Chettiamparamba Service Co-operative bank Ltd, Thalassery V. The ITO, Kannur

ITA 60/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81406 (ITAT-COCHIN)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 13-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-02-2014
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Keywords: Bad and doubtful debts
• Section: 27; 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. NO. 60 /COCH/2014 ASSESSMENT YEAR : 2007-08 THE CHETTIAMPARAMBA SERVICE CO-OP BANK LTD., CHETTIAMPARAMBA, KELAKAM, THALASSERY-670 674. [PAN: AAFFC 6250P] VS. THE INCOME TAX OFFICER, WARD-2, KANNUR. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI ARUN RAJ S. ADV. REVENUE BY SHRI K.K. JOHN, SR. DR DATE OF HEARING 13/11/2014 DATE OF PRONOUNCEMENT 21/11/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 19/11/2013 PASSED BY THE CIT(A), KOZHIKODE FOR THE ASSESSMENT YEARS 2007- 08. 2. THE FIRST GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO DENIAL OF DEDUCTION U/S. 80P(4) OF THE I.T. ACT. I.T.A. NO.60/COCH/2014 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER AFTER ANALYZING THE ACTIVITIES OF THE ASSESSEE-SOCIETY CAME TO THE CONCLUSION THAT SINCE THE ASSESSEE HAS NOT FULFILLED ITS MAIN OBJECTIVE OF PR OVIDING FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPO SES OR FOR PURPOSES CONNECTED WITH AGRICULTURAL ACTIVITIES, IT IS NOT E LIGIBLE FOR DEDUCTION U/S. 80P OF THE ACT. 4. ON APPEAL, THE CIT(A) OBSERVED THAT AS PER SECTI ON 80P(4), PRIMARY AGRICULTURAL CREDIT SOCIETY SHALL HAVE THE MEANING ASSIGNED TO IT IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949). AS PER SECTION 59CCIV) OF THE BANKING REGULATION ACT, PRIMARY AGRICULTURAL CRED IT SOCIETY MEANS A CO- OPERATIVE SOCIETY THE PRIMARY OBJECT OR PRINCIPA L BUSINESS OF WHICH IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSES OR FOR PURPOSES CONNECTED WITH AGRICULTURAL ACTIVITIES (INCLUDING THE MARKETING OF CROPS). ACCORDING TO THE CIT(A), THERE WAS NO CLA USE INCORPORATED IN THE BYE-LAW OF THE ASSESSEE BANK FOR PROVISION OF FINAN CIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSES OR FOR PURPOSES C ONNECTED WITH AGRICULTURAL ACTIVITIES AND THE AGRICULTURAL CREDIT PROVIDED BY THE ASSESSEE IS NEGLIGIBLE. THUS, THE CIT(A) HELD THAT THE ASSESSEE HAD FAILED TO FULFIL ITS OBLIGATION AS DEFINED U/S. 59CCIV) OF THE BANKING REGULATION ACT AND SINCE THE ASSESSEE I.T.A. NO.60/COCH/2014 3 HAS BEEN MORE IN THE FIELD OF BANKING INSTEAD OF TH E PRINCIPAL OBJECTIVE OF EXTENDING CREDIT FACILITY TO ITS MEMBERS FOR AGRICU LTURAL PURPOSES, THE ASSESSEE CANNOT CLAIM DEDUCTION U/S. 80P OF THE ACT. THE CIT (A) RELIED ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF M/S. THATHAMANGALAM SERVICE CO-OPERATIVE BANK LTD. IN WP(C) NO. 14226 O F 2012(C) DATED 14 TH SEPTEMBER, 2012. 5. THE LD. AR SUBMITTED THAT THE SUBSTANTIAL PORTIO N OF 96.33% OF THE TOTAL OUTSTANDING ADVANCES WAS GIVEN FOR AGRICULTUR AL PURPOSES. HENCE, THE PRINCIPAL BUSINESS OF THE ASSESSEE WAS TO PROVIDE F INANCIAL ACCOMMODATION FOR PURPOSES CONNECTED WITH AGRICULTURAL ACTIVITIES TO ITS MEMBERS AND FURTHER, THE ASSESSEE IS NOT HAVING ANY OTHER CO-OPERATIVE S OCIETIES AS ITS MEMBER. HENCE, THE ASSESSEE COMES UNDER THE MEANING OF PRIM ARY AGRICULTURAL CREDIT SOCIETY AND AS SUCH, THE ASSESSEE IS ELIGIBLE FOR D EDUCTION U/S. 80P OF THE I.T. ACT. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES. I.T.A. NO.60/COCH/2014 4 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. WE ARE OF THE OPINION THAT SIMILAR ISSUE CAME FOR CONSIDERATION BEFORE THE CO CHIN BENCH OF THE TRIBUNAL ON THE EARLIER OCCASION IN TH E CASE OF KUNNAMANGALAM CO-OPERATIVE BANK IN I.T.A. NO. 156/COCH/2014 VIDE ORDER DATED 25/07/2014 WHICH DECIDED THE ISSUE AGAINST THE ASSESSEE. THE RELEVANT PORTION OF THE SAID ORDER IS AS FOLLOWS: 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEES CONTENTION IS THAT IT IS LENDING MONEY PRIMARILY FOR THE PURPOSE OF AGRICULTURAL ACTIVITIES AND ITS MEMBER AGRICULTURISTS. BEING SO, THE ASSESSEE IS ENTITLED FOR DEDUCTION U/ S. 80P OF THE ACT. WE HAVE CAREFULLY GONE THROUGH THE BUSINESS CARRIED ON BY THE ASSESSEE. THE ASSESSING OFFICER HAS CLEARLY BROUGHT ON RECORD THA T THE ASSESSEE HAS LENT ONLY 3.56% OF TOTAL LOANS ADVANCED DURING THE YEAR UNDER CONSIDERATION FOR THE PURPOSE OF AGRICULTURAL ACTIVITIES. THE AS SESSEE WAS UNABLE TO POINT OUT THAT HOW WITH THIS MEAGRE 3.56% OF THE LO ANS ADVANCED FOR THE PURPOSE OF AGRICULTURAL ACTIVITIES; THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80P OF THE I.T. ACT. THE QUESTION BEFORE US IS WHETHER THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I) AND WHETHER THE ASSESSEE IS HIT BY THE PROVISIONS OF SEC. 80P(4) WHICH WAS INTRODUCED IN THE STATUTE BY THE FINANCE ACT, 2006 W.E.F. 1.4.2007. THE RELEVANT PRO VISIONS OF BOTH THE SECTIONS ARE RE-PRODUCED FOR OUR READY REFERENCE AS UNDER : 80P.