M/s. Madai Co-op Rural Bank ltd, Kannur v. ITO, Kannur

ITA 675/COCH/2013 | 2010-2011
Pronouncement Date: 14-11-2014

Appeal Details

RSA Number 67521914 RSA 2013
Assessee PAN CEACT2007W
Bench Cochin
Appeal Number ITA 675/COCH/2013
Duration Of Justice 1 year(s) 9 day(s)
Appellant M/s. Madai Co-op Rural Bank ltd, Kannur
Respondent ITO, Kannur
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2014
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 14-11-2014
Date Of Final Hearing 17-11-2016
Next Hearing Date 17-11-2016
Assessment Year 2010-2011
Appeal Filed On 04-11-2013
Judgment 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. NOS. 673-675/COCH/2013 ASSESSMENT YEARS : 2007-08 2008-09 & 2010-11 M/S. MADAI CO-OPERATIVE RURAL BANK LTD. PAYYANGADI KANNUR-670 303. [PAN: AAABT9 1743P] VS. THE INCOME TAX OFFICER WARD-2 KANNUR. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI R. KRISHNA IYER CA REVENUE BY SHRI K.K.JOHN SR. DR DATE OF HEARING 14/10/2014 DATE OF PRONOUNCEMENT 14/11/2014 O R D E R PER CHANDRA POOJARI ACCOUNTANT MEMBER: ALL THESE APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE COMMON ORDER DATED 30-08-2013 PASSED BY THE CIT(A) KOZHIKODE FOR THE ASSESSMENT YEARS 2007-08 2008-09 AND 2010-11 R ESPECTIVELY. 2. SINCE THE ISSUES INVOLVED IN ALL THESE APPEAL S ARE IDENTICAL IN NATURE THERE WERE CLUBBED TOGETHER HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. I.T.A. NOS. 673-675/COCH/2013 2 3. THE FIRST COMMON GROUND RAISED IN THESE APPEALS IS WITH REGARD TO DENIAL OF EXEMPTION CLAIMED U/S. 80P(2)(A)(I) OF THE I.T. ACT. 4. THE BRIEF FACTS OF THE CASE AS NARRATED IN I.T.A . NO. 673/COCH/2013 ARE THAT THE ASSESSEE IS A REGISTERED CO-OPERATIVE SOCIETY UNDER ACT VI OF 1932 (MADRAS CO-OPERATIVE ACT). THE ASSESSEE FILED RETURN OF INCOME ON 17- 10-2011 IN RESPONSE TO THE NOTICE U/S. 148 OF THE A CT ISSUED ON 12-09-2012. AS PER THE RETURN OF INCOME THE GROSS TOTAL INCOME WAS RS. 1 89 24 547/-. THE ASSESSEE CLAIMED DEDUCTION U/S. 80P OF THE ACT. HOWEVER THE ASSESSING OFFICER AFTER ANALYZING THE ACTIVITIES OF THE ASSESSEE-SOCIETY CAME TO THE CONCLUSION THAT SINCE THE ASSESSEE HAS NOT F ULFILLED ITS MAIN OBJECTIVE OF PROVIDING FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSES OR FOR PURPOSES CONNECTED WITH AGRICULTURA L ACTIVITIES IT IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P OF THE ACT. 5. ON APPEAL THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY RELYING ON THE JUDGMENT OF THE HIGH COURT OF KERALA IN WP(C) NO. 14226 OF 2012(C) DATED 14 TH SEPTEMBER 2012 IN THE CASE OF THATHAMANGALAM SERVICE CO-OPERATIVE BANK LTD. AGAINST THIS THE A SSESSEE IS IN APPEAL BEFORE US. I.T.A. NOS. 673-675/COCH/2013 3 6. THE LD. AR SUBMITTED THAT THE ASSESSEE FILED AP PLICATION FOR LICENCE FOR CARRYING ON BANKING BUSINESS. THE RBI VIDE LETTER DATED 25-10-2013 REJECTED THE APPLICATION AND HELD THAT PRIMARY AGRI CULTURAL CREDIT SOCIETIES (PACS) ARE NOT ENTITLED TO BANKING LICENCE AND HENC E THE SOCIETY DOES NOT COME UNDER THE PURVIEW OF RBI. AGAINST THIS THE SO CIETY FILED A WRIT PETITION BEFORE THE HONBLE HIGH COURT OF KERALA VI E JUDGMENT DATED 22-05- 2014 ALLOWED THE WRIT PETITION. THE LD. AR SUBMITT ED THAT THE ASSESSEE IS A CO-OPERATIVE RURAL BANK REGISTERED UNDER THE CO-OPE RATIVE SOCIETY UNDER THE PROVISIONS OF THE KERALA CO-OPERATIVE SOCIETIES ACT . INITIALLY IT WAS REGISTERED AS A CONSUMER SOCIETY THE PRINCIPAL OBJ ECT OF THE SOCIETY WAS LATER AMENDED AND OTHER ACTIVITIES WERE INCIDENTALL Y THERETO. ACCORDING TO THE LD. AR IT IS PRESENTLY CLASSIFIED UNDER PRIMARY AGRICULTURAL CREDIT SOCIETY WITH A VIEW TO EXPANDING THE FUNCTION OF THE SOCIET Y THE SOCIETY RESOLVED TO AMEND THE BYE-LAWS AND INSERTION OF 4 NEW SUB CLAUS ES IN THE SAID BYE- LAWS. 7. THE LD. AR SUBMITTED THAT THE HONBLE HIGH COURT OBSERVED THAT THE AMENDMENTS PROPOSED IN THE BYE-LAWS WERE WHOLLY ALI EN TO THE PRIMARY OBJECT OF AGRICULTURAL ACTIVITIES THAT WAS SOUGHT T O BE PURSUED BY THE SOCIETY AND DIRECTED THE JOINT REGISTRAR OF CO-OP SOCIETIES TO APPROVE THE AMENDMENTS TO THE BYE-LAW OF THE SOCIETY. THUS TH E HIGH COURT ACCEPTED I.T.A. NOS. 673-675/COCH/2013 4 THAT THE SOCIETY COMES UNDER THE CLASSIFICATION OF PRIMARY AGRICULTURAL CREDIT SOCIETY. 8. THE LD. AR RELIED ON THE JUDGMENT OF KARNATAKA H IGH COURT IN THE CASE OF CIT VS. BANGALORE CREDIT CO-OPERATIVE SOCIE TY LTD. IN I.T.A. NO. 598/2013 DATED 27-06-2014 WHEREIN IT WAS HELD THAT SECTION 80P(4) WAS APPLICABLE ONLY TO CO-OPERATIVE BANKS AND NOT TO CR EDIT CO-OPERATIVE SOCIETIES. THE HONBLE COURT OBSERVED THAT A CO-OP ERATIVE BANK AS DEFINED UNDER BANKING REGULATION ACT INCLUDES THE PRIMARY A GRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL RURA L DEVELOPMENT BANK. THE LEGISLATURE DID NOT WANT TO DENY THE SAID BENEF IT TO A PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY OR A PRIMA RY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. IF THE ASSESSEE WAS NO T A CO-OPERATIVE BANK CARRYING ON EXCLUSIVE BANKING BUSINESS AND IF IT D OES NOT POSSESS A LICENCE FROM THE RBI TO CARRY ON THE BUSINESS THEN IT IS N OT A CO-OPERATIVE BANK. IT IS A CO-OPERATIVE SOCIETY WHICH ALSO CARRIES ON THE BUSINESS OF LENDING MONEY TO ITS MEMBERS WHICH IS COVERED U/S. 80P(2)(A )(I) I.E. CARRYING ON THE BUSINESS OF BANKING FOR PROVIDING CREDIT FACILI TIES TO ITS MEMBERS. THE OBJECT OF THE AFORESAID AMENDMENT IS NOT TO EXCLUDE THE BENEFIT EXTENDED U/S. 80P(I) TO THE SOCIETY. THE LD. AR SUBMITTED T HAT THE SAID JUDGMENT WAS HELD IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE LD. AR SUBMITTED THAT THE ABOVE FACTS MAY BE CONSIDERED BY THE TRIBUNAL AND I.T.A. NOS. 673-675/COCH/2013 5 DEDUCTION U/S. 80P MAY BE ALLOWED. THE LD. AR PLAC ED RELIANCE IN THE CASE OF FARRUKHABAD GRAMIN BANK (103 ITD 207) (AGRA BEN CH) (THIRD MEMBER) WHEREIN IT WAS HELD THAT ASSESSEE A RURAL BANK WH ICH WAS ALSO DEEMED TO BE A CO-OPERATIVE SOCIETY FOR THE PURPOSE OF ACT AS PROVIDE IN SECTION 22 OF RRB ACT WOULD BE ENTITLED TO DEDUCTION U/S. 80P(A) (I) OF THE ACT IN RESPECT OF INTEREST INCOME FROM BOTH SLR AND NON-SLR INVEST MENTS. THE LD. AR ALSO RELIED ON VARIOUS CASE LAWS WHEREIN THE COURTS FOLLOWING THE CIRCULAR NO. 11-04-1955 HELD THAT A LIBERAL APPROACH IS TO B E ADOPTED FOR CONSIDERING THE BENEFICIARY PROVISIONS. THE LD. AR ALSO RELIED ON CBDT CIRCULAR NO. 319 DATED 11-01-1982 20-10-1978 WHICH MADE NO DISTINCT ION BETWEEN THE INTEREST FROM SLR INVESTMENT AND THE INTEREST FROM NON SLR INVESTMENT. 8.1 THE LD. AR ALSO SUBMITTED THAT THE CO-OPERATIVE DEPARTMENT OF THE GOVERNMENT OF KERALA HAS CLASSIFIED THE SOCIETY AS A PRIMARY AGRICULTURAL CO-OPERATIVE SOCIETY THE MAIN OBJECT BEING LENDING TO AGRICULTURISTS. THE LD. AR SUBMITTED THAT THE ASSESSEE IS A PRIMARY AGI CULTURAL CO-OPERATIVE SOCIETY WHICH IS DEFINED IN SECTION 2(OA) OF THE KE RALA CO-OPERATIVE SOCIETIES ACT 1969 AND THE ASSESSEE WAS ISSUED A C ERTIFICATE BY THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES. ACCORDING TO THE LD. AR THE STATE GOVERNMENT HAS GIVEN PERMISSION TO INCLUDE THE WORD BANK IN THE NAME OF THE SOCIETY AND RBI HAS ALSO ACCORDED SANCTION I N THE PREVIOUS YEARS. IN I.T.A. NOS. 673-675/COCH/2013 6 VIEW OF THE ABOVE FACTS THE LD. AR CONTENDED THAT DEDUCTION U/S. 80P MAY BE ALLOWED. 9. ON THE OTHER HAND THE LD. DR RELIED ON THE DECI SION OF THE TRIBUNAL IN THE CASE OF PINARAYI SERVICE CO-OPERATIVE BANK L TD. AND OTHERS VS. ITO IN I.T.A. NO. 123/COCH/2012 & OTHERS VIDE ORDER DATED 31/07/2014 AS WELL AS THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE O F THATHAMANGALAM SERVICE CO-OPERATIVE BANK LTD. IN WP(C) NO. 14226 O F 2012(C) DATED 14 TH SEPTEMBER 2012. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT A SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFO RE THE TRIBUNAL ON A EARLIER OCCASION IN THE CASE OF KUNNAMANGALAM CO-OP ERATIVE BANK LTD. IN I.T.A. NO. 156/COCH/2014 VIDE ORDER DATED 25/07/201 4 WHEREIN THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE . THE RELEVANT PO RTION OF THE SAID ORDER IS AS FOLLOWS: 8.10 WE HAVE GONE THROUGH THE DECISION OF THE HYDE RABAD BENCH OF THIS TRIBUNAL IN THE CASE OF THE CITIZEN COOPERATIV E SOCIETY VS. ADDL. CIT 41 305 (HYD). WE NOTICE THAT THIS DECISION IS APPLICABLE TO THE FACTS OF THE CASE BEFORE US. IN THAT DECISION UNDER PARA 23 THE TRIBUNAL HAS GIVEN A FINDING THAT THE ASSESSEE IS CARRYING ON BA NKING BUSINESS AND FOR ALL PRACTICAL PURPOSES IT ACTS LIKE A CO-OPERAT IVE BANK. THE SOCIETY IS GOVERNED BY THE BANKING REGULATIONS ACT. THEREFORE THE SOCIETY BEING A CO-OPERATIVE BANK PROVIDING BANKING FACILITIES TO MEMBERS IS NOT ELIGIBLE TO CLAIM DEDUCTION 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 GON E THROUGH THE DECISION OF THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. I.T.A. NOS. 673-675/COCH/2013 7 DIVYAJYOTHI CREDIT CO-OPERATIVE SOCIETY LTD. (SUPRA ) IN ITA NO. 72/BANG/2013. IN THIS CASE WE NOTICE THAT THE HON' BLE TRIBUNAL CONFIRMED THE ORDER OF CIT(A) FOLLOWING THE DECISIO N OF THE TRIBUNAL IN THE CASE OF ACIT CIRCLE 3(1) BANGALORE VS. M/S. B ANGALORE COMMERCIAL TRANSPORT CREDIT CO-OPERATIVE SOCIETY LT D. IN ITA NO. 1069/BANG/2010 HOLDING THAT SEC. 80P(2)(A)(I) IS AP PLICABLE ONLY TO A CO-OPERATIVE BANK AND NOT TO CREDIT CO-OPERATIVE SO CIETY. WITH DUE REGARDS TO THE BENCH WE ARE UNABLE TO FIND ANY TER MCREDIT COOPERATIVE SOCIETYQ U/S 80P(2)(A)(I) OR U/S 80P(4) THEREFORE THIS DECISION CANNOT ASSIST US. WE NOTED THAT THE HON'BLE GUJARAT HIGH C OURT IN THE CASE OF CITVS. JAFARI MOMIN VIKAS CO-OP. CREDIT SOCIETY LTD . IN TAX APPEALS NO 442 OF 2013 443 OF 2013 AND 863 OF 2013 (SUPRA) VI DE ORDER DT. 15.1.2014 TOOK THE VIEW THAT SEC. 80P(4) WILL NOT A PPLY TO A SOCIETY WHICH IS NOT A CO-OPERATIVE BANK. IN THE CASE OF VY AVASAYA SEVA SAHAKARA SANGHA VS. STATE OF KARNATAKA &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 COMPETENCE OF THE STATE LEGISLATURE FOR ISSUING A CIRCULAR. THE ISSUE DOES NOT RELATE T O THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I). WHILE DEALING WITH THIS ISSUE THE HON'BLE HIGH COURT UNDER PARA 12 OBSERVED AS UNDER : 12. IT IS NOT POSSIBLE TO ACCEPT THIS CONTENTION. THE 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 PROVI SIONS OF THE ACT PASSED BY THE STATE LEGISLATURE. CONSEQUENTLY THE STATE GOVERNMENT HAS CONTROL OVER THEM TO THE EXTENT THE ACT PERMITS. MAJOR ACTIVITIES OF THE PETITIONERS ARE TO FINANCE ITS MEMBERS. FOR THE PURPOSE OF FINANCING ITS MEMBERS THEY BORROW MONEY FROM THE FINANCING AGENCIES AND REPAY THE SAME. MERELY BECAU SE THE PETITIONERS THE CO-OPERATIVE SOCIETIES IN QUESTION- ARE REQUIRED TO ADVANCE LOANS TO THEIR MEMBERS THEY DO NOT CEASE T O BE CO- OPERATIVE SOCIETIES GOVERNED BY THE ACT NOR CAN THE Y BE TREATED AS BANKING COMPANIES. IT IS ALSO NOT POSSIBLE TO HOLD THAT THESE ACTIVITIES OF THE PETITIONERS AMOUNT TO BANKING AS CONTEMPLA TED 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 ALREADY HELD IN THE PRECEDING PARAGRAPHS ARE APPLICABLE TO A CO -OPERATIVE SOCIETY WHICH IS ENGAGED IN CARRYING ON BANKING BUSINESS FA CILITIES TO ITS MEMBERS IF IT IS NOT A CO-OPERATIVE BANK. WE HAVE A LSO GONE THROUGH THE DECISION OF THIS BENCH IN THE CASE OF DCIT VS. JAYALAKSHMI MAHILA I.T.A. NOS. 673-675/COCH/2013 8 VIVIDODESHAGALA SOUHARDA SAHAKARI LTD. IN ITA NO. 1 TO 3/PNJ/2012 DT. 30.3.2012 (SUPRA). WHILE DISCUSSING 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 : 12.FROM THE AFORESAID OBJECTS IT IS APPARENT THAT NONE OF THE AIMS AND OBJECTS ALLOWS THE ASSESSEE COOPERATIVE SOCIETY TO ACCEPT DEPOSITS OF MONEY FROM PUBLIC FOR THE PURPOSE OF L ENDING OR INVESTMENT. IN OUR OPINION UNTIL AND UNLESS THAT CO NDITION IS SATISFIED IT CANNOT BE SAID THAT THE PRIME OBJECT OR PRINCIPAL B USINESS OF THE ASSESSEE IS BANKING BUSINESS. THEREFORE THE ASSESS EE WILL NOT COMPLY WITH THE FIRST CONDITION AS LAID DOWN IN THE DEFINITION AS GIVEN U/S. 5(CCV) OF THE BANKING REGULATION ACT 1959 FOR BECOMING PRIMARY COOPERATIVE BANK. THE ASSESSEE THEREFORE CANNOT BE REGARDED TO BE PRIMARY COOPERATIVE BANK AND IN CONSEQUENCE THER EOF IT CANNOT BE A CO-OPERATIVE BANK AS DEFINED UNDER PART V OF T HE BANKING REGULATION ACT 1949. ACCORDINGLY IN OUR OPINION TH E PROVISIONS OF SECTION 80P (4) READ WITH EXPLANATION THERE UNDER W ILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSE E THEREFORE IN OUR OPINION WILL BE ENTITLED FOR THE DEDUCTION U/S 80P(2)(A)(I). WE ACCORDINGLY CONFIRM THE ORDER OF CIT(A) ALLOWING DE DUCTION 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 PROVISIONS OF SECTION 80P(4). 