The Alleppey Dist Co- Bank Ltd, Alappuzha V. The ACIT, Alappuzha

ITA 247/COCH/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8653 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 21-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Keywords: Bad and doubtful debts
• Section: 263

Judgement Text

ITA NO . 247/C/2015 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & G EORGE GEORGE.K , J M ITA NO . 247/COCH/2015 (ASST YEAR 2010 - 11 ) THE ALLEPPY DISTRICT COOP BANK LTD PALACE ROAD ALLEPPY 688 001 VS THE ASST COMMR OF INCOME TAX CIRCLE 1 ALAPUZHA ( APPELLANT) (RESPONDENT) PAN NO. AAAAT1275B ASSESSEE BY SHRI SIVADAS CHETTOOR REVENUE BY SH K P GOPAKUMAR SR DR DATE OF HEARING 11 TH MAY 2016 DATE OF PRONOUNCEMENT 18 TH , MAY 2016 OR D ER PER GEORGE GEORGE. K. J M: THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE , IS DIRECTED AGAINST THE CITS ORDER DATED 16.2.2015 PASSED U/S 263 OF THE I T ACT. THE RELEVANT ASSESSMENT YEAR IS 2010 - 11. 2 THE GROUND RAISED READ AS UNDER: 1 . THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX , KOTTAYAM UN DER SECTION 263 OF THE INCOME TAX ACT 1961 IN SO FAR AS IT IS PREJUDICIAL TO THE APPELLANT IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE . 2 . THE WHOLE ORDER IS ILLEGAL SINCE THE LEARNED COMMISSIONER HAS TAKEN THE POPULATION OF PANCHAYAT INSTEAD OF V ILLAGE RECOGNIZED AS THE PLACE OF A RURAL BRANCH BY THE HON HIGH COURT OF KERALA IN CIT V LORD ITA NO . 247/C/2015 2 KRISHNA BANK LTD 331 ITR 235 (KER) AND APPARENTLY RELIED ON BY THE CIT . 3 . IT IS SUBMITTED THAT THE WORD 'PLACE ' AS APPEAR I NG IN THE DEFINITION OF RURAL BRANCH IN EXPLANATION TO SECTION 36(VII) (A) OF THE ACT SHOULD BE INTERPRETED AS POPULATION OF A ' WARD ' FOR WHICH 2001 CENSUS FIGURES ARE PUBLISHED BY THE KERALA GOVERNMENT . IT I S RESPECTFULLY SUBMITTED THAT THE DECISION OF THE HON KERALA HIGH COURT HOLD I NG THAT 'P LACE' SHOULD BE INTERPRETED AS EQU I VALENT TO A ' VILLAGE ' IS PER I N CU R IUM IN SO FAR AS THE HON COURT PASSED THE ORDER ON THE ERRONEOUS IMPRESSION THAT CENSUS FIGURES ARE AVAILABLE FOR THE POPULATION OF A ' VILLAGE ' . IN FACT THERE ARE NO CENSUS DATA FO R A ' V ILLAGE ' AND ONLY WARD - WISE POPULATION OF A PANCHAYAT A IS AVA I LABLE AND PUBLISHED . THIS CRUCIAL ASPECT WAS NOT BROUGHT TO THE NOTICE OF THE HON COURT . 4 . IT IS SUBM IT TED THAT THE DEFINITION OF ' RURAL BRANCH ' AS CONTAINED I N EXPLANATION TO SECT I ON 36 IS NOT APPLICABLE TO ' COOPERATIVE BANK ' AND T HE APPELLANT IS A CO - OPERATIVE BANK . THE DEFINITION APPLIES ONLY TO A SCHEDULED AND NON - SCHEDULED BANK . THEREFORE THE ORDINARY MEANING OF RURAL BRANCH BE APPLIED WHILE INTERPRETING THE TERM 5 . IT I S SUBMITTED THAT THE IM PUGNED OR DER U/S 263 IS PATENTLY ILLEGAL SINCE THE SUBJECT MATTER OF REVISION IS HIGHLY DEBATABLE AND CERTAINLY TWO VIEWS ARE POSSIBLE IN THE MATTER. IT IS SETTLED LAW THAT IN SUCH CIRCUMSTANCES AN ORDER CANNOT BE SAID TO BE ERRONEOUS. 6 . THE IMPUGNED ORDER IS ILLEGAL SINCE THERE IS NOT EVEN A WHISPER ABOUT THE POPULAT ION FIGURES OF THE PLACES WHERE THE DISPUTED 19 BRANCHES ARE SITUATED AND THE BASIS OF CONCLUSION IS CLEARLY BASED ON SURMISES OR SUSPIC ION AND WITHOUT ANY ENQUIRY AS ENVISAGED IN SECTION 263 OF THE ACT . 