(1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB- SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY : (A) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED I N (I)CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR...............THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH AC TIVITIES. I.T.A. NO.60/COCH/2014 5 80P(4)THE PROVISIONS OF THIS SECTION SHALL NOT APP LY IN RELATION TO ANY CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK. EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION, (A)'CO-OPERATIVE BANK' AND 'PRIMARY AGRICULTURAL CR EDIT SOCIETY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949); (B)'PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEV ELOPMENT BANK' MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFIN ED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LON G-TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. 8.1 IN OUR OPINION, SEC. 80P(2)(A)(I) PROVIDES TWO TYPES OF ACTIVITIES IN WHICH THE CO-OPERATIVE SOCIETY MUST BE ENGAGED TO B E ELIGIBLE FOR DEDUCTION UNDER SUB-CLAUSE (I). THESE TWO ACTIVITIES ARE NOT ALTERNATE ONES BECAUSE THE SECTION ALLOWS DEDUCTION TO THE CO-OPERATIVE SO CIETY ON THE WHOLE OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY O NE OR MORE OF SUCH ACTIVITIES. THIS PRE-SUPPOSES THAT ELIGIBLE CO-OPER ATIVE SOCIETY CAN CARRY ON EITHER ONE OF THESE TWO BUSINESSES OR CAN CARRY BOT H THESE BUSINESSES FOR THE MEMBERS. IF THE ASSESSEE CO-OPERATIVE SOCIETY C ARRIES ON ONE OR BOTH OF THE ACTIVITIES, IT WILL BE ELIGIBLE FOR DEDUCTION. THESE TWO ACTIVITIES ARE (A) CO- OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS O F BANKING FACILITIES TO ITS MEMBERS OR (B) CO-OPERATIVE SOCIETY ENGAGED IN PROV IDING CREDIT FACILITIES TO ITS MEMBERS. BOTH THE ACTIVITIES MUST BE CARRIED ON BY THE CO-OPERATIVE SOCIETY FOR ITS MEMBERS. IF A CO-OPERATIVE SOCIETY IS ENGAGED IN CARRYING ON THESE ACTIVITIES/FACILITIES FOR THE PERSONS OTHER T HAN ITS MEMBERS, THE CO- OPERATIVE SOCIETY, IN OUR OPINION, WILL NOT BE ELIG IBLE FOR DEDUCTION U/S 80P(2)(A)(I) ON THE INCOME WHICH IT DERIVES FROM CA RRYING ON THE ACTIVITIES NOT RELATING TO ITS MEMBERS. THEREFORE, WHERE A CO- OPERATIVE SOCIETY IS ENGAGED IN CARRYING ON BUSINESS OF BANKING FACILITI ES TO ITS MEMBERS AND TO THE PUBLIC OR PROVIDING CREDIT FACILITIES TO ITS ME MBERS OR TO THE PUBLIC, THE INCOME WHICH RELATES TO THE BUSINESS OF BANKING FAC ILITIES TO ITS MEMBERS OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS WILL ONL Y BE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I). THERE IS NO PROHIBITION U/S 80P N OT TO ALLOW DEDUCTION TO SUCH CO-OPERATIVE SOCIETIES IN RESPECT OF BUSINESS RELATING TO ITS MEMBERS. 8.2 NOW, THE QUESTION BEFORE US IS WHETHER THE ASS ESSEE IS A CO-OPERATIVE BANK OR NOT. CO-OPERATIVE BANK AS DEFINED IN PART V OF THE BANKING REGULATIONS ACT, 1949 IS AS UNDER : CO-OPERATIVE BANK MEANS A STATE CO-OPERATIVE BANK , A CENTRAL CO-OPERATIVE BANK AND A PRIMARY CO-OPERATIVE BANK: I.T.A. NO.60/COCH/2014 6 8.3 FROM THE DEFINITION OF CO-OPERATIVE BANK IT I S APPARENT THAT CO- OPERATIVE BANK MEANS STATE CO-OPERATIVE BANK, A CEN TRAL CO-OPERATIVE BANK AND A PRIMARY CO-OPERATIVE BANK. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE IS A STATE CO-OPERATIVE BANK OR CENTRAL CO -OPERATIVE BANK. WE HAVE THEREFORE TO FIND WHETHER THE ASSESSEE IS A PR IMARY CO-OPERATIVE BANK. 8.4 THE PRIMARY CO-OPERATIVE BANK IS DEFINED UNDE R SECTION 5 CLAUSE (CCV) OF BANKING REGULATION ACT 1949 AS UNDER:- (CCV) PRIMARY CO-OPERATIVE BANK MEANS A CO-OPERATIVE SOCIETY, OTHER THAN A PRIMARY AGRICULT URAL CREDIT SOCIETY- (1) THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH I S TRANSACTION OF BANKING BUSINESS: (2) THE PAID-UP SHARE CAPITAL AND RESERVES OF WHICH ARE NOT LESS THAN ONE LAKH OF RUPEES: AND (3) THE BYE-LAWS OF WHICH DO NOT PERMIT ADMISSION O F ANY OTHER CO-OPERATIVE SOCIETY AS A MEMBER: PROVIDED TH AT THIS SUB- CLAUSE SHALL NOT APPLY TO THE ADMISSION OF A CO-OPE RATIVE BANK AS A MEMBER BY REASON OF SUCH CO-OPERATIVE BANK SUBSCRIB ING TO THE SHARE CAPITAL OF SUCH CO-OPERATIVE SOCIETY OUT OF F UNDS PROVIDED BY THE STATE GOVERNMENT FOR THE PURPOSE 8.5 FROM THE AFORESAID DEFINITION, IT IS APPARENT T HAT IF THE CO-OPERATIVE SOCIETY COMPLIED WITH ALL THE THREE CONDITIONS; FIR STLY THAT THE PRIMARY OBJECT OR PRINCIPLE BUSINESS TRANSACTED BY IT IS A BANKING BU SINESS, SECONDLY, THE PAID UP SHARE CAPITAL AND RESERVE OF WHICH ARE 1 LAKH OR MO RE AND THIRDLY, BY LAWS OF THE CO-OPERATIVE SOCIETY DO NOT PERMIT ADMISSION OF ANY OTHER CO-OPERATIVE SOCIETY AS A MEMBER, IT WILL BE REGARDED TO BE PRIM ARY CO-OPERATIVE BANK. IF CO- OPERATIVE SOCIETY DOES NOT FULFILL ANY OF THE CONDI TIONS, IT CANNOT BE REGARDED TO BE A PRIMARY CO-OPERATIVE BANK. THEREFORE, IN THE C ASE OF THE ASSESSEE WE HAVE TO EXAMINE ON THE BASIS OF THE FACTS AND MATER IALS ON RECORD WHETHER THE ASSESSEE CO-OPERATIVE SOCIETY COMPLIES WITH ALL THE THREE CONDITIONS. IN CASE, IT DOES NOT COMPLY WITH ALL THE THREE CONDITIONS, IT C ANNOT BE REGARDED TO BE A CO- OPERATIVE BANK AND THE PROVISIONS OF SEC. 80P(4), I N OUR OPINION, WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. ONCE, THE A SSESSEE WILL NOT FALL WITHIN THE PROVISIONS OF SEC. 80P(4), THE ASSESSEE, IN OUR OPINION, WILL BE ELIGIBLE TO GET DEDUCTION U/S 80P(2)(A)(I) IN RESPECT OF WHOLE OF THE INCOME WHICH THE ASSESSEE DERIVES FROM CARRYING ON THE BUSINESS OF B ANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. I.T.A. NO.60/COCH/2014 7 8.6 WHETHER CONDITION NO. 1 IS APPLICABLE IN THE CA SE OF THE ASSESSEE, FOR THIS WE HAVE TO LOOK INTO THE BYE-LAWS OF THE ASSES SEE. THE OBJECTS OF THE ASSESSEE IN THIS CASE ARE ENUMERATED AS UNDER : 1) TO PROVIDE SHORT TERMS, MEDIUM TERM AND LONG TE RM LOANS TO ITS MEMBERS. 