O SATISFY THE PROVISIONS OF SAID SECTION I.E. MAKING A PROVISION TO THAT EXTENT IN THE BOOKS OF ACCOUNT. THE FIRST ISSUE WHICH IS RAISED I N THE CASE OF DIFFERENT CO-OPERATIVE BANKS STANDS DECIDED IN FAVOUR OF ASSE SSEE. 8. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDENT ICAL TO THE ISSUE BEFORE THE TRIBUNAL IN BHAGINI NIVEDITA SAHAKARI BA NK LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM THE AFORESAID DEDUCTION U/S. 36(1)(VIIA) OF THE ACT. CONSEQUENTLY , THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, ALLOWED . 9. BEFORE US, NO MATERIAL HAS BEEN PLACED BY REVENUE TO DEMONSTRATE THAT THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2013-14 (SUPRA) HAS BEEN SET ASIDE / STAYED BY HIGHER JUDICIAL FORUM. REVENUE HAS ALSO NOT POINTED OUT ANY DISTINGUISHI NG FEATURE IN THE FACTS OF THE PRESENT CASE AND IN THE CASE OF ASSE SSEES OWN CASE IN A.Y. 2013-14. WE THEREFORE, RELYING ON THE DECISION OF TH E TRIBUNAL 11 IN ASSESSEES OWN CASE IN A.Y. 2013-14 (SUPRA) AND FOR S IMILAR REASONS HOLD THAT ASSESSEE IS ENTITLED TO CLAIM THE DEDUCTION U/S 36(1)(VIIA) OF THE ACT. THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 20 TH DAY OF DECEMBER, 2019. SD/- SD/- ( PARTHA SARATHI CHAUDHURY ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 20 TH DECEMBER, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A) 2, PUNE. . PR.CIT-3, PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER , / / TRUE COPY / / -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.