M/s.Vengeri Service Co-op Bank Ltd, Calicut V. The ITO, Calicut

ITA 590/COCH/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7556 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 26-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: SUJITH KUMAR T N
• Keywords: Bad and doubtful debts
• Section: 143(3); 56; 28

Judgement Text

ITA NO . 588 TO 590/C/2014 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 S . 588 TO 590/COCH/2014 (ASST YEAR S 2008 - 09 TO 2010 - 11 ) M/ S VENGERI SERVICE COOP BANK LTD VENGERI BANK BUILDING VEBNGERI POST KOZHIKODE 673 010 VS THE INCOME TAX OFFICER WARD 1(2), KOZHIKODE ( APPELLANT) (RESPONDENT) PAN NO. AABAV4252F ASSESSEE BY SH SUJITH KUMAR T.N REVENUE BY SH K P GOPAKUMAR , SR DR DATE OF HEARING 13 TH JAN 2015 DATE OF PRONOUNCEMENT 22 ND JAN 2016 OR D ER PER BENCH : THESE THREE APPEALS, AT THE INSTANCE OF THE ASSESSEE, ARE DIRECTED AGAINST THE CONSOLIDATED ORDER OF THE CIT(A) DATED 11.9.2014. THE RELEVANT ASSESSMENT YEARS ARE 2008 - 09 TO 2010 - 11. 2 SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS AND TH EY PERTAIN TO THE SAME ASSESSEE, THEY WERE HEARD TOGETHER AND DISPOSE OFF BY THIS CONSOLIDATED ORDER. ITA NO . 588 TO 590/C/2014 2 3 THE SOLITARY ISSUE , THAT IS RAISED IN THE GROUNDS OF APPEAL , IS WHETHER THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ASSESSMENT ORDER S FOR AYS 2008 - 09 T O 2010 - 11 WHICH HA D DENIED THE BENEFIT OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT , HOLDING THAT THE ASSESSEE IS A COOPERATIVE BANK AND IN VIEW OF INSERTION OF SECTION 80P(4), THE COOPERATIVE BANKS ARE NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2)(A )(I) OF THE ACT. THE ASSESSEE HAS ALSO FILED AN IDENTICAL ADDITIONAL GROUND FOR ALL THE ASSESSMENT YEARS, EXCEPT FOR VARIANCE IN THE FIGURES . THE ISSUE THAT IS RAISED IN THE ADDITIONAL GROUND IS WHETHER THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION OF OVER DUE INTEREST ON NON - PERFORMING ASSETS . 4 BRIEFLY STATED THE FACTS ARE AS FOLLOWS: THE ASSESSEE IS A COOPERATIVE SOCIETY, MAINLY DOING THE BUSINESS OF BANKING. THE BENEFIT OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT WAS DENIED TO THE ASSESSEE FOR ALL THE ASSESSMENT YEARS CONCERNED WHILE CONCLUDING THE ASSESSMENT U/S 143(3) R.W.S 147 OF THE ACT. THE AO WAS OF THE VIEW THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BANKING AND IN VIEW OF INSERTION OF SECTION 80P(4) W.E.F. 1.4.2007, THE COOPERATIVE BANK S ARE NOT ENTITLED TO THE BENEFIT OF SECTION 80P(2) OF THE ACT. 5 ON FURTHER APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE AO FOR ALL THE ASSESSMENT YEARS BY FOLLOWING THE ORDERS OF THE TRIBUNAL IN THE CASE OF M/S KUNNAMANGALAM COOPERATIVE BANK VS ITO IN ITA NO. 156/COCH/2014 (ORDER ITA NO . 588 TO 590/C/2014 3 DATED 25.7.2014) AND M/S PINARAYI SERVICE COOPERATIVE BANK LTD VS ITO, IN ITA NO. 123/COCH/2012 (ORDER DATED 31.7.2014). THE RELEVANT FINDINGS OF THE CIT(A) IN PARA 5 OF HIS ORDER READ AS UNDER: 5 I HAVE CONSIDERED THE SUBMISSION OF THE LD COUNSEL. THE FIRST COMMON ISSUE RAISED BY THE APPELLANT WITH REGARD TO DISALLOWANCE OF DEDUCTION U/S 80P OF THE ACT HAS BEEN CONSIDERED BY THE HONBLE ITAT, COCHIN BENCH IN THE CASES OF M/S KUNNAMANGALAM COOPERATIVE BANK VS ITO WARD 2( 3), CALICUT IN ITA NO. 156/COCH/2014 