2) TO PROVIDE OVER DRAFT FACILITIES TO MEMBERS WHO ARE TRADERS AND KISAN CREDIT CARD LOAN TO MEMBERS WHO ARE FARMERS; 3) TO INVENT AND EXECUTE DIFFERENT SCHEMES FOR THE NON AGRICULTURAL PURPOSE OF THE MEMBERS; 4) TO PROCURE AND DISTRIBUTE FERTILIZERS, PESTICIDE S AND EQUIPMENTS FOR AGRICULTURAL PURPOSES AND DIFFERENT ARTICLES FOR HO USE-HOLD NEEDS OF THE MEMBERS; 5) TO DEVISE DIFFERENT SCHEMES FOR COLLECTION, PROC ESSING AND THE MARKETING OF AGRICULTURAL PRODUCE OF THE MEMBERS; 6) IN ORDER TO LEND MONEY TO MEMBERS, TAKE LOANS FR OM GOVERNMENT AND OTHER CO-OPERATIVE INSTITUTIONS; 7) TO PROVIDE BANKING FACILITIES TO MEMBERS INCLUDI NG ENCASHMENT OF CHEQUE, DRAFTS, BILLS ETC.; 8) TO ACQUIRE MOVABLE AND IMMOVABLE ASSETS FOR THE FUNCTIONING OF THE BANK; 9) TO COLLECT DEPOSITS FROM MEMBERS AND CUSTOMERS UNDER DIFFERENT DEPOSIT SCHEMES; 10)MARKETING OF THE AGRICULTURAL PRODUCE OF THE ME MBERS, CO- OPERATING WITH GOVERNMENT AND QUASI GOVERNMENT AGE NCIES; 11) TO START BRANCHES AND EXTENSION COUNTERS WITHI N ITS AREA OF OPERATION IF NECESSARY FOR THE DEVELOPMENT OF THE B ANK; 12) TO ACQUIRE AND MARKET INDUSTRIAL PRODUCTS FOR T HE BENEFIT OF THE MEMBERS; 13) TO ISSUE LOANS TO MEMBERS UNDER HIRE PURCHASE SCHEME FOR PURCHASING HOUSEHOLD ARTICLES, MACHINERY, JEEP, AUT ORIKSHAW, CAR ETC. I.T.A. NO.60/COCH/2014 8 14) TO ACCEPT DEPOSITS FROM PRIMARY NON-AGRICULTUR AL CO-OPERATIVE SOCIETIES. OUT OF THESE, ONLY FOUR OBJECTS (I.E. CLAUSE NO. 2, 4,5 AND 10) ARE RELATED TO AGRICULTURE OR AGRICULTURAL OPERATIONS. SO FROM THE BYE-LAWS OF THE BANK IT CANNOT BE AID THAT THE PRIMARY OBJECT OR PR INCIPAL BUSINESS OF THE BANK IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS M EMBERS FOR AGRICULTURAL PURPOSES OR FOR THE PURPOSES CONNECTED WITH AGRICULTURAL ACTIVITIES . 8.7 ON THE BASIS OF THESE OBJECTS WHETHER IT CAN B E SAID THAT THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF THE ASSESSEE IS TRA NSACTION OF BANKING BUSINESS? BANKING BUSINESS HAS BEEN DEFINED U/S 5(B) OF THE B ANKING REGULATION ACT IN THE FOLLOWING MANNER : ' BANKING' MEANS THE ACCEPTING, FOR THE PURPOSE OF LENDING OR IN VESTMENT, OF DEPOSITS OF MONEY FROM THE PUBLIC, REP AYABLE ON DEMAND OR OTHERWISE, AND WITHDRAWABLE BY CHEQUE, DRAFT, OR DER OR OTHERWISE. FROM THE SAID DEFINITION IT IS CLEAR THAT BANKING M EANS ACCEPTING DEPOSIT OF MONEY FROM THE PUBLIC WHICH IS REPAYABLE ON DEMAND OR OTHERWISE AND WITHDRAWAL OF THESE DEPOSITS BY CHEQUE, DRAFT, ORDE R OR OTHERWISE AND THESE DEPOSITS ARE ACCEPTED FOR THE PURPOSE OF LENDING OR INVESTMENT. THESE DEPOSITS MUST BE ACCEPTED FROM THE PUBLIC, NOT ONLY FROM THE MEMBERS. THESE DEPOSITS MUST BE REPAYABLE ON DEMAND OR OTHERWISE AND COULD BE WITHDRAWN BY THE DEPOSITOR BY CHEQUE, DRAFT OR OTHERWISE. WE NOTICE THAT THE CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE HAS CARRIED O N BANKING ACTIVITIES ON THE BASIS OF FINDINGS IN THE ASSESSMENT ORDER. THE RELE VANT PORTION OF THE ASSESSMENT ORDER IS AS UNDER : 16. THIS SHOWS THAT MORE THAN 95% PERCENTAGE OF TH E LOANS ADVANCE FOR NON-AGRICULTURAL PURPOSES (NORMAL BANKING BUSIN ESS ACTIVITIES LIKE ANY OTHER COMMERCIAL BANK). THE PERCENTAGE OF LOANS IS SUED FOR AGRICULTURAL PURPOSES IS ONLY 3.56%. IN SHORT, IT CANNOT BE SAI D THAT THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF THE BANK IS TO PROV IDE FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPO SES OR FOR THE PURPOSES CONNECTED WITH AGRICULTURAL ACTIVITIES. 17. THE ASSESSEE BANK IS HAVING FOUR TYPES OF SHARE HOLDINGS. (A) CLASS EQUITY SHARES OF RS. 5/- EACH WITH VOTING RIGHTS. IT IS EXPLAINED THAT THESE SHARES ARE ISSUED TO INDIVIDUALS. (B) CLASS E QUITY SHARES OF RS.250/- EACH. IT IS SUBMITTED THAT PRESENTLY KERA LA GOVERNMENT IS HOLDING THREE SHARES. (C) CLASS EQUITY SHARES OF RS . 5/- EACH WITHOUT I.T.A. NO.60/COCH/2014 9 VOTING RIGHTS. THESE SHARES ARE ISSUED TO INDIVIDU ALS. (D) CLASS EQUITY SHARES OF RS. 25/- EACH WITHOUT VOTING RIGHTS. THES E SHARES ARE ALSO ISSUED TO INDIVIDUALS. AS PER THE BYE-LAWS OF THE BANKS, (B) CLASS SHARES CAN BE ISSUED TO STATE GOVERNMENT, STATE CO-OPERATI VE BANK, DISTRICT CO-OPERATIVE BANK, KERALA COCONUT FARMERS CO-OPERA TIVE FEDERATION, LOCAL BODIES AND TRUST FALLING UNDER THE AREA OF OP ERATION OF THE BANK. THERE IS NO SPECIFIC CLAUSE IN THE BYE-LAWS OF THE BANK WHICH DO NOT PERMIT ADMISSION OF ANY OTHER CO-OPERATIVE SOCIETY AS A MEMBER. 18. THE ASSESSEE CO-OPERATIVE BANK IS REGISTERED AS A PRIMARY AGRICULTURAL CREDIT SOCIETY, BUT AS NARRATED ABOVE, IT DOES NOT SATISFY THE CRITERIA OR CONDITIONS STIPULATED IN THE BANKING RE GULATION ACT, 1949. SO IT SQUARELY FALLS UNDER THE OPERATION OF SUB-SECTIO N (4) OF SECTION 80P OF INCOME TAX ACT, 1961. AS SUCH THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P OF THE INCOME TAX ACT, 1961. 8.8 THE DEPOSITS ACCEPTED ARE USED BY THE ASSESSE E CO-OPERATIVE SOCIETY FOR LENDING OR INVESTMENT. THIS FACT HAS NOT BEEN DENIE D. EVEN OUT OF THE DEPOSITS SO RECEIVED, THE LOANS HAVE BEEN GIVEN TO THE MEMBE RS OF THE SOCIETY IN ACCORDANCE WITH THE OBJECTS AS ENUMERATED ABOVE. TH US, IN OUR OPINION, CONDITION NO. 1 STANDS SATISFIED AND IT CANNOT BE S AID THAT THE ASSESSEE SOCIETY WAS NOT CARRYING ON BANKING BUSINESS AS IT WAS ACCE PTING DEPOSITS FROM THE PERSONS WHO HAVE NO VOTING RIGHT. SO FAR AS THE SEC OND CONDITION IS CONCERNED, THERE IS NO DISPUTE THAT THE PAID UP SHARE CAPITAL AND RESERVES IN THE CASE OF THE ASSESSEE IS MORE THAN RS. 1 LAC. THEREFORE, THE ASSESSEE SATISFIES THE SECOND CONDITION. 