TaxTMI 
TaxTMI 
TaxTMI 
2019 (8) TMI 1447
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.... two components of deduction u/s. 36(1)(viia) of the ITA, 1961. 3. The appellant craves leave to add / modify / delete / amend all / any of the grounds of appeal." 3. The only issue raised in the present appeal is against the disallowance made u/s. 36(1)(viia) of the Act. 4. The ld. AR for the assessee at the outset pointed out that the issue stands covered by the decision of Pune Bench of Tribunal in the case of Bhagini Nivedita Sahakari Bank Ltd. Vs. Deputy Commissioner of Income Tax reported as 100 taxmann.com 375 (Pune-Trib.). 5. The ld. DR for the Revenue on the other hand fairly admitted that the issue stands covered by the order of Tribunal on similar issue. 6. We have heard the rival contentions and perused the record. The assessee was a Co-operative Bank registered under the Maharashtra State Co-operative Act, 1960 and Banking Regulation Act with RBI. During the course of assessment proceedings, the Assessing Officer noted that the assessee had claimed deduction u/s. 36(1)(viia) of the Act at Rs. 30,53,340/-. The Assessing Officer noted that the assessee was not having any rural branches and hence was not eligible to claim the deduction u/s. 36(1)(viia) of the Act. H....
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.... on account of provision for bad and doubtful debts, subject to the condition that provision to that extent is made in the books of account. Sub-clause (a) refers to deduction of an amount not exceeding 7.5% of total income, before allowing any deduction under the Chapter VI-A and secondly, it also refers to a deduction of an amount not exceeding 10% of aggregate average advances made by rural branches of such banks, which have been computed in prescribed manner. 15. The CBDT vide Circular No.464, dated 18.07.1986 had clarified the position for bad and doubtful debts made by the banks that under the existing provisions inserted by Finance Act, 1979 provision for bad and doubtful debts made by scheduled or non-scheduled Indian bank was allowed as deduction within prescribed limits. The limit prescribed at the relevant time was 10% of total income or 2% of aggregate average advances made by the rural branches of such banks, whichever was higher. There was representation to the Government that foreign banks were not entitled to any such deduction and further it was also felt that existing ceiling at the relevant time, should be modified. Accordingly, by Amending Act, the deduction p....
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....mount not exceeding 7.5% of total income computed before making any deduction under Chapter VI-A and an amount not exceeding 10% of aggregate average advances made by rural branches of such banks, computed in the prescribed manner. The scope of said section has thus been enlarged w.e.f. 01.04.2007 and deduction is available not only to the scheduled or non-scheduled banks but to the Co-operative banks also i.e. the assessee before us. 16. The issue which arises before us is in relation to co-operative banks which do not have any rural branches. The question which is to be addressed is whether in the absence of any rural branches, can the benefit of deduction be allowed under section 36(1)(viia) of the Act and that also to the extent of 7.5% of total income. 17. We find that this issue has been elaborately considered and addressed by the Hon'ble High Court of Kerala in The Kodungallur Town Co-Op. Bank Ltd. Vs. ACIT (supra) and it has been held as under:- "9. Admittedly, appellants/assessees are cooperative 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 1.4.2007 and after 1.4.2007. During....
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....re 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-scheduled 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 purpose 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, auth....
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....wn Co-Op. Bank Ltd. Vs. ACIT (supra) again decided the aforesaid issue of claim of deduction under section 36(1)(vii) of the Act, especially in view of the ratio laid down by the Hon'ble Supreme Court in Catholic Syrian Bank Ltd. Vs. CIT (supra) relied upon by the Commissioner while invoking revisionary jurisdiction under section 263 of the Act. The Tribunal held that the Hon'ble Supreme Court had considered the issue whether the deduction was allowable to scheduled banks under section 36(1)(vii) of the Act in respect of bad debts written off and had held that the same shall be limited to the extent the said debts credit balance in the provision for bad and doubtful debts account made under clause (viia). It was further observed by the Tribunal that the assessments in the said case related to assessment year 2002-03 and prior years and the Apex Court had considered the law with reference to the fact situation; whereas the assessee before them was co-operative bank, which was included in the category of beneficiaries under clause (viia) by the Finance Act, 2007 w.e.f. 01.04.2007. The Tribunal further goes on to hold that the deduction provided in the first part of clause (vi....
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....s pointed out before us that no other decision of any Hon'ble High Court, whether in favour or contrary, is available. The learned Departmental Representative for the Revenue has not pointed out any contrary decision or any decision of jurisdictional High Court on the issue. The position as settled by the Hon'ble High Court is that deduction under section 36(1)(viia) of the Act is available to non-scheduled bank i.e. co-operative bank @ 7.5% of total income or in case there are rural branches, then further deduction of 10% of aggregate average advances as per prescribed procedure. 24. The issue before us is similar to the issue before the Hon'ble High Court of Kerala and though the decision is by non-jurisdictional High Court but in the absence of any decision to the contrary by the jurisdictional High Court, the decision of High Court is binding upon the Tribunal. In any case, no other decision of any High Court has been brought to our knowledge contradicting or favouring the view taken by the Hon'ble High Court of Kerala. In such circumstances, we are guided by the proposition laid down by the Hon'ble Bombay High Court in CIT Vs. Smt. Godavaridevi Saraf (supra), wherein it was ....
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.... Vs. Thana Electricity Supply Ltd. (1994) 206 ITR 727 (Bom), wherein the limited question was whether or not the decision of one of the High Court was binding on another High Court. The Tribunal in this regard observed as under:- "10. In this light, and bearing in mind the fact that limited question before. Their Lordships was whether or not decision of one of the High Court's is binding on another High Court, it would appear to us that ratio decidendi in Thana Electricity Co. Ltd. (supra), is on the non binding nature of a High Court's judgment on another High Court. In any case, this Division Bench did not, and as stated in this judgment itself, could not have differed with another Division Bench of the some strength in the case of Godavari Devi Saraf (supra). Therefore, it cannot be open to a subordinate Tribunal like us to disregard any of the judgments of the Hon'ble Bombay High Court, whether in the case of Thana Electricity Co. Ltd. (supra) or in the case of Godavari Devi Saraf. It is indeed our duty to loyally extend utmost respect and reverence to the Hon'ble High Court, and to read these two judgments by the Division Benches of equal strength of the Hon&....