DATED 25.7.2014 FOR THE ASSESSMENT YEAR 2009 - 10 AND M/S PINARAYI SERVICE COOPERATIVE BANK LTD VS ITO, WARD 2, KANNUR IN ITA NO. 123/COCH/2012 DATED 31.7.2014 FOR THE ASSESSMENT YEAR 2009 - 10. RESPECTFULLY FOLLOWING THE SAID ORDER, I DISMISS THIS GROUND OF APPEAL OF THE APPELLANT IN THESE CASES ALSO AS THE FACTUAL MATRIX IS SAME IN ALL THE CASES. ALTERNATIVE PLEA OF THE ASSESSEE THAT THEY ARE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) IS ALSO REJECTED IN VIEW OF THE FIN DINGS GIVEN BY THE HONBLE TRIBUNAL IN THE DECISIONS CITED SUPRA. 6 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE US. AT THE VERY OUTSET, THE LD DR SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE ORDER S OF THE TRIBUNAL IN THE CASES CITED SUPRA. THE LD COUNSEL FOR THE ASSESSEE WAS UNABLE TO CONTROVERT THE SUBMISSIONS MADE BY THE LD DR. 7 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FINDING OF THE INCOME TAX AUTHORITIES THAT THE ASSESSEE IS DOING BUSIN ESS OF BANKING HAS NOT BEEN DISPELLED BY THE ASSESSEE BEFORE US. THEREFORE, IN VIEW OF THE ORDERS OF THE TRIBUNAL IN THE CASES OF M/S KUNNAMANGALAM COOPERATIVE AND M/S PINARAYI SERVICE COOPERATIVE BANK LTD , CITED SUPRA, WE HOLD THAT THE ASSESSEE IS NOT EN TITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. HENCE, THE GROUNDS RAISED IN ALL THE APPEALS ARE REJECTED. ITA NO . 588 TO 590/C/2014 4 8 AS REGARDS THE ADDITIONAL GROUND RAISED WITH REGARD TO THE DEDUCTION OF OVERDUE INTEREST ON NON PERFORMING ASSETS, THE CIT(A) DE CIDED THE ISSUE AGAINST THE ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF PAPPINISSERY COOPERATIVE RURAL BANK LTD VS ITO, KANNUR IN ITA NOS 711 714/COCH/2013 (ORDER DATED 8.8.2014). 9 AGGRIEVED, THE ORDER OF THE CIT(A), THE ASSESSEE PR EFERRED THIS ADDITIONAL GROUND FOR ALL THE ASSESSMENT YEARS. 10 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE TRIBUNAL IN THE CASE OF M/S PAPPINIS SDRY COOPERATIVE RURAL BANK LTD , CITED SUPRA, HAS DECIDED AN IDENTICAL ISSUE AGAINST THE ASSESSEE. THE RELEVANT FINDINGS OF THE TRIBUNAL IN PARAS 8 TO 10 , READ AS UNDER: 8. THE LAST COMMON GROUND IN I.T.A. NOS. 711 & 714 IS WITH REGARD TO DISALLOWANCE OF UNREALIZED INTEREST ON NON - PERFORMING ASSETS. . 9. AFTER HEARIN G BOTH THE PARTIES, WE ARE OF THE OPINION THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION IN THE CASE OF KANNUR CO - OPERATIVE BANK LTD. IN I.T.A. NOS. 182&183/COCH/2014 DATED 27/06/2014 WHEREIN THE TRIBUNAL HELD AS UNDER: 3. THE ASSESSEE RAISED THE GROUND I N BOTH THE APPEALS 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 BRANCHES U/S. 36(1)(VIIA) OF THE I.T. ACT. 4. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION 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 JURISDICTIONAL HIGH COURT HE LD AS UNDER: ITA NO . 588 TO 590/C/2014 5 8. SECTION 36 OF THE ACT DEALS WITH VARIOUS DEDUCTIONS THAT COULD BE ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF 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 SECTION 36(1). THIS CLAUSE MAKES PROVISION FOR BAD AND DOUBTFUL DEBTS. IN OTHER 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 UNDER WHICH SUCH DEDUCTIONS COULD BE CLAIMED BY A PARTICULAR BANK. SECTION 36(1)(VIIA ) COMMENCES WITH FOLLOWING WORDS IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBT MADE BY AND SUB - CLAUSE (A) READS AS UNDER: A SCHEDULED BANK NOT BEING A BANK APPROVED BY CENTRAL GOVERNMENT FOR THE PURPOSES OF CLAUSE (VIIIA) OR 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 BANK OR A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, AN A MOUNT NOT EXCEEDING SEVEN AND ONE - HALF PERCENT OF THE TOTAL INCOME (COMPUTED BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE AND CHAPTER VIA) AND AN AMOUNT NOT EXCEEDING TEN PERCENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL BRANCHES OF SUCH BANK CO MPUTED IN THE PRESCRIBED MANNER. UNDER EXPLANATION TO SECTION 36 FOR BETTER UNDERSTANDING OF CERTAIN TERMS USED IN SUB - CLAUSE (A) OF CLAUSE (VIIA) DEFINITIONS ARE 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 DEFINED UNDER CLAUSE (C) OF SECTION 5 OF THE BANKING REGULATION ACT, 1949, WHICH IS NOT A SCHEDULED BAN K. 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 OF THE PREVIOUS YEAR. ITA NO . 588 TO 590/C/2014 6 CO - OPERATIVE BANK, PRIMARY AGRICULTURAL CREDIT SOCIETY AND PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN THE EXPLANATION TO SUB - SECTION (4) OF SECTION 80P. SCHEDULED BANK MEANS A BANK FOR THE TIME BEING INCLUDED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT. IN ORDER TO UNDERSTAND WHAT IS A BANKING COMPANY, ONE HAS TO REFER TO BANKING REGULATION ACT AND TO UNDERSTAND WHETHER A PARTICULAR BAN K IS A SCHEDULED BANK, ONE HAS TO SEE WHETHER SUCH BANK FINDS A PLACE IN THE SECOND SCHEDULE TO RESERVE BANK OF INDIA ACT. CO - OPERATIVE 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 COMPANY 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 CLAUSE (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 CLA USE SHALL BE INSERTED, NAMELY: - (CCI) CO - OPERATIVE BANK MEANS A STATE CO - OPERATIVE BANK, A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO - OPERATIVE BANK. MEANING OF DIFFERENT TERMS USEFUL FOR THE PURPOSE OF DECIDING THE CONTROVERSY, ONE HAS TO SEE HOW PR ESENCE OF A PARTICULAR TERM IN A PARTICULAR PROVISION AND SIMULTANEOUSLY BEING ABSENT IN THE EXPLANATION TO THE SAID PROVISION WOULD CHANGE THE POSITION OF THE APPELLATE BANKS WITH REFERENCE TO THE CONTEXT. 9. ADMITTEDLY, APPELLANTS/ASSESSEES ARE CO - OPERA TIVE BANKS. WITH INTRODUCTION OF FINANCE ACT OF 2007, COMING INTO EFFECT FROM 01.04.2007, ONE HAS TO UNDERSTAND WHAT WAS THE POSITION PRIOR TO ITA NO . 588 TO 590/C/2014 7 01.04.2007 AND AFTER 01.04.2007, THEY WERE ENJOYING THE BENEFITS PROVIDED U/S. 80P. WITH THE INTRODUCTION OF FIN ANCE ACT 2007 WITH EFFECT FROM 01.04.2007, 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). PRIOR TO FINANCE ACT OF 2007, CO - OPERATIVE BANK WAS NOT INCLUDED IN SUB - CLAUS E (A) SO FAR AS PROVISIONS FOR BAD AND DOUBTFUL DEBTS. WITH EFFECT FROM 01.04.2007, CO - OPERATIVE BANK WAS INCLUDED UNDER SUB - CLAUSE (A) OF CLAUSE (VIIA) OF SECTION 36(1). IT IS FURTHER CLARIFIED THAT ONLY SUCH CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICU LTURE CREDIT SOCIETY, ETC. IS INCLUDED IN SUB - CLAUSE (A) OF CLAUSE (VIIA). THE PROVISION IS A BENEFICIAL ONE. NO DOUBT, PLAIN READING OF MAIN SECTION 36(1) (VIIA)(A) AND EXPLANATION UNDER SAID SECTION PRESENT CERTAIN DIFFICULTIES, BUT SITUATION IS NOT WI THOUT POSSIBILITIES. THE OBJECT AND INTENTION OF THE LEGISLATURE IS TO BE UNDERSTOOD BY HARMONIOUS CONSTRUCTION OF THE PROVISIONS. THE POLICY WAS TO INCLUDE CO - OPERATIVE BANKS AS WELL, AS THEY COULD NOT TAKE SHELTER U/S. 80P OF THE INCOME TAX ACT ANY MOR E. BY RESTRICTING THE SCOPE OF THE PROVISIONS, THE VERY PURPOSE OF INCLUSION OF CO - OPERATIVE BANK WOULD 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 01.04.2007, 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 APPLICABLE 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 PROVISION FOR BAD AND DOUBTFUL DEBTS IN THE BOOKS OF ACCOUNTS. SO FA R AS THIS ISSUE IS CONCERNED, OPINION OF THE ASSESSING OFFICER AND TWO APPELLATE AUTHORITIES IS JUSTIFIED AND WE NEED NOT INTERFERE WITH THE OPINION OF THE AUTHORITIES IN RESTRICTING DEDUCTIONS ONLY TO 7.5% OF THE TOTAL INCOME AS PROVIDED UNDER SUB - CLAUSE (VIIA) OF SECTION 36(1). 10. THEN COMING TO THE OTHER CONTROVERSIAL ISSUE WHETHER A CO - OPERATIVE BANK, IRRESPECTIVE OF HAVING RURAL BRANCH AS EXPLAINED UNDER 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 DEFINITION OF RURAL BRANCH UNDER EXPLANATION TO SECTION 36(1) WOULD IT MAKE ANY DIFFERENCE. LEARNED COUNSEL APPEARING FOR APPELLANTS TRIED TO CONVINCE THE COURT THAT ADJECTIVE OF RURAL WOULD MEAN IN RELATIO N TO OR CHARACTERISTIC OF THE COUNTRYSIDE RATHER THAN THE TOWN; REMOTE RURAL AREAS. URBAN, NO DOUBT, IS OPPOSITE TO RURAL. URBAN IS IN RELATION TO OR CHARACTERISTIC OF A TOWN OR CITY. ITA NO . 588 TO 590/C/2014 8 11. ACCORDING TO US, THERE IS NO NECESSITY TO FIND OUT THE GENERIC MEA NING OF EITHER URBAN OR RURAL FOR THE SIMPLE REASON THAT EXPLANATION 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 PURPOSE OF UNDERS TANDING RURAL BRANCH WITH REFERENCE TO SUB - CLAUSE (A) OF CLAUSE (VIIA) TO SECTION 36(1) ONE NEED NOT TO GO IN SEARCH OF THE MEANING OF RURAL OR WHAT EXACTLY WOULD CONSTITUTE RURAL BRANCH. THIS COURT HAD AN OCCASION TO DECIDE THE SAID CONTROVERSY PERTAININ G 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 UNDER: NEXT QUESTION RAISED PERTAINS TO THE ASSESSEES 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 THE BANK AS RURAL BRANCHES AND OTHER BRANCHES. RURAL BRANCH IS DEFINED UNDER EXPLANATION (IA) TO SECTION 36(1)(VIIA) AS F OLLOWS: 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 OF THE PREVIOUS YEAR.. 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 ASSESSEES CASE THAT FOUND A CCEPTANCE 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 PLACE CONTAINED IN THE DEFINITION CLAUSE 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 MEANING OF PLACE REFERRED TO IN THE SECTION. STANDING COUNSEL FOR THE DEPARTMENT PRODUCED BEFORE US LAST PUBLISHED CENSUS REPORT OF 2001. EVEN THOUGH T HE 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. IN OUR VIEW, THE DEFINITION CLAUSE DOES NOT EXCLUDE THE LITE RAL MEANING OF RURAL BRANCH WHICH NECESSARILY EXCLUDES URBAN AREAS. IF ITA NO . 