8.9 THUS, WE NOTICE THAT ALL THE THREE CONDITIONS IN THE CASE OF THE ASSESSEE FOR BECOMING PRIMARY COOPERATIVE BANK STAND COMPLIE D WITH. 8.10 WE HAVE GONE THROUGH THE DECISION OF THE HYDER ABAD BENCH OF THIS TRIBUNAL IN THE CASE OF THE CITIZEN COOPERATIVE SOC IETY VS. ADDL. CIT, 41 305 (HYD). WE NOTICE THAT THIS DECISION IS APPLICABLE T O THE FACTS OF THE CASE BEFORE US. IN THAT DECISION, UNDER PARA 23 THE TRIBUNAL HA S GIVEN A FINDING THAT THE ASSESSEE IS CARRYING ON BANKING BUSINESS AND FOR AL L PRACTICAL PURPOSES IT ACTS LIKE A CO-OPERATIVE BANK. THE SOCIETY IS GOVERNED B Y THE BANKING REGULATIONS ACT. THEREFORE, THE SOCIETY BEING A CO-OPERATIVE BA NK PROVIDING BANKING FACILITIES TO MEMBERS IS NOT ELIGIBLE TO CLAIM DEDU CTION U/S 80P(2)(A)(I) AFTER THE INTRODUCTION OF SUB-SECTION (4) TO SECTION 80P. IN VIEW OF THIS FINDING, THE ASSESSEE WAS DENIED DEDUCTION U/S 80P(2)(A)(I). WE HAVE ALSO GONE THROUGH THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. DIVYAJYOTHI CREDIT CO-OPERATIVE SOCIETY LTD. (SUPRA ) IN ITA NO. 72/BANG/2013. IN THIS CASE, WE NOTICE THAT THE HON'BLE TRIBUNAL C ONFIRMED THE ORDER OF CIT(A) I.T.A. NO.60/COCH/2014 10 FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT, CIRCLE 3(1), BANGALORE VS. M/S. BANGALORE COMMERCIAL TRANSPORT C REDIT CO-OPERATIVE SOCIETY LTD. IN ITA NO. 1069/BANG/2010 HOLDING THAT SEC. 80 P(2)(A)(I) IS APPLICABLE ONLY TO A CO-OPERATIVE BANK AND NOT TO CREDIT CO-OP ERATIVE SOCIETY. WITH DUE REGARDS TO THE BENCH, WE ARE UNABLE TO FIND ANY TER MCREDIT CO-OPERATIVE SOCIETY U/S 80P(2)(A)(I) OR U/S 80P(4), THEREFORE, THIS DE CISION CANNOT ASSIST US. WE NOTED THAT THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CITVS. JAFARI MOMIN VIKAS CO-OP. CREDIT SOCIETY LTD. IN TAX APPEA LS NO 442 OF 2013, 443 OF 2013 AND 863 OF 2013 (SUPRA) VIDE ORDER DT. 15.1.20 14 TOOK THE VIEW THAT SEC. 80P(4) WILL NOT APPLY TO A SOCIETY WHICH IS NOT A C O-OPERATIVE BANK. IN THE CASE OF VYAVASAYA SEVA SAHAKARA SANGHA VS. STATE OF KARN ATAKA &ORS. (SUPRA) WE NOTICE THAT THE ISSUE BEFORE THE HON'BLE HIGH COURT IN THE WRIT PETITION FILED BY THE PETITIONER RELATED TO THE LEGISLATIVE COMPETENC E OF THE STATE LEGISLATURE FOR ISSUING A CIRCULAR. THE ISSUE DOES NOT RELATE TO TH E CLAIM OF DEDUCTION U/S 80P(2)(A)(I). WHILE DEALING WITH THIS ISSUE, THE H ON'BLE HIGH COURT UNDER PARA 12 OBSERVED AS UNDER : 12.IT IS NOT POSSIBLE TO ACCEPT THIS CONTENTION. T HE PETITIONERS ARE NOT THE BANKING INSTITUTIONS COMING UNDER THE PURVIEW O F THE BANKING REGULATION ACT. THEY ARE THE CO-OPERATIVE SOCIETIES REGISTERED UNDER THE ACT, AND AS SUCH THEY ARE GOVERNED BY THE PROVISION S OF THE ACT PASSED BY THE STATE LEGISLATURE. CONSEQUENTLY, THE STATE G OVERNMENT HAS CONTROL OVER THEM TO THE EXTENT THE ACT PERMITS. MA JOR ACTIVITIES OF THE PETITIONERS ARE TO FINANCE ITS MEMBERS. FOR THE PUR POSE OF FINANCING ITS MEMBERS, THEY BORROW MONEY FROM THE FINANCING AGENC IES AND REPAY THE SAME. MERELY BECAUSE THE PETITIONERS-THE CO-OPE RATIVE SOCIETIES IN QUESTION-ARE REQUIRED TO ADVANCE LOANS TO THEIR MEM BERS, THEY DO NOT CEASE TO BE CO-OPERATIVE SOCIETIES GOVERNED BY THE ACT NOR CAN THEY BE TREATED AS BANKING COMPANIES. IT IS ALSO NOT POSSIB LE TO HOLD THAT THESE ACTIVITIES OF THE PETITIONERS AMOUNT TO BANKING A S CONTEMPLATED UNDER THE BANKING REGULATION ACT, 1949, INASMUCH AS THESE CO-OPERATIVE SOCIETIES ARE NOT ESTABLISHED FOR THE PURPOSE OF DO ING BANKING AS DEFINED IN SECTION 5(B) OF THE BANKING REGULATION A CT, 1949. THIS DECISION, IN OUR OPINION, IS NOT APPLICABLE TO THE CASE BEFORE US BECAUSE THE PROVISIONS OF SEC. 80P(2)(A)(I), AS WE HAVE ALR EADY HELD IN THE PRECEDING PARAGRAPHS, ARE APPLICABLE TO A CO-OPERATIVE SOCIET Y WHICH IS ENGAGED IN CARRYING ON BANKING BUSINESS FACILITIES TO ITS MEMB ERS IF IT IS NOT A CO-OPERATIVE BANK. WE HAVE ALSO GONE THROUGH THE DECISION OF THI S BENCH IN THE CASE OF DCIT VS. JAYALAKSHMI MAHILA VIVIDODESHAGALA SOUHARD A SAHAKARI LTD. IN ITA NO. 1 TO 3/PNJ/2012 DT. 30.3.2012 (SUPRA). WHILE D ISCUSSING THIS ISSUE, AFTER ANALYSING THE AIMS AND OBJECTS OF THE CO-OPERATIVE SOCIETY UNDER PARA 12 OF ITS ORDER, THIS TRIBUNAL HAS HELD AS UNDER : I.T.A. NO.60/COCH/2014 11 12.FROM THE AFORESAID OBJECTS, IT IS APPARENT THAT NONE OF THE AIMS AND OBJECTS ALLOWS THE ASSESSEE COOPERATIVE SO CIETY TO ACCEPT DEPOSITS OF MONEY FROM PUBLIC FOR THE PURPO SE OF LENDING OR INVESTMENT. IN OUR OPINION UNTIL AND UNLESS THAT CONDITION IS SATISFIED, IT CANNOT BE SAID THAT THE PRIME OBJECT OR PRINCIPAL BUSINESS OF THE ASSESSEE IS BANKING BUSINESS. THERE FORE, THE ASSESSEE WILL NOT COMPLY WITH THE FIRST CONDITION A S LAID DOWN IN THE DEFINITION AS GIVEN U/S. 5(CCV) OF THE BANKING REGULATION ACT, 1959 FOR BECOMING PRIMARY COOPERATIVE BANK. THE A SSESSEE, THEREFORE, CANNOT BE REGARDED TO BE PRIMARY COOPERA TIVE BANK AND IN CONSEQUENCE THEREOF, IT CANNOT BE A CO-OPERA TIVE BANK AS DEFINED UNDER PART V OF THE BANKING REGULATION ACT 1949. ACCORDINGLY, IN OUR OPINION THE PROVISIONS OF SECTI ON 80P (4) READ WITH EXPLANATION THERE UNDER WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE, THEREFORE, IN OUR OPINION WILL BE ENTITLE D FOR THE DEDUCTION U/S 80P(2)(A)(I). WE ACCORDINGLY CONFIRM THE ORDER OF CIT(A) ALLOWING DEDUCTION TO THE ASSESSEE. THE OTHER DECISIONS ALSO RELIED ON ARE NOT APPLICAB LE TO THE FACTS OF THE CASE OF THE ASSESSEE. 