9. ON THE OTHER HAND THE ASSESSEE MADE AN ALTERNAT IVE PLEA THAT THE ASSESSEE IS LENDING MONEY ONLY TO ITS MEMBERS. BEIN G SO APPLYING THE CONCEPT OF MUTUALITY THE TOTAL INCOME OF THE A SSESSEE HAS TO BE EXEMPT FROM TAX. HOWEVER WE FIND THAT THIS ARGUMEN T OF THE ASSESSEE IS ALSO DEVOID OF MERITS. THE HONBLE SUPREME COURT HAD AN OCCASION TO CONSIDER THIS MUTUALITY CONCEPT. SIMILAR ISSUE C AME UP FOR CONSIDERATION OF THE HONBLE SUPREME COURT IN THE C ASE OF CIT VS. KUMBAKONAM MUTUAL BENEFIT FUND LTD. 53 ITR 241 (SC ) WHEREIN IT WAS HELD THAT IF THE PROFITS ARE DISTRIBUTED TO SHA REHOLDERS 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 FULFIL ANY OTHER CONDITION. HIS POSITION IS IN NO WAY DIFFERENT FROM A SHAREHOLDER IN A BANKING COMPANY LIMITED BY SHARES. INDEED I.T.A. NOS. 673-675/COCH/2013 9 THE POSITION OF THE ASSESSEE IS NO DIFFERENT FROM A N ORDINARY BANK EXCEPT THAT IT LENDS MONEY AND RECEIVES DIVIDEND FR OM ITS SHAREHOLDERS WHICH DOES NOT BY ITSELF MAKE ITS INCO ME ANY THE LESS INCOME FROM BUSINESS. THE SAME JUDGMENT WAS FOLLOWE D IN THE CASE OF CIT VS. ARCOT DHANASEKHARA NIDHI LTD. 59 ITR 48 0 (MAD.) CIT VS. DHARMAVARAM MUTUAL BENEFIT PERMANENT FUND LTD. 67 ITR 673 (AP) AND CIT VS. BHAVNAGAR TRUST CORPORATION (P) LTD. 6 9 ITR 278. FURTHER THE HONBLE KERALA HIGH COURT IN THE CASE OF KOTTAYAM CO- OPERATIVE LAND MORTGAGE BANK LTD. VS. CIT 172 ITR 443(KER.) WHERE IT WAS HELD AS UNDER: THE INCOME-TAX OFFICER HELD THE VIEW THAT THE ASS ESSEE 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 CL AUSE (C) IS IN ADDITION TO THE EXEMPTION ALLOWABLE UNDER CLAUSES ( A) AND (B) AND DIRECTED THE INCOME TAX OFFICER TO ALLOW A DEDUCTIO N OF RS. 20 000 SEPARATELY TAKING INTO CONSIDERATION THE PROPERTY INCOME EARNED BY THE ASSESSEE. THE REVENUE CARRIED THE MATTER IN APP EAL BEFORE THE APPELLATE TRIBUNAL. THE TRIBUNAL HELD THAT THE RULE OF CONSTRUCTION OF EJUSDEM GENERIS APPLIES TO THE CONSTRUCTION OF CLAU SE (C) WHICH RESULTS IN PROFITS 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 ENTI TLED TO ANY EXEMPTION UNDER CLAUSE (C). THE TRIBUNAL DID NOT AC CEPT THE ALTERNATIVE CONTENTION RAISED BY THE ASSESSEE FOR T HE FIRST TIME BEFORE THE TRIBUNAL THAT THE LETTING OUT OF SURPLUS SPACE SHOULD BE TREATED AS A BUSINESS ACTIVITY UNDER CLAUSE (A) OF SUB-SECTION (2) OF SECTION 80P OF THE ACT. THE APPEALS WERE ACCORDINGLY ALLOWED. T HE QUESTION OF LAW ARISES OUT OF THE ORDER OF THE TRIBUNAL. SECTIO N 80P OF THE INCOME- TAX ACT 1961 ALLOWS A STRAIGHT DEDUCTION IN THE COMPUTATION OF THE TOTAL INCOME OF A CO-OPERATIVE SOCIETY TO THE EXTE NT MENTIONED. CLAUSE(C) OF SECTION 80P(2) PROVIDES THAT IN THE CA SE OF A CO- OPERATIVE SOCIETY ENGAGED IN ACTIVITIES OTHER THAN THOSE SPECIFIED IN CLAUSE (A) OR CLAUSE (B) EITHER INDEPENDENTLY OF O R 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-OPER ATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR P ROVIDING CREDIT FACILITIES TO ITS MEMBERS FALLS UNDER CLAUSE (A) OF SECTION 80P(2). THE CLAIM FOR EXEMPTION UNDER CLAUSE (C) IS IN ADDITION TO THE EXEMPTION PROVIDED UNDER CLAUSE (A). THE PROVISIONS ARE CUMUL ATIVE AND MUTUALLY SUPPLEMENTING. THE LIMITS SPECIFIED IN CLA USE(C) ARE IN RELATION TO THE PROFITS AND GAINS ATTRIBUTABLE TO T HE ACTIVITY OTHER THAN I.T.A. NOS. 673-675/COCH/2013 10 THAT SPECIFIED IN CLAUSE (A). IF THE RENTAL INCOME RECEIVED BY THE SOCIETY IS ATTRIBUTABLE TO ANY ACTIVITY OF THE SOCI ETY CLAUSE (C) WOULD BE ATTRACTED. IT IS THEN NECESSARY THAT THE CO-OPER ATIVE SOCIETY MUST PROVE THAT IT HAS ENGAGED ITSELF IN CARRYING ON THE ACTIVITY GIVING RISE TO PROFITS OR GAINS. SUCH ACTIVITY OF THE ASSESSEE MUS T HAVE A DIRECT OR PROXIMATE CONNECTION WITH OR NEXUS TO THE EARNING I N ORDER THAT THE ASSESSEE MAY ENJOY THE EXEMPTION. SECTION 80P(2)(C) OF THE ACT EXEMPTS INCOME OF CO-OPERATIVE SOCIETIES TO THE EXT ENT MENTIONED THEREIN IF THE PROFITS OR GAINS ARE ATTRIBUTABLE TO THE ACTIVITY IN WHICH THE CO-OPERATIVE SOCIETY IS ENGAGED. THE EXPRESSION ATTRIBUTABLE TO IS MUCH WIDER THAN THE EXPRESSION DERIVED FROM AN D IT COVERS RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF THE ASSESSEE. IN THIS VIEW OF THE MATTER INTEREST EARNED BY A CO- OPERATIVE SOCIETY WHICH WAS CARRYING ON THE BUSINE SS OF SUPPLYING SURGARCANE ON STATUTORY INVESTMENT IN GOVERNMENT SE CURITIES WAS HELD PROFIT ATTRIBUTABLE TO THE CARRYING ON OF THE ACTIVITY OF SUPPLYING SUGARCANE (CIT VS. COOPERATIVE CANE DEVELOPMENT UNI ON LTD. (1979) 118 ITR 770 (ALL.). THE PROFITS AND GAINS FR OM SUCH INVESTMENTS WERE CONNECTED WITH OR INCIDENTAL TO TH E CARRYING ON OF THE ACTUAL BUSINESS. WHERE HOWEVER THE ASSESSEE A S OWNER OF CERTAIN PROPERTY LETS OUT THAT PROPERTY AND RECEIVE S RENTAL INCOME THE INCOME THUS RECEIVED CANNOT PARTAKE OF THE CHARACTE R OF PROFITS AND GAINS ATTRIBUTABLE TO AN ACTIVITY CARRIED ON BY THE SOCIETY. 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 AS SET. THE WORD ACTIVITY IS WIDER THAN THE WORD BUSINESS. IT CO NNOTES A SPECIFIED FORM OF SUPERVISED ACTION OR 0FIELD OF ACTION. READ IN THE CONTEXT OF THE PROFIT EARNING ACTIVITY OF A CO-OPERATIVE SOCIE TY IT MEANS THE CORPORATE ACTIVITY OF THE SOCIETY THAT IS TO SAY WHETHER OR NOT THEY AMOUNT TO A BUSINESS TRADE OR PROFESSION IN THE OR DINARY SENSE. CLAUSE (C) OF SECTION 80P(2) IS INTENDED TO COVER R ECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINE SS BUT ATTRIBUTABLE TO AN ACTIVITY WHICH RESULTS IN PROFITS AND GAINS. LETTING OUT OF SURPLUS SPACE IN THE BUILDING OWNED AND USED BY THE ASSESSE E IS NOT SUCH AN ACTIVITY FALLING UNDER CLAUSE (C). THE RENT THUS RE CEIVED BY THE ASSESSEE IS NOT ELIGIBLE FOR THE EXEMPTION PROVIDED THEREUNDER. IN THIS VIEW THE APPELLATE TRIBUNAL WAS JUSTIFIED IN REJEC TING THE ASSESSEES CLAIM. 10. IN VIEW OF THE ABOVE DISCUSSIONS WE ARE INCLIN ED TO HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 80P OF THE ACT ON ANY REASONING. I.T.A. NOS. 673-675/COCH/2013 11 11. THE JUDICIAL DISCIPLINE REQUIRES CONSISTENCY IN ITS PROCEEDINGS. WE FIND NO DIFFERENCE IN THE FACTS AND CIRCUMSTANCES O F THE PRESENT CASE AS COMPARED TO THE EARLIER CASES DECIDED BY THIS TRIBU NAL. ALSO ALL THE PRECEDENTS RAISED BY THE LD. COUNSEL HAVE ALREADY B EEN CONSIDERED BY THIS TRIBUNAL IN EARLIER APPEALS CITED SUPRA. RESPECTF ULLY FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL WE ARE INCLINED TO DISMISS T HIS GROUND OF THE ASSESSEE. 12. NEXT COMMON GROUND IS WITH REGARD TO DISA LLOWANCE OF INTEREST PAID WITHOUT DEDUCTING TAX TO NON MEMBERS U/S. 40(A)(IA) OF THE ACT. 13. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT THE ASSESSEE HAD P AID A PORTION OF THE INTEREST TO NON-MEMBERS ALSO. AS PER THE PROVISION S OF 194A(3)(V) OF THE I.T. ACT INTEREST PAID BY A CO-OPERATIVE SOCIETY T O ITS MEMBER ALONE IS EXEMPT FROM TDS. WHEN THIS ASPECT WAS COMMUNICATED TO THE ASSESSEE VIDE PRE-ASSESSMENT NOTICE DATED 26-11-2012 THE AS SESSEE STATED THAT THE MADAI CO-OPERATIVE RURAL BANK IS A PRIMARY AGRICULT URAL CREDIT SOCIETY AND THEREFORE COVERED BY THE EXEMPTION IN SUB-SECTION (3)(VIIA) OF SECTION 194A. HOWEVER THE ASSESSING OFFICER HELD THAT THE CLAIM OF THE ASSESSEE WAS NOT MAINTAINABLE FOR THE FOLLOWING REASONS. I.T.A. NOS. 673-675/COCH/2013 12 13.1 AS PER SECTION 194A(3)(VIIA) OF THE I.T. AC T TAX DEDUCTION IS NOT REQUIRED FROM INTEREST CREDITED OR PAID IN RESPECT OF DEPOSITS WITH A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CREDIT SOC IETY OR A CO-OPERATIVE LAND MORTGAGE BANK OR A CO-OPERATIVE LAND DEVELOPME NT BANK. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE BANK IS NEIT HER A PRIMARY CREDIT SOCIETY NOR A PRIMARY AGRICULTURAL CREDIT SOCIETY A S CLAIMED BY THE ASSESSEE. ACCORDINGLY THE ASSESSING OFFICER HELD THAT THE EX EMPTION FOR TAX DEDUCTION FROM INTEREST PAID/CREDITED PROVIDED AS PER THE PR OVISIONS OF SECTION 194A(3)(VIIA) OF THE ACT WAS NOT APPLICABLE TO THE ASSESSEES CASE. 13.2 THE BANK HAD PAID A SUM OF RS.17 79 336/- AS I NTEREST ON TERM DEPOSITS TO NON MEMBERS IN EXCESS OF RS. 5000/- FR OM WHICH TAX WAS DEDUCTIBLE. AS PER THE PROVISIONS OF SECTION 40A(I A) OF THE I.T. ACT ANY INTEREST COMMISSION OR BROKERAGE RENT ROYALTY F EES FOR PROFESSIONAL OR TECHNICAL SERVICE OR CONTRACT PAYMENT FROM WHICH TA X IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED OR PAID SHALL N OT BE ALLOWED AS AN EXPENDITURE. IN THIS CASE THE ASSESSEE HAS NOT DED UCTED TAX AT SOURCE FROM INTEREST PAID TO NON MEMBERS OF THE BANK. THEREFOR E THE ASSESSING OFFICER DISALLOWED THE SAME AS DEDUCTION WHILE COMPUTING TH E INCOME CHARGEABLE UNDER THE HEAD BUSINESS OR PROFESSION. ACCORDINGLY A SUM OF RS.17 79 336 WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME O F THE BUSINESS. I.T.A. NOS. 673-675/COCH/2013 13 14. ON APPEAL THE CIT(A) CONFIRMED THE ORDER OF TH E ASSESSING OFFICER BY OBSERVING THAT AS PER SECTION 5(CCIV) OF THE BANKIN G REGULATIONS ACT PRIMARY AGRICULTURAL CREDIT SOCIETY MEANS A CO-OP ERATIVE SOCIETY THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPO SES OR FOR PURPOSES CONNECTED WITH AGRICULTURAL ACTIVITIES INCLUDING M ARKETING OF CROPS. ACCORDING TO THE CIT(A) THE ASSESSING OFFICER HAS ANALYSED THE ACTIVITIES OF THE ASSESSEE SOCIETY AND FOUND THAT THE AGRICULTURA L CREDIT PROVIDED BY THE ASSESSEE IS NEGLIGIBLE IF NOT EXTINCT. THUS. ACCOR DING TO THE CIT(A). IT WAS AMPLY CLEAR THAT THE ASSESSEE HAD FAILED TO FULFIL ITS OBLIGATION AS DEFINED U/S. 5(CCIV) OF THE BANKING REGULATION ACT. SINCE T HE PRINCIPAL OBJECT WAS NOT FULFILLED THE CIT(A) OBSERVED THAT THE ASSESSE E SOCIETY HAS LOST ALL CHARACTERISTICS OF A PRIMARY AGRICULTURAL SOCIETY A ND BEING SO THE ASSESSEE CANNOT BE TREATED AS A PRIMARY AGRICULTURAL CREDIT SOCIETY AND HENCE THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S. 194A(3) (VIIA) OF THE ACT. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 15. THE LD. AR SUBMITTED THAT THIS ISSUE HAD BEEN C ONSIDERED BY THE ITAT IN I.T.A. NOS. 251 253 254 AND 255/COCH/2012 W HEREIN IT WAS HELD THAT THEREFORE FOR ALL PRACTICAL PURPOSES THE TA XPAYERS HAVE TO BE TREATED AS PRIMARY AGRICULTURAL CO-OPERATIVE SOCIETIES WITH IN THE MEANING OF SEC. 2(19) OF THE INCOME TAX ACT. THE LD AR SUBMITTED T HAT IN VIEW OF THE I.T.A. NOS. 673-675/COCH/2013 14 ABOVE AS FOUND BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF LORD KRISHNA BANK LTD. VS. CIT (339 ITR 606) THE TAXPAYERS ARE EXEMPT FORM DEDUCTION OF TAX AT SOURCE U/S. 194A. HENCE THE LD. AR SUBM ITTED THAT THE ORDERS OF THE LOWER AUTHORITIES MAY BE SET ASIDE AND THE ADDI TION U/S. 40A(IA) MAY BE DELETED. 16. THE LD. DR RELIED ON THE DECISION OF THE TRIBUN AL IN THE CASE OF PINARAYI SERVICE CO-OPERATIVE BANK LTD. AND OTHERS VS. ITO IN I.T.A. NO. 123/COCH/2012 & OTHERS VIDE ORDER DATED 31/07/2014. 17. WE HAVE HEARD BOTH THE PARTIES. WE FIND A SIMILAR ISSUE CAME UP FOR CONSIDERATION OF THE COCHIN BENCH OF TRIBUNAL IN TH E CASE OF KARIVELLOOR SERVICE CO-OPERATIVE BANK LTD. VS. ITO IN I.T.A. NO . 311/COCH/2012 VIDE ORDER DATED 22-03-2013 WHEREIN IT WAS HELD AS UNDER : 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IN T HE CASE OF KADACHIRA SERVICE CO-OPERATIVE BANK LTD. (SUPRA) T HIS TRIBUNAL FOUND THAT THE TAXPAYERS WERE NOT CARRYING ON ANY B ANKING ACTIVITY AND THEREFORE THEY ARE AGRICULTURAL COOPERATIVE S OCIETIES. IN VIEW OF THE SPECIFIC PROVISIONS EXEMPTING THE AGRICULTURAL CO-OPERATIVE SOCIETIES FROM DEDUCTION OF TAX IN RESPECT OF AGRIC ULTURAL CO-OPERATIVE SOCIETIES THIS TRIBUNAL FOUND THAT SECTION 194A(3)( VIIA) IS NOT APPLICABLE TO AGRICULTURAL CO-OPERATIVE SOCIETIES. IN THIS CASE IT APPEARS THAT THE TAXPAYER WAS ACCEPTING DEPOSITS AN D MAINTAINING SAVINGS BANK ACCOUNT AND CURRENT BANK ACCOUNT. THE TAXPAYER IS PROVIDING CHEQUE FACILITIES TO ITS CUSTOMERS. APART FROM THIS THE TAXPAYER IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF CEMENT HARDWARE MEDICINE AND HOME APPLIANCES. THE LOAN AP PEARS TO HAVE BEEN GIVEN ON PLEDGING OF GOLD JEWELLERY AND MORTGA GE OF LAND. IN I.T.A. NOS. 673-675/COCH/2013 15 VIEW OF THE ADMITTED FACT THAT THE TAXPAYER IS MAIN TAINING SAVINGS ACCOUNT CURRENT ACCOUNT AND PROVIDING CHEQUE FACIL ITY TO ITS CUSTOMERS IT IS OBVIOUS THAT THE TAXPAYER IS ENGAG ED ITSELF IN THE BUSINESS OF BANKING APART FROM OTHER TRADING ACTIVI TIES. EXEMPTION U/S. 194A(3)(VIIA) IS APPLICABLE ONLY IN RESPECT OF AGRI CULTURAL COOPERATIVE SOCIETIES. THE AGRICULTURAL COOPERATIVE BANKS ARE B OUND TO DEDUCT TAX. IN THIS CASE ADMITTEDLY THE TAX PAYER IS ENGAGED IN THE BANKING ACTIVITY AND MAINTAINING SAVINGS BANK ACCOUNT CURR ENT ACCOUNT AND PROVIDING CHEQUE FACILITY TO ITS CUSTOMERS. THEREFO RE THE TAXPAYER IS BOUND TO DEDUCT TAX IN RESPECT OF INTEREST ON THE D EPOSITS. THEREFORE THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DECISION IN THE CASE OF KADACHIRA SERVICE COOPERATIVE BANK LTD.(SUPRA) M AY NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. ACCORD INGLY THE ORDERS OF THE LOWER AUTHORITIES ARE CONFIRMED. 18. SINCE THIS ISSUE IS IDENTICAL AND THE FACTS ARE ALSO SIMILAR TO THE ONE CONSIDERED BY THIS BENCH OF THE TRIBUNAL IN THE EAR LIER OCCASION WE ARE INCLINED TO DECIDED THE ISSUE AGAINST THE ASSESSEE. THIS GROUND IN ALL THE ASSESSEES APPEALS IS DISMISSED. 19. THE NEXT COMMON GROUND IS WITH REGARD TO DISAL LOWANCE OF PROVISION OF BAD AND DOUBTFUL DEBTS OF RS.4 65 70 239/- U/S. 36(1)(VIIA). 18. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAD MADE A PROVISION OF RS.4 65 70 239 TOWARDS BAD AND DOUBTFU L DEBTS IN THE BOOKS. THE FINANCE ACT 2007 HAS AMENDED SECTION 36(1)(VII A) THEREBY EXTENDING THE DEDUCTION IN RESPECT OF ANY PROVISION FOR BAD A ND DOUBTFUL DEBTS ALSO TO A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTUR AL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK. AS PER THE I.T.A. NOS. 673-675/COCH/2013 16 PROVISIONS OF SECTION 36(1)(VIIA) MAXIMUM DEDUCTIO N ALLOWABLE FOR BAD AND DOUBTFUL DEBTS IS THE TOTAL OF 7.5% OF GROSS TOTAL INCOME AND 10% OF AGGREGATE AVERAGE ADVANCES MADE BY RURAL BRANCHES O F THE ASSESSEE WHICH IS FURTHER TO BE RESTRICTED TO THE ACTUAL PROVISION MADE FOR BAD AND DOUBTFUL DEBTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IN T HE RELEVANT PREVIOUS YEAR. 18.1 AS PER EXPLANATION (IA) TO SECTION 36(1)(VIIA ) RURAL BRANCH MEANS BRANCH OF A BANK SITUATE IN A PLACE WHICH HAS A POP ULATION OF NOT MORE THAN 10 000 AS PER THE LAST CENSUS. MOREOVER AS PER TH E CENSUS DATA UNIT FOR CLASSIFICATION OF RURAL AREA IS THE VILLAGE. THE J URISDICTIONAL HIGH COURT IN THE CASE OF LORD KRISHNA BANK VS. CIT (2010) (339 ITR 6 06) HELD THAT REVENUE VILLAGE IS THE CRITERIA AND NOT THE WARD OF A PANCH AYAT/VILLAGE FOR CLASSIFICATION OF RURAL NATURE OF A BRANCH OF A BAN K FOR THE PURPOSE OF DEDUCTION U/S. 36(1)(VIIA) OF THE I.T. ACT. 18.2 DURING THE PERIOD IT WAS NOTICED THAT THE ASSESSEE WAS HAVING 19 BRANCHES IN VARIOUS VILLAGES AND AS PER THE LAST CE NSUS DATA ALL THE VILLAGES WERE HAVING POPULATION OF MORE THAN 10 000. THEREF ORE THE ASSESSING OFFICER HELD THAT NONE OF THE BRANCHES OF THE BANK CAN BE TREATED AS RURAL BRANCHES AND THEREFORE THE BANK WAS ELIGIBLE FOR O NLY 7.5% OF THE GROSS TOTAL INCOME TOWARDS PROVISIONS FOR BAD AND DOUBTFU L DEBTS. THUS THE I.T.A. NOS. 673-675/COCH/2013 17 ASSESSING OFFICER RESTRICTED THE CLAIM TO 7.5% OF T HE TOTAL INCOME I.E. RS.15 52 791 AGAINST THE CLAIM OF RS. 4 65 70 239/- . 19. ON APPEAL THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY RELYING ON THE JUDGMENT OF THE HIGH COURT IN THE CASE OF LORD KRISHNA BANK LTD. VS. CIT (339 ITR 606). AGAINST THIS TH E ASSESSEE IS IN APPEAL BEFORE US. 20. THE LD. AR SUBMITTED THAT THE CLAIM HAS BEEN MA DE U/S. 80P WHICH WAS REJECTED AND THE DEDUCTION ALLOWABLE U/S. 36(1) (VIIA) WAS RESTRICTED TO 7.5% WHICH WAS NOT CORRECT. THE LD. AR REFERRED T O EXPLANATION (IA) OF CHAPTER VIA RURAL BRANCH WHICH MEANS A BRANCH OF A SCHEDULED BANK (OR A NON-SCHEDULED BANK) SITUATED IN A PLACE WHICH HAS A POPULATION OF NOT MORE THAN TEN THOUSAND ACCORDING TO THE LAST PRECED ING CENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIR ST DAY OF THE PREVIOUS YEAR. THE LD. AR SUBMITTED THAT THE CO-OPERATIVE B ANKS ARE NOT INCLUDED IN THE DEFINITION OF PLACE AND HENCE THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF LORD KRISHNA BANK VS. CIT (339 ITR 606) WAS NOT APPLICABLE TO THE ASSESSEES CASE AND HENCE WAS ELIGIBLE FOR DEDU CTION U/S. 36(1)(VIIA) OF THE ACT. I.T.A. NOS. 673-675/COCH/2013 18 21. THE LD. DR RELIED ON THE DECISION OF THE TRIBUN AL IN THE CASE OF PINARAYI SERVICE CO-OPERATIVE BANK LTD. AND OTHERS VS. ITO IN I.T.A. NO. 123/COCH/2012 & OTHERS VIDE ORDER DATED 31/07/2014. 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION IN THE CASE OF KANNUR CO- OPERATIVE BANK LTD. IN I.T.A. NOS. 182&183/COCH/201 4 DATED 27/06/2014 WHEREIN THE TRIBUNAL HELD AS UNDER: 3. THE ASSESSEE RAISED THE GROUND IN BOTH THE APPE ALS THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS NOT E NTITLED 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 OP INION 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 3 RD APRIL 2014. THE HONBLE JURISDICTIONAL HIGH COURT HELD AS 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 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 CO NCERNED WITH SUB- CLAUSE (A) OF CLAUSE (VIIA) TO SECTION 36(1). THIS CLAUSE MAKES PROVISION FOR BAD AND DOUBTFUL DEBTS. IN OTHER WORD S DEDUCTION COULD BE CLAIMED BY BANKS REFERRED TO IN CLAUSE (VIIA) IN RESPECT OF BAD AND DOUBTFUL DEBTS. IT PROVIDES CERTAIN TERMS AND C ONDITIONS UNDER WHICH SUCH DEDUCTIONS COULD BE CLAIMED BY A PARTICU LAR 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: I.T.A. NOS. 673-675/COCH/2013 19 A SCHEDULED BANK NOT BEING A BANK APPROVED BY CENT RAL GOVERNMENT FOR THE PURPOSES OF CLAUSE (VIIIA) OR A BANK INCORPORATED BY OR UNDER THE LAWS OF A COUNTRY OUTS IDE INDIA OR A NON-SCHEDULED BANK OR A CO-OPERATIVE BANK OTHER THA N A BANK OR A CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTUR AL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT 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 PERCENT OF THE AGGREGATE AVERAGE ADVA NCES MADE BY THE RURAL BRANCHES 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 ARE 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 DEF INED UNDER CLAUSE (C) OF SECTION 5 OF THE BANKING REGULATION A CT 1949 WHICH IS NOT A SCHEDULED BANK. . RURAL BRANCH MEANS A BRANCH OF A SCHEDULED BANK O R A NON- SCHEDULED BANK SITUATED IN A PLACE WHICH HAS A POPU LATION OF NOR MORE THAN TEN THOUSAND ACCORDING TO THE LAST PRECEDING C ENSUS OF WHICH THE RELEVANT FIGURES HAVE BEEN PUBLISHED BEFORE THE FIR ST DAY OF THE PREVIOUS YEAR. CO-OPERATIVE BANK PRIMARY AGRICULTURAL CREDIT SO CIETY AND PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BAN K SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN THE EXPLA NATION TO SUB- SECTION (4) OF SECTION 80P. SCHEDULED BANK MEANS A BANK FOR THE TIME BEING IN CLUDED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT. 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 SUCH BANK FINDS A PLACE IN THE SECOND SCHEDULE TO RESERVE BANK OF INDIA ACT. C OOPERATIVE BANK MEANS A BANK AS EXPLAINED UNDER SUB-SECTION (4) OF SECTION 80P OF THE I.T.A. NOS. 673-675/COCH/2013 20 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 REGULAT ION ACT ENTIRE PROVISIONS DEAL WITH CO-OPERATIVE SOCIETIES. SECTIO N 56 SAYS AFTER CLAUSE (CC) CLAUSE (CCI) DEFINITION OF CO-OPERATIVE BANK IS TO BE INCLUDED. SECTION 56(C) OF BANKING REGULATION ACT SAYS: IN SECTION 5:- (I) AFTER CLAUSE (CC) THE FOLLOWING CLAUSE SHALL B E INSERTED NAMELY:- (CCI) CO-OPERATIVE BANK MEANS A STATE CO-OPERATIV E BANK A CENTRAL CO- OPERATIVE BANK AND A PRIMARY COOPERATIVE 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 POSITION PRIOR T O 01.04.2007 AND AFTER 01.04.2007 THEY WERE ENJOYING THE BENEFITS P ROVIDED U/S. 80P. WITH THE INTRODUCTION OF FINANCE ACT 2007 WITH EFFECT FR OM 01.04.2007 THEY COULD CLAIM DEDUCTIONS AS PROVIDED U/S. 36(1) OF TH E ACT. WE ARE CONCERNED WITH SUB-CLAUSE(A) OF CLAUSE (VIIA) TO SE CTION 36(1). PRIOR TO FINANCE ACT OF 2007 CO-OPERATIVE BANK WAS NOT INCL UDED IN SUBCLAUSE (A) SO FAR AS PROVISIONS FOR BAD AND DOUBTFUL DEBTS . WITH EFFECT FROM 01.04.2007 CO-OPERATIVE BANK WAS INCLUDED UNDER SU B-CLAUSE (A) OF CLAUSE (VIIA) OF SECTION 36(1). IT IS FURTHER CLARI FIED THAT ONLY SUCH CO- OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURE CRE DIT SOCIETY ETC. IS INCLUDED IN SUB-CLAUSE (A) OF CLAUSE (VIIA). THE PR OVISION IS A BENEFICIAL ONE. NO DOUBT PLAIN READING OF MAIN SECTION 36(1) (VIIA)(A) AND EXPLANATION UNDER SAID SECTION PRESENT CERTAIN DIFF ICULTIES BUT SITUATION IS NOT WITHOUT POSSIBILITIES. THE OBJECT AND INTENTION OF THE LEGISLATURE IS TO BE UNDERSTOOD BY HARMONIOUS CONSTRUCTION OF THE PRO VISIONS. 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. BY RESTRIC TING THE SCOPE OF THE PROVISIONS THE VERY PURPOSE OF INCLUSION OF CO-OPE RATIVE BANK WOULD BE LOST. I.T.A. NOS. 673-675/COCH/2013 21 SUB-CLAUSE (A) CONSISTS OF TWO TYPES OF DEDUCTIONS. ONE REFERS TO DEDUCTION OF AN AMOUNT NOT EXCEEDING 7.5% OF THE TO TAL INCOME. ONLY CONDITION IS THERE SHOULD BE A PROVISION FOR BAD A ND DOUBTFUL DEBTS. TILL 01.04.2007 THERE WAS NO NEED TO MAKE ANY PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER THIS CLAUSE SO