588 TO 590/C/2014 9 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 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 L OCATED 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 CEN SUS 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 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 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, MU NICIPALITY 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 WHERE THE POPULATION IN THE VILLAGE AS A UNIT IS LESS T HAN 10000. IT IS CLEAR FROM THE ABOVE JUDGMENT THAT THIS COURT HAD ALREADY AN OCCASION TO CONSIDER THE MEANING OF PLACE WITH REFERENCE TO ABOVE SECTION. THEREFORE, RURAL BRANCH IS A BRANCH WHICH FALLS UNDER EXPLANATION (IA) TO SECTION 36(1) (VIIA). TRI BUNAL HAD TO REVERSE THE JUDGMENT OF CIT(APPEALS) IN THE LIGHT OF THE DECISION IN LORD KRISHNA BANKS CASE (SUPRA). 12. THEN COMING TO THE CONTROVERSY WHETHER CO - OPERATIVE BANK COULD CLAIM DEDUCTION OF 10% OF THE AGGREGATE AVERAGE ADVANCES WHILE COMPUTIN G THE INCOME IRRESPECTIVE OF FALLING UNDER RURAL BRANCH AS 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 REGULATION ACT. EXPLANATION TO SECTION 5(C) CLEAR LY INDICATES WHICH ARE THE TRANSACTIONS WHICH WOULD NOT COME WITHIN THE MEANING OF BANKING BUSINESS. NON - SCHEDULE 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 CONSID ERED AS A SCHEDULED BANK AS SECOND SCHEDULE TO RESERVE BANK OF INDIA ACT DOES NOT INCLUDE ANY OF THE CO - OPERATIVE BANKS. READING OF SECTION 5(C) ALONG WITH EXPLANATION, ITA NO . 588 TO 590/C/2014 10 CLEARLY INDICATES THOUGH ANY COMPANY WHICH TRANSACTS BUSINESS OF BANKING IN INDIA WOUL D COME WITHIN THE MEANING OF NON - SCHEDULED 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 TYPES OF DEDUCTIONS ARE PROVIDED TO NON - SCHEDULED BANK, A SCHEDULED BANK AND A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY, ETC. IT IS TO BE NOTED THAT APPELLANTS/ASSESSEES ARE NOT PRIMARY AGRICULTURAL CREDIT CO - OPERATIVE SOCIETY OR OTHER KIND OF BANK SO AS TO GO OUT OF THE DEFINITION OF CO - OPERATIV E BANK 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 REFERS 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, VIRTUALLY EVERY BANK WHICH IS NOT A SCHEDULED BANK WOULD FALL UNDER THE DEFINITI ON OF NON - SCHEDULE BANK. READING OF DEFINITION OF NON - SCHEDULE BANK ALONG WITH 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 PURPOS E OF THIS SECTION. THEREFORE, READING OF ENTIRE SECTION 36(1)(VIIA)(A) ALONG WITH EXPLANATION WOULD MEAN TWO KINDS OF DEDUCTIONS 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 BELOW 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 HAVE ADVANCED SUCH AMOUNT S. SUCH RURAL BRANCH MEANS A BRANCH 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. 10. IN VIEW OF THE ABOVE TRIBUNAL, IN OUR OPINION, THE OVERDUE INTEREST WILL FALL UNDER THE PURVIEW OF SEC. 36(1)(VIIA) OF THE I.T. ACT AND DEDUCTION UND ER THIS SECTION CAN ONLY BE GIVEN TO THE EXTENT SPECIFIED THEREIN. BEING SO, WE ARE INCLINED TO DECIDE THE ISSUE AGAINST THE ASSESSEE. ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE IN THE ABOVE MENTIONED APPEALS IS DISMISSED. ITA NO . 588 TO 590/C/2014 11 11 IN VIEW OF THE ORD ER OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S PAPPINISSDRY COOPERATIVE RURAL BANK LTD (SUPRA) , WHICH IS IDENTICAL ON FACTS OF THIS CASE, WE REJECT THE ADDITIONAL GROUND S RAISED FOR ALL HE AYS . IT IS ORDERED ACCORDINGLY. 12 IN THE RESU LT, THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JAN 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 22 ND JAN 2016 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDE NT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN