TaxTMI 
TaxTMI 
2014 (2) TMI 511
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....e Act in respect of 10% of aggregate average advances by the rural branches of the assessee. 3. The facts relating to the issue are stated in brief. The assessee is a co-operative bank engaged in the banking business. In the return of income, it claimed deduction u/s. 36(1)(viia) of the Act to the tune of Rs. 2.64 crores. The said deduction consisted of 7.5% of profit amounting to Rs. 0.24 crore and 10% of advances made by the rural branches amounting to Rs. 2.40 crores. The Assessing Officer disallowed the claim of Rs.2.40 crores relating to 10% of advances made by the rural branches of the assessee on the reasoning that none of the branches of the assessee-bank shall qualify as "rural branch" as per the definition of rural branch given i....
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....ed 07-10-2010 passed by Hon'ble Kerala High Court in ITA No.234 of 2009 in the case of CIT Vs. The Lord Krishna Bank Ltd, which is reported in 195 Taxman 57. The relevant observations made by the Hon'ble Jurisdictional Kerala High Court are extracted below, for the sake of convenience:- "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 a....
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....sessment." By respectfully following the decision of Jurisdictional High Court, we set aside the order of Ld CIT(A) on this issue and restore that of the assessing officer. 7. Before us, the Ld A.R took an alternative plea with regard to the issue of determination of "rural branch" by submitting that the definition of "rural branch" given in sec. 36(1)(viia) shall not apply to the Co-operative banks and hence the order of Hon'ble Jurisdictional High Court shall not apply to the assessee herein. 7.1 In order to understand this alternative plea, it is necessary to explain the relevant provisions. The section 36(1)(viia) opens with the words "in respect of any provision for bad and doubtful debts made by --- (a) a scheduled bank not being ....
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....n raised before the lower authorities. Hence, the alternative ground should not have been accepted normally. However, since the alternative plea of the assessee involves interpretation of the various provisions/clauses of the Act/other Central Act only, in the interest of natural justice, we proceed to address the alternative plea of the assessee in the coming paragraphs. 8. The Explanation below section 36(1)(viia) defines various terms. Some of the definitions, which are relevant to the issue under consideration, are extracted below:- "non-scheduled bank" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank. "scheduled bank" means the State Bank of....
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....y which transacts the business of banking in India. For understanding the meaning of "Co-operative Bank" we have to refer to Part V of the Banking Regulations Act, 1949. The said Part V starts with section 56, which reads as under:- 56:- Act to apply to Co-operative societies subject to modifications:- The provisions of this Act, as in force for the time being, shall apply to, or in relation to cooperative societies as they apply to, or in relation to banking companies subject to the following modifications namely:- Throughout this Act, unless the context otherwise requires:- References to a "banking company" or "the company" or "such company" shall be construed as reference to a Co-operative Bank"...... ...... In section (5), after cl....