8.11. IN VIEW OF OUR AFORESAID DISCUSSION, WE HOLD THAT THE ASSESSEE IS A PRIMARY COOPERATIVE BANK AND THEREFORE HIT BY THE P ROVISIONS OF SECTION 80P(4). 9. ON THE OTHER HAND, THE ASSESSEE MADE AN ALTERNA TIVE PLEA THAT THE ASSESSEE IS LENDING MONEY ONLY TO ITS MEMBERS. BEIN G SO, APPLYING THE CONCEPT OF MUTUALITY, THE TOTAL INCOME OF THE ASSESSEE HAS TO BE EXEMPT FROM TAX. HOWEVER, WE FIND THAT THIS ARGUMENT OF THE ASSESSEE IS ALSO DEVOID OF MERITS. THE HONBLE SUPREME COURT HAD AN OCCASION TO CONSID ER THIS MUTUALITY CONCEPT. SIMILAR ISSUE CAME UP FOR CONSIDERATION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. KUMBAKONAM MUTUAL BENEFIT FUND LTD. , 53 ITR 241 (SC) WHEREIN IT WAS HELD THAT IF THE PROFITS ARE DISTRIB UTED TO SHAREHOLDERS AS SHAREHOLDERS, THE PRINCIPLE OF MUTUALITY IS NOT SAT ISFIED. A SHAREHOLDER IN THE ASSESSEE-COMPANY IS ENTITLED TO PARTICIPATE IN THE PROFITS WITHOUT CONTRIBUTING TO THE FUNDS OF THE COMPANY BY TAKING LOANS. HE IS ENTITLED TO RECEIVE DIVIDEND AS LONG AS HE HELD SHARES. HE DID NOT HAVE TO FULFI L ANY OTHER CONDITION. HIS POSITION IS IN NO WAY DIFFERENT FROM A SHAREHOLDER IN A BANKING COMPANY, LIMITED BY SHARES. INDEED, THE POSITION OF THE ASS ESSEE IS NO DIFFERENT FROM AN ORDINARY BANK EXCEPT THAT IT LENDS MONEY AND RECEIV ES DIVIDEND FROM ITS SHAREHOLDERS WHICH DOES NOT BY ITSELF MAKE ITS INCO ME ANY THE LESS INCOME FROM BUSINESS. THE SAME JUDGMENT WAS FOLLOWED IN T HE CASE OF CIT VS. ARCOT DHANASEKHARA NIDHI LTD., 59 ITR 480 (MAD.), CIT VS. DHARMAVARAM MUTUAL BENEFIT PERMANENT FUND LTD., 67 ITR 673 (AP) AND C IT VS. BHAVNAGAR TRUST I.T.A. NO.60/COCH/2014 12 CORPORATION (P) LTD., 69 ITR 278. FURTHER, THE HON BLE KERALA HIGH COURT IN THE CASE OF KOTTAYAM CO-OPERATIVE LAND MORTGAGE BANK LT D. VS. CIT, 172 ITR 443(KER.) WHERE IT WAS HELD AS UNDER: THE INCOME-TAX OFFICER HELD THE VIEW THAT THE ASSE SSEE IS NOT ENTITLED TO CLAIM ANY FURTHER EXEMPTION UNDER CLAUS E (C) AS THE ASSESSEE IS ENTITLED TO EXEMPTION U/S. CLAUSE (A) I N RESPECT OF THE BANKING ACTIVITIES. THE APPELLATE ASSISTANT COMMISS IONER, IN ALLOWING THE ASSESSEES APPEAL, HELD THAT EXEMPTION UNDER CLAUSE (C) IS IN ADDITION TO THE EXEMPTION ALLOWABLE UNDER CLAUSES (A) AND (B) AND DIRECTED THE INCOME-TAX OFFICER TO ALLO W A DEDUCTION OF RS. 20,000 SEPARATELY, TAKING INTO CONSIDERATION THE PROPERTY INCOME EARNED BY THE ASSESSEE. THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE APPELLATE TRIBUNAL. THE TRIBU NAL HELD THAT THE RULE OF CONSTRUCTION OF EJUSDEM GENERIS APPLIES TO THE CONSTRUCTION OF CLAUSE (C), WHICH RESULTS IN PROFIT S AND GAINS, THAT THE INCOME FROM HOUSE PROPERTY HAS BEEN DEALT WITH IN SECTIONS 22 TO 27 AS INCOME AND NOT AS PROFITS AND GAINS AND THAT THE ASSESSEE IS NOT, THEREFORE, ENTITLED TO ANY EXEMPTI ON UNDER CLAUSE (C). THE TRIBUNAL DID NOT ACCEPT THE ALTERNATIVE CO NTENTION RAISED BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE TRIBU NAL THAT THE LETTING OUT OF SURPLUS SPACE SHOULD BE TREATED AS A BUSINESS ACTIVITY UNDER CLAUSE (A) OF SUB-SECTION (2) OF SEC TION 80P OF THE ACT. THE APPEALS WERE ACCORDINGLY ALLOWED. THE QUE STION OF LAW ARISES OUT OF THE ORDER OF THE TRIBUNAL. SECTION 80P OF THE INCOME-TAX ACT, 1961, ALLOWS A S TRAIGHT DEDUCTION, IN THE COMPUTATION OF THE TOTAL INCOME O F A CO- OPERATIVE SOCIETY, TO THE EXTENT MENTIONED. CLAUSE (C) OF SECTION 80P(2) PROVIDES THAT IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED IN ACTIVITIES OTHER THAN THOSE SPECIFIED IN CLAUSE (A) OR CLAUSE (B) EITHER INDEPENDENTLY OF, OR IN ADDITION TO, ALL OR ANY OF THE ACTIVITIES SO SPECIFIED, SO MUCH OF ITS PROFITS AND GAINS ATTRIBUTABLE TO SUCH ACTIVITIES AS DOES NOT EXCEED RS. 20,000 SHALL BE DEDUCTED IN COMPUTING THE TOTAL INCOME. THE CO-OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBE RS FALLS UNDER CLAUSE (A) OF SECTION 80P(2). THE CLAIM FOR EXEMPT ION UNDER CLAUSE (C) IS IN ADDITION TO THE EXEMPTION PROVIDED UNDER CLAUSE (A). THE PROVISIONS ARE CUMULATIVE AND MUTUALLY SUP PLEMENTING. THE LIMITS SPECIFIED IN CLAUSE(C) ARE IN RELATION T O THE PROFITS AND GAINS ATTRIBUTABLE TO THE ACTIVITY OTHER THAN THAT SPECIFIED IN CLAUSE (A). IF THE RENTAL INCOME RECEIVED BY THE S OCIETY IS I.T.A. NO.60/COCH/2014 13 ATTRIBUTABLE TO ANY ACTIVITY OF THE SOCIETY, CLAUSE (C) WOULD BE ATTRACTED. IT IS THEN NECESSARY THAT THE CO-OPERAT IVE SOCIETY MUST PROVE THAT IT HAS ENGAGED ITSELF IN CARRYING ON THE ACTIVITY GIVING RISE TO PROFITS OR GAINS. SUCH ACTIVITY OF THE ASS ESSEE MUST HAVE A DIRECT OR PROXIMATE CONNECTION WITH OR NEXUS TO THE EARNING IN ORDER THAT THE ASSESSEE MAY ENJOY THE EXEMPTION. SECTION 80P(2)(C) OF THE ACT EXEMPTS INCOME OF CO-O PERATIVE SOCIETIES TO THE EXTENT MENTIONED THEREIN IF THE PR OFITS OR GAINS ARE ATTRIBUTABLE TO THE ACTIVITY IN WHICH THE CO-OP ERATIVE SOCIETY IS ENGAGED. THE EXPRESSION ATTRIBUTABLE TO IS MUCH WIDER THAN THE EXPRESSION DERIVED FROM AND IT COVERS RECEIPTS FR OM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF TH E ASSESSEE. IN THIS VIEW OF THE MATTER, INTEREST EARNED BY A CO-OP ERATIVE SOCIETY, WHICH WAS CARRYING ON THE BUSINESS OF SUPPLYING SUR GARCANE ON STATUTORY INVESTMENT IN GOVERNMENT SECURITIES, WAS HELD PROFIT ATTRIBUTABLE TO THE CARRYING ON OF THE ACTIVITY OF SUPPLYING SUGARCANE (CIT VS. CO-OPERATIVE CANE DEVELOPMENT UN ION LTD. (1979) 118 ITR 770 (ALL.) THE PROFITS AND GAINS FRO M SUCH INVESTMENTS WERE CONNECTED WITH OR INCIDENTAL TO TH E CARRYING ON OF THE ACTUAL BUSINESS. WHERE, HOWEVER, THE ASSESSEE AS OWNER OF CERTAIN PR OPERTY LETS OUT THAT PROPERTY AND RECEIVES RENTAL INCOME, THE I NCOME THUS RECEIVED CANNOT PARTAKE OF THE CHARACTER OF PROFITS AND GAINS ATTRIBUTABLE TO AN ACTIVITY CARRIED ON BY THE SOCIE TY. THE BUILDING LET OUT IS NOT A COMMERCIAL ASSET OR THE RENT RECEI VED IS NOT PROFIT OR GAIN ARISING FROM THE EXPLOITATION OF A BUSINESS ASSET. THE WORD ACTIVITY IS WIDER THAN THE WORD BUSINESS. IT CONNOTES A SPECIFIED FORM OF SUPERVISED ACTION OR 0FIELD OF AC TION. READ IN THE CONTEXT OF THE PROFIT EARNING ACTIVITY OF A CO- OPERATIVE SOCIETY, IT MEANS THE CORPORATE ACTIVITY OF THE SOCIETY, THA T IS TO SAY, WHETHER OR NOT THEY AMOUNT TO A BUSINESS, TRADE OR PROFESSION IN THE ORDINARY SENSE. CLAUSE (C) OF SECTION 80P(2) IS INTENDED TO COVER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL C ONDUCT OF THE BUSINESS BUT ATTRIBUTABLE TO AN ACTIVITY WHICH RESU LTS IN PROFITS AND GAINS. LETTING OUT OF SURPLUS SPACE IN THE BUILDIN G OWNED AND USED BY THE ASSESSEE IS NOT SUCH AN ACTIVITY FALLIN G UNDER CLAUSE (C). THE RENT THUS RECEIVED BY THE ASSESSEE IS NOT ELIGIBLE FOR THE EXEMPTION PROVIDED THEREUNDER. IN THIS VIEW, THE A PPELLATE TRIBUNAL WAS JUSTIFIED IN REJECTING THE ASSESSEES CLAIM. 10. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE INCLI NED TO HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 80P OF THE ACT ON ANY REASONING. I.T.A. NO.60/COCH/2014 14 8. IN VIEW OF THE ABOVE TRIBUNAL ORDER, WE ARE INCL INED TO DISMISS THIS GROUND OF THE ASSESSEE. 9. THE ASSESSEE RAISED THE GROUND THAT THE CIT(A), HAVING CONSIDERED THE ASSESSEE AS CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATI VE AGRICULTURAL AND RURAL DEVELOPMENT BANK, AND ALLOWED DEDUCTION U/S. 36(1)( VIIA) OUGHT TO HAVE ALLOWED DEDUCTION VIDE PROVISO TO SECTION 36(1) (VI IA) FOR PROVISIONS MADE FOR ASSETS CLASSIFIED AS DOUBTFUL ASSETS OR LO SS ASSETS IN ACCORDANCE WITH THE GUIDELINES ISSUED BY THE RESERVE BANK OF I NDIA. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. A SIMILAR CASE CAME UP FOR CONSIDERATION BEFORE THE C OCHIN BENCH OF THE TRIBUNAL IN THE CASE OF THE KANNUR DISTRICT CO-OPER ATIVE BANK LTD. VS. DCIT IN I.T.A. NOS. 182&183/COCH/2014 DATED 27/06/2 014 WHEREIN IT WAS HELD AS UNDER: 4. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE O PINION THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THE HONBLE JURIS DICTIONAL 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 HELD A S UNDER: 8. SECTION 36 OF THE ACT DEALS WITH VARIOUS DEDUCT IONS THAT COULD BE ALLOWED IN COMPUTING THE INCOME REFERRED TO IN SECT ION 28 OF THE ACT. SECTION 36 HAS VARIOUS CLAUSES AND EACH CLAUSE REFE RS TO DEDUCTION I.T.A. NO.60/COCH/2014 15 ALLOWABLE TO A PARTICULAR ASSESSEE LIKE AMOUNT OF P REMIUM PAID IN RESPECT OF INSURANCE AGAINST RISK OF DAMAGES, FEDER AL MILK CO- OPERATIVE SOCIETY, GENERAL INSURANCE ETC. WE ARE C ONCERNED WITH SUB-CLAUSE (A) OF CLAUSE (VIIA) TO SECTION 36(1). T HIS CLAUSE MAKES PROVISION FOR BAD AND DOUBTFUL DEBTS. IN OTHER WOR DS, DEDUCTION COULD BE CLAIMED BY BANKS REFERRED TO IN CLAUSE (VI IA) IN RESPECT OF BAD AND DOUBTFUL DEBTS. IT PROVIDES CERTAIN TERMS AND CONDITIONS UNDER WHICH SUCH DEDUCTIONS COULD BE CLAIMED BY A P ARTICULAR BANK. SECTION 36(1)(VIIA) COMMENCES WITH FOLLOWING WORDS IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBT MADE BY AN D 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 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 SOCI ETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK, AN AMOUNT 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 P ERCENT OF THE AGGREGATE AVERAGE ADVANCES MADE BY THE RURAL B RANCHES OF SUCH BANK COMPUTED IN THE PRESCRIBED MANNER. UNDER EXPLANATION TO SECTION 36 FOR BETTER UNDERSTA NDING OF CERTAIN TERMS USED IN SUB-CLAUSE (A) OF CLAUSE (VIIA) DEFIN ITIONS AR PROVIDED. FOR THE PURPOSE OF THE ABOVE APPEALS, WE NEED TO KN OW WHAT EXACTLY NON-SCHEDULED BANK, RURAL BRANCH CO-OPERATIVE BANK AND SCHEDULED BANK MEAN AS PER THE EXPLANATION WHICH READ AS UNDE R: NON-SCHEDULED BANK MEANS A BANKING COMPANY AS DE FINED UNDER CLAUSE (C) OF SECTION 5 OF THE BANKING REGU LATION ACT, 1949, WHICH IS NOT A SCHEDULED BANK. RURAL BRANCH MEANS A BRANCH OF A SCHEDULED BANK OR A NON- SCHEDULED BANK SITUATED IN A PLACE WHICH HAS A PO PULATION OF NOR MORE THAN TEN THOUSAND ACCORDING TO THE LAST P RECEDING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUB LISHED BEFORE THE FIRST DAY OF THE PREVIOUS YEAR. CO-OPERATIVE BANK, PRIMARY AGRICULTURAL CREDIT S OCIETY AND PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVEL OPMENT BANK SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO T HEM IN THE EXPLANATION TO SUB-SECTION (4) OF SECTION 80P. I.T.A. NO.60/COCH/2014 16 SCHEDULED BANK MEANS A BANK FOR THE TIME BEING I NCLUDED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA A CT. 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 SU CH BANK FINDS A PLACE IN THE SECOND SCHEDULE TO RESERVE BANK OF IND IA ACT. CO- OPERATIVE BANK MEANS A BANK AS EXPLAINED UNDER SUB- SECTION (4) OF SECTION 80P OF THE ACT. SECTION 5(C) OF BANKING RE GULATION 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 REGULAT ION ACT, ENTIRE PROVISIONS DEAL WITH CO-OPERATIVE SOCIETIES. SECTI ON 56 SAYS, AFTER CLAUSE (CC) CLAUSE (CCI), DEFINITION OF CO-OPERATIV E BANK, IS TO BE INCLUDED. SECTION 56(C) OF BANKING REGULATION ACT S AYS: 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-OPERATI VE BANK. MEANING OF DIFFERENT TERMS USEFUL FOR THE PURPOSE O F DECIDING THE CONTROVERSY, ONE HAS TO SEE HOW PRESENCE OF A PARTI CULAR TERM IN A PARTICULAR PROVISION AND SIMULTANEOUSLY BEING ABSEN T 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-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 POSI TION PRIOR TO 01.04.2007 AND AFTER 01.04.2007, THEY WERE ENJOYING THE BENEFITS PROVIDED U/S. 80P. WITH THE INTRODUCTION OF FINANCE 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 2 007, CO-OPERATIVE BANK WAS NOT INCLUDED IN SUB-CLAUSE (A) SO FAR AS P ROVISIONS FOR BAD I.T.A. NO.60/COCH/2014 17 AND DOUBTFUL DEBTS. WITH EFFECT FROM 01.04.2007, C O-OPERATIVE BANK WAS INCLUDED UNDER SUB-CLAUSE 9A) OF CLAUSE (VIIA) OF SECTION 36(1). IT IS FURTHER CLARIFIED THAT ONLY SUCH CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURE CREDIT SOCIETY, ETC. IS INCLUDE D 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 EXPLANAT ION UNDER SAID SECTION PRESENT CERTAIN DIFFICULTIES, BUT SITUATION IS NOT WITHOUT POSSIBILITIES. THE OBJECT AND INTENTION OF THE LEG ISLATURE IS TO BE UNDERSTOOD BY HARMONIOUS CONSTRUCTION OF THE PROVIS IONS. 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 MORE. B Y RESTRICTING THE SCOPE OF THE PROVISIONS, THE VERY PURPOSE OF INCLUS ION OF CO-OPERATIVE BANK WOULD BE LOST. SUB-CLAUSE (A) CONSISTS OF TWO TYPES OF DEDUCTIONS. ONE REFERS TO DEDUCTION OF AN AMOUNT N OT EXCEEDING 7.5% OF THE TOTAL INCOME. ONLY CONDITION 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 DEB TS UNDER THIS CLAUSE SO FAR AS CO-OPERATIVE BANK AND THEY WERE CL AIMING 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 APPELL ANTS/ASSESSEES HAVE CREATED PROVISION FOR BAD AND DOUBTFUL DEBTS I N THE BOOKS OF ACCOUNTS. SO FAR AS THIS ISSUE IS CONCERNED, OPIN ION OF THE ASSESSING OFFICER AND TWO APPELLATE AUTHORITIES IS JUSTIFIED AND WE NEED NOT INTERFERE WITH THE OPINION OF THE AUTHORITIES IN RE STRICTING 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 WH ETHER A CO- OPERATIVE BANK, IRRESPECTIVE OF HAVING RURAL BRANCH AS EXPLAINED UNDER EXPLANATION, IS ENTITLED TO HAVE THE BENEFIT O F SECOND PART OF SECTION 36(1)(VIIA)(A), WE HAVE TO SEE, IN THE ABSE NCE OF CO- OPERATIVE BANK IN THE DEFINITION OF RURAL BRANCH UN DER EXPLANATION TO SECTION 36(1) WOULD IT MAKE ANY DIFFERENCE. LEARNE D COUNSEL APPEARING FOR APPELLANTS TRIED TO CONVINCE THE COUR T THAT ADJECTIVE OF RURAL WOULD MEAN IN RELATION TO OR CHARACTERISTIC O F THE COUNTRYSIDE RATHER THAN THE TOWN; REMOTE RURAL AREAS. URBAN, N O DOUBT, IS OPPOSITE TO RURAL. URBAN IS IN RELATION TO OR CHAR ACTERISTIC 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 REA SON 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 I.T.A. NO.60/COCH/2014 18 THE LIGHT OF GIVING A PARTICULAR DEFINITION FOR THE PURPOSE OF UNDERSTANDING RURAL BRANCH WITH REFERENCE TO SUB-CL AUSE (A) OF CLAUSE (VIIA) TO SECTION 36(1) ONE NEED NOT TO GO IN SEARC H OF THE MEANING OF RURAL OR WHAT EXACTLY WOULD CONSTITUTE RURAL BRA NCH. THIS COURT HAD AN OCCASION TO DECIDE THE SAID CONTROVERSY PERT AINING 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 C LAIM FOR DEDUCTION OF PROVISION FOR BAD DEBTS IN TERMS O F SECTION 36(1) (VIIA) OF THE INCOME-TAX ACT. HERE THE ONLY QUEST ION RAISED IS AS TO BASIS OF CLASSIFYING BRANCHES OF THE BANK AS RU RAL 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- SCHEDULES BANK SITUATED IN A PLACE WHICH HAS A POP ULATION OF NOR MORE THAN TEN THOUSAND ACCORDING TO THE LAST PREC EDING 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 CLASSIFICA TION BETWEEN RURAL AND OTHER BRANCHES OF A BANK IS MADE BASED ON THE P OPULATION IN THE PLACE WHERE THE CONCERNED BRANCH IS LOCATED. WHILE THE ASSESSEES CASE THAT FOUND ACCEPTANCE WITH THE TRIBUNAL IS THA T PLACE REFERRED TO IN THE ABOVE DEFINITION CLAUSE IS THE WARD OF A PANCHAYAT OR MUNICIPALITY, THE ASSESSING OFFICER TOOK THE VIEW T HAT PLACE CONTAINED IN THE DEFINITION CLAUSE SHOULD MEAN A RE VENUE VILLAGE. NO DOUBT, AS SUCH IS NOT DEFINED IN THE DEFINITION CL AUSES AND SO MUCH SO, WE HAVE TO FIND OUT THE SCOPE AND MEANING OF P LACE REFERRED TO IN THE SECTION. STANDING COUNSEL FOR THE DEPARTMEN T PRODUCED BEFORE US LAST PUBLISHED CENSUS REPORT OF 2001. EVEN THOU GH 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 C ENSUS 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 DEFINITION IS FOLLOWED. I.T.A. NO.60/COCH/2014 19 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 P OPULATION 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, TH EN PROBABLY EVEN IN MUNICIPAL AREAS THERE MAY BE WARDS WITH LESS THAN 1 0000 POPULATION THEREBY ANSWERING THE BRANCH LOCATED IN SUCH MUNICI PAL AREA ALSO AS A RURAL BRANCH. GOING BY THE ORDINARY MEANING OF R URAL BRANCH, WE FEEL ONLY BRANCHES OF THE BANK LOCATED IN RURAL ARE AS 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 IDENTIFICAT ION 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 CE NSUS REPORT WHEREIN REVENUE VILLAGE IS TREATED AS A UNIT OF RUR AL AREA, CAN BE RIGHTLY ADOPTED. SO MUCH SO, PLACE REFERRED TO IN THE ABOVE DEFINITION CLAUSE FOR THE PURPOSE OF IDENTIFYING TH E 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 LOCA L AUTHORITY LIKE PANCHAYAT OR MUNICIPALITY IS INCORRECT AND, IN OUR VIEW, A RURAL BRANCH HAS TO BE ALWAYS IN RURAL AREAS AND THE PLACE REFER RED 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 CORPORATION AREA WHERE TH E POPULATION IS LESS THAN 10000. SO MUCH SO, RURAL BRANCHES ARE SUCH OF THE BRANCHES LOCATED IN A VILLAGE WHERE THE POPULATION IN THE VI LLAGE 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 REFE RENCE TO ABOVE SECTION. THEREFORE, RURAL BRANCH IS A BRANCH WHICH FALLS UNDER EXPLANATION (IA) TO SECTION 36(1) (VIIA). TRIBUNAL HAD TO REVERSE THE JUDGMENT OF CIT(APPEALS) IN THE LIGHT OF THE DECISI ON 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 AVERA GE ADVANCES WHILE COMPUTING THE INCOME IRRESPECTIVE OF FALLING UNDER RURAL BRANCH AS PER EXPLANATION, IN ORDER TO CONSIDER A COMPANY A S A BANKING COMPANY IT MUST TRANSACT BUSINESS OF BANKING IN IND IA AS DEFINED U/S. 5(C) OF BANKING REGULATION ACT. EXPLANATION TO SECT ION 5(C) CLEARLY INDICATES WHICH ARE THE TRANSACTIONS WHICH WOULD NO T COME WITHIN THE MEANING OF BANKING BUSINESS. NON-SCHEDULE BANK MEA NS A BANKING I.T.A. NO.60/COCH/2014 20 COMPANY AS DEFINED U/S. 5(C) WHICH IS NOT A SCHEDUL ED BANK. AS ALREADY STATED ABOVE, CO-OPERATIVE BANK CANNOT BE C ONSIDERED AS A SCHEDULED BANK AS SECOND SCHEDULE TO RESERVE BANK O F INDIA ACT DOES NOT INCLUDE ANY OF THE CO-OPERATIVE BANKS. RE ADING OF SECTION 5(C) ALONG WITH EXPLANATION, CLEARLY INDICATES THOU GH ANY COMPANY WHICH TRANSACTS BUSINESS OF BANKING IN INDIA WOULD COME WITHIN THE MEANING OF NON-SCHEDULED BANK, BY VIRTUE OF EXPLANAT ION (1) UNDER THIS CLAUSE SCHEDULED BANK IS EXCLUDED. SO FAR AS SUB-CLAUSE(A) OF CLAUSE (VIIA) TO SECTION 36(1), TWO TYPES OF DEDUCT IONS ARE PROVIDED TO NON-SCHEDULED BANK, A SCHEDULED BANK AND A CO-OP ERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY, E TC. IT IS TO BE NOTED THAT APPELLANTS/ASSESSEES ARE NOT PRIMARY AGRICULTU RAL CREDIT CO- OPERATIVE SOCIETY OR OTHER KIND OF BANK SO AS TO GO OUT OF THE DEFINITION OF CO-OPERATIVE BANK UNDER SUB-CLAUSE (A ) TO CLAUSE (VIIA) OF SECTION 36(1). NO DOUBT, EXPLANATION (IA) TO SEC TION 36(1)(VIIA) DEFINES WHAT IS A RURAL BRANCH. IT IS WITH REFEREN CE TO A PLACE AND CERTAIN NUMBER OF POPULATION. IT REFERS TO BRANCH OF A SCHEDULED BANK OR A NON-SCHEDULED BANK. APPARENTLY, WE DO NO T FIND THE TERM CO-OPERATIVE BANK. SECTION 5(CCI) OF BANKING REGUL ATION ACT THOUGH HAS BROUGHT IN DEFINITION OF CO-OPERATIVE BANK, VIR TUALLY EVERY BANK WHICH IS NOT A SCHEDULED BANK WOULD FALL UNDER THE DEFINITION OF NON- SCHEDULE BANK. READING OF DEFINITION OF NON-SCHEDU LE BANK ALONG WITH MEANING OF RURAL BRANCH UNDER EXPLANATION TO SE CTION 36(1) OF THE ACT, CLEARLY INDICATE THAT CO-OPERATIVE BANK AL SO FALLS UNDER THE CATEGORY OF NON-SCHEDULE BANK FOR THE PURPOSE OF TH IS SECTION. THEREFORE, 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 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 AGGREGATE AVERAGE ADVANCES IS APPLICABLE TO CO-OPERATIVE BANK ALSO PR OVIDED THEIR RURAL BRANCHES HAVE ADVANCED SUCH AMOUNTS. SUCH RURAL BR ANCH MEANS A BRANCH AS EXPLAINED UNDER EXPLANATION (IA), AS OPINE D 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 QUESTIO NS OF LAW IN FAVOUR OF REVENUE. I.T.A. NO.60/COCH/2014 21 5. IN VIEW OF THE ABOVE JUDGMENT OF THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE, WE ARE INCLINED T O DECIDE THE ISSUE AGAINST THE ASSESSEE. ACCORDINGLY, THIS GROUND RAI SED BY THE ASSESSEE IN BOTH THE APPEALS IS DISMISSED 6. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE IN I.T.A. NOS. 182&183/COCH/2014 ARE DISMISSED. . 11. IN VIEW OF THE ABOVE TRIBUNAL ORDER, THIS GROUN D OF THE ASSESSEE IS DISMISSED. 12. THE LD. AR ALSO SUBMITTED THAT CIT(A) HAS WRONG LY CONSIDERED THE RESERVE FOR OVERDUE INTEREST DUE ON BORROWINGS AMOUNTING TO RS.41,60,210/- PAYABLE BY THE ASSESSEE AS PROVISION FOR BAD AND DOUBTFUL DEBTS AND ALLOWED DEDUCTION U/S. 36(1) (VI I) SUBJECT TO THE STATUTORY LIMIT SPECIFIED THEREIN INSTEAD OF ALLOWI NG THE INTEREST ON BORROWING U/S. 36(1)(VII) OF THE I.T. ACT. THE ASSE SSEE EXPLAINED THAT THE RESERVE FOR OVERDUE INTEREST DEBITED IN THE P&L ACC OUNT WAS ACTUALLY THE CUMULATIVE FIGURE AND NOT SOLELY FOR THE CURRENT YE AR. 13. THE ABOVE GROUND TAKEN BY THE ASSESSEE IS TOTAL LY MISCONSTRUED AS THE CIT(A) IS JUSTIFIED IN GIVING A FINDING THA T THE ASSESSEES CLAIM FOR DEDUCTION U/S. 36(1)(VII) (A) IS TO BE CONSIDERED S UBJECT TO STATUTORY LIMIT AND ALSO THE LD. AR HAS NOT BEEN ABLE TO SHOW AS TO HOW THIS SECTION IS I.T.A. NO.60/COCH/2014 22 NOT APPLICABLE TO THE ASSESSEES CASE. BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDI NGLY, THIS GROUND OF THE ASSESSEE IS DISMISSED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. - PRONOUNCED ACCORDINGLY ON 21-11-2 014. SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 21ST NOVEMBER, 2014 GJ COPY TO: 1. THE CHETTIAMPARAMBA SERVICE CO-OP BANK LTD., CHE TTIAMPARAMBA, KELAKAM, THALASSERY-670 674. 2. THE I.T.O., WARD-2, KANNUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOZHIKO DE. 4. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN