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TMI Blog2014 (6) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... d to in the provision - the authorities below were justified in opining that the benefit of deduction of 10 per cent of the aggregate average advances is applicable to co-operative bank also provided their rural branches have advanced such amounts - - Decided against Assessee. - I.T.A. Nos.182&183 /Coch/2014 - - - Dated:- 27-6-2014 - SHRI N.R.S.GANESAN, JM AND CHANDRA POOJARI, AM For the Petitioner : Shri Radhesh Bhat, CA For the Respondent : Smt. Latha V Kumar, Jr. DR ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER: These two appeals filed by the assessee are directed against the different orders of the CIT(A), Kannur. 2. Since the issue in both the appeals is identical in nature, they were grouped together, heard together and are being disposed of by this common consolidated order. 3. The assessee raised the ground in 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 Hon ble Jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to the last preceding census of which the relevant figures have been published before the first day of the previous year. Co-operative bank , primary agricultural credit society and primary cooperative agricultural and rural development bank shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of Section 80P. Scheduled band 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 bank 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. Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ul debts under this clause so far as cooperative 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 far 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 relation to or characteristic of the countryside rather than the tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 literal meaning of rural branch which necessarily excludes urban areas. 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 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 located 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 Census Report can be legitimately adopted. So much so, we feel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) 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-operative 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 definition 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 cooperative bank also falls under the category of non-schedule bank for the purpose of this Section. Therefore, reading of entire Section 36(1)(viia)(a) along with explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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