TaxTMI 
TaxTMI 
2014 (8) TMI 635
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....t the definition of the term 'banking company' in section 5(c) of the Banking Regulation Act covers a co-operative bank, which is separately defined in section 5(cci) of the said Act ?" All the above appeals are directed against the order of the Appellate Tribunal. It is clear from substantial questions of law stated above what exactly is the dispute. Admittedly, appellants-assessee are co-operative banks having its registered offices at the addresses mentioned in the cause title and they have several branches spread all over the State of Kerala. What we understand from the contentions raised by appellants-assessees is that though sub-clause (a) of clause (viia) of section 36(1) of Income-tax Act (for short "the Act") particularly refers to co-operative bank, but under the Explanation, while defining rural branch, it does not refer to co-operative bank, therefore, irrespective of the Explanation of rural branch, they are entitled to claim deduction of an amount not exceeding 10 per cent. of the aggregate average advances made by them. The Assessing Officer and other two appellate authorities opined that the appellants-assessees are entitled to claim deduction in respect of....
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....nch of co-operative bank is situated, as long as it has licence as rural branch issued by the Reserve Bank of India and fits within the general meaning of rural area, they are entitled for deduction of 10 per cent. of the aggregate average advances made by such rural branches. Learned counsel took us through several definitions provided under the Income-tax Act, the Banking Regulation Act, 1949, and also the Reserve Bank of India Act, 1934, to understand what is a banking company, scheduled bank, non-scheduled bank and co-operative bank. They also refer to the dictionary meanings of banking terminologies. Further, reliance is placed on several materials to understand what exactly the words "rural" and "urban" would mean. According to them, the judgment in CIT v. Lord Krishna Bank Ltd. [2011] 339 ITR 606 (Ker) is not applicable so far as cooperative bank is concerned. As against this, the learned standing counsel appearing for the Revenue took us through the very same judgment of a Division Bench of this court in Lord Krishna Bank's case (supra) and contends that once the provision under the Income-tax Act refers to a particular bank and its rural branch, it has to be understo....
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....or bad and doubtful debt made by" and sub-clause (a) reads as under : "A scheduled bank not being a bank approved by the 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 primary agricultural credit society or a primary co-operative agricultural and rural development bank, an amount not exceeding seven and one-half per cent. of the total income (computed before making any deduction under this clause and Chapter VI-A) and an amount not exceeding ten per cent. of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner." Under the 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 nonscheduled bank, rural branch, co-operative bank and scheduled bank mean as per the Explanation which read as under : "'non-scheduled bank' means a baking company as defined under clause (c) of se....
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....007, one has to understand what was the position prior to April 1, 2007, and after April 1, 2007. During the relevant assessment year, admittedly, the appellants-assessees were not entitled for any deduction provided under section 80P of the Act. Prior to April 1, 2007, they were enjoying the benefits provided under section 80P. With the introduction of the Finance Act, 2007, with effect from April 1, 2007, they could claim deductions as provided under section 36(1) of the Act. We are concerned with sub-clause (a) of clause (viia) of section 36(1). Prior to the Finance Act of 2007, cooperative bank was not included in sub-clause (a) so far as the provisions for bad and doubtful debts. With effect from April 1, 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 agriculture credit society, etc., is included in sub-clause (a) of clause (viia). The provision is a beneficial one. No doubt, a plain reading of the main section 36(1)(viia)(a) and the Explanation under the said section present certain difficulties but situation is not without possibilities. The object and ....
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....istic 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. According to us, there is no necessity to find out the generic meaning of either urban or rural for the simple reason that the 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 understanding rural branch with reference to sub-clause (a) of clause (viia) of section 36(1) one need not 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 pertaining 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 (page 608 of 339 ITR) : "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 the only question raised is as to....
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....ated 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 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, municipality 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....