7 . THE IMPUGNED ORDER IS ILLEGAL SINCE THE CIT OUGHT TO HAVE P[ASSED THE ORDER HIMSELF SINCE THE SECTION MANDATES THAT THE CIT HIMSELF SHOULD PASS THE ORDER IN CASES OF MODIFICATION OR ENHANCEMENT. THE SECTION GRANTS POWER TO DIRECT EH LOWER AUTHOR ITIES ONLY IN CIRCUMSTANCES WHERE THE CIT CANCELS THE ASSESSMENT AND DIRECT FRESH ASSESSMENT. 8 . IT IS SUBMITTED THAT THE ORDER IS ILLEGAL IN SO FAR AS IT RELIED ON ITA NO . 247/C/2015 3 INFORMATION CONTAINED IN A WEBSITE WHICH CANNOT BE ACCEPTED AS AUTHENTIC ESPECIALLY FOR IMPOSI NG TAX BURDEN ON THE APPELLANT. IN FACT ON A COMPARISON WITH THE ACTUAL PUBLISHED INFORMATION BY THE CENSUS DEPARTMENT IT WAS FOUND THAT WEBSITE FIGURES DO NOT MATCH. 9 . FOR THESE AMONGST OTHER GROUNDS THAT MAY BE RAISED AND EVIDENCES ADDUCED AT TE TIME OF HE ARING, IT IS PRAYED THAT THE IMPUGNED ORDER BE MODIFIED, SET ASIDE, CANCELLED OR QUASHED PRAYED ACCORDINGLY . 3 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: FOR THE RELEVANT ASSESSMENT YEAR THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 1 43(3) OF THE ACT VIDE ORDER DATED 28.3.2013 , FIXING THE TOTAL INCOME AT RS. 1,02,00,720/ - . THE CIT ISSUED NOTICE DATED 11.12.2014 U/S 263 OF THE ACT STATING THAT A SUM OF RS. 1,13,00,000/ - HAS BEEN ALLOWED AS PROVISION FOR BAD AND DOUBTFUL DEBTS BA SED ON THE LIST OF 19 RURAL BRANCHES FILED BY THE ASSESSEE. ACCORDING TO THE COMMISSIONER OF INCOME TAX, THE SAID DEDUCTION IS NOT PERMISSIBLE IN VIEW OF THE DEFINITION OF THE RURAL BRANCH VIDE EXPLANATION (1A) U/S 36(1)(VIIA) OF THE A CT , SINCE THE BRANCHES ARE SITUATED IN A VILLAGES HAVING POPULATION EXCEEDING 10 , 000 AS PER THE CENSUS DETAILS OF 2001. THE ASSESSEE FILED REPLY TO THE ABOVE NOTICE ON 15.1.2015 . THE ASSESSEE STATED THAT ALL THE RURAL BRANCHES ARE NOT SITUATED IN A MUNICIPALITY OR C ORPORATION. THE COMMISSIONER OF INCOME TAX, HOWEVER, REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE AND PASSED ORDER DATED 16.2.2015 U/S 263 OF THE I T ACT . 4 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE US. THE LD COUNSEL FOR THE ASSESSEE RELIED ON THE GROUNDS RAISED. ON THE OTHER HAND, THE LD DR RELIED ON ITA NO . 247/C/2015 4 THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS LO R D KRISHNA BANK LTD REPORTED IN 339 ITR 606 AND CONTENDED THAT THE RURAL BRANCH IS A BRANCH SITUATED IN A VILLAGE HAVING PO PULATION OF LESS THAN 10000. IN THE INSTANT CASE, IT WAS SUBMITTED THAT THE BRANCHES ARE SITUATED IN A PLACE/VILLAGE HAVING POPULATION OF MORE THAN 10000 AS PER THE CENSUS FIGURES OF 2001. HENCE, IT WAS SUBMITTED THAT THE CLASSIFICATION OF 19 RURAL BR ANCHES OF THE ASSESSEE, FOR THE PURPOSE OF CLAIMING BAD DEBTS IS WRONG AND THE CIT HAS CORRECTLY INVOKED HIS REVISIONARY POWERS U/S 263 OF THE ACT. 5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAD CLAIMED A SUM OF RS. 1.13 CRORES AS DEDUCTION U/S 36(1)(VIIA) TOWARDS PROVI SION FOR BAD AND DOUBTFUL DEBTS FOR RURAL BRANCHES. THE ASSESSEE HAD CLAIMED 19 BRANCHES ARE RURAL BRANCHES AND CLAIMED THE ABOVE DEDUCTION. THE CIT NOTICED THAT THE ASSESSEE HAD CLASSIFIED MANY B RANCHES AS RURAL BRANCHES WHERE THE POPULATION IS MORE THAN 10000. THEREFORE, THE CIT DIRECTED THE AO TO ASCERTAIN THE VERACITY OF THE CLAIM OF THE ASSESSEE THAT THE SAID 19 RURAL BRANCHES ARE ACTUALLY SITUATED IN A VILLAGE HAVING POPULATION OF LESS THAN 1 0000 AND MAKE NECESSARY MODIFICATION TO THE ASSESSMENT ORDER. 5 .1 THE HONBLE KERALA HIGH COURT IN THE CASE OF LORD KRISHNA BANK LTD (SUPRA) HAS HELD THAT BRANCHES CAN BE CLASSIFIED AS A RURAL BRANCH WHERE IT IS LOCATED IN ITA NO . 247/C/2015 5 A VILLAGE HAVING POPULATION OF LESS THAN 10000. THE RELEVANT FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT READ AS UNDER: 4. NEXT QUESTION 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 TH E ONLY QUESTION RAISED IS AS TO BASIS OF CLASSIFYING BRANCHES OF 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 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 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 PLACE WHERE THE CONCERNED BRANCH IS LOCATED. WHILE THE ASSESSEE'S CASE THAT FOUND ACCEPTANCE WITH THE TRIBUNAL IS THAT 'PLACE' REFERRED TO IN THE ABOV E DEFINITION CLAUSE IS THE WARD OF A PANCHAYAT OR MUNICIPALITY, THE ASSESSING OFFICER TOOK THE VIEW THAT 'PLACE' CONTAINED IN THE DEFINITION CLAUSE SHOULD MEAN A REVENUE VILLAGE. NO DOUBT, 'PLACE' AS SUCH IS NOT DEFINED IN THE DEFINITION CLAUSES AND SO MUC H 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 STRICT DEFINITION IS FOLLOWED.' 6. IN OUR VIEW, THE DEFINITION CLAUSE DOES NOT EXCLUDE THE LITERAL MEANING OF RURAL BRANCH WHICH NECESSARILY EXCLUDES URBAN A REAS. IF THE ASSESSEE'S 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 THERE MAY BE WARDS WITH L ESS 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 P OPULATION 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 RIGHTLY ADOPTED. SO MUCH SO, 'PLACE' REFERRED TO IN THE ABOVE DEFINITION CLAUSE FOR THE ITA NO . 247/C/2015 6 PURPOSE OF IDENTIFYING THE BRANCH OF A BAN K 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 LIKE PANCHAYAT OR MUNICIPALITY IS INCORRECT AND, IN O UR 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 CO RPORATION AREA WHERE THE POPULATION IS LESS THAN 10000. SO MUCH SO, RURAL BRANCHES ARE SUCH OF THE BRANCHES LOCATED IN A VILLAGE WHERE THE POPULATION IN THE VILLAGE AS A UNIT IS LESS THAN 10000. WE, THEREFORE, ALLOW THE APPEAL ON THIS ISSUE BY REVERSING TH E ORDER OF THE TRIBUNAL AND BY RESTORING THE ASSESSMENT. 6 FROM THE ABOVE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, IT IS CLEAR THAT THE BRANCH SITUATED IN A VILLAGE HAVING POPULATION OF LESS THAN 10000 ALONE IS TO BE CLASSIFIED AS A RURAL BRAN CH. THE CIT, IN THE IMPUGNED ORDER HAS ONLY DIRECTED THE AO TO ASCERTAIN THE VERACITY OF THE CLAIM OF THE ASSESSEE THAT THE 19 BRANCHES ARE RURAL BRANCHES. IN VIEW OF THE HONBLE JURISDICTIONAL HIGH COURT JUDGMENT CITED SUPRA, WE ARE OF THE VIEW THAT THE CIT IS JUSTIFIED IN INVOKING HIS REVISIONARY POWERS U/S 263 OF THE ACT. HENCE, WE REFRAIN FROM INTERFERING WITH THE CIT ORDER PASSED U/S 263 AND DISMISS THE GROUNDS RAISED IN THE APPEAL FILED BY THE ASSESSEE. IT IS ORDERED ACCORDINGLY. 6 IN THE RESULT, THE A PPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF MA Y 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 18 TH M AY 2016 RAJ* ITA NO . 247/C/2015 7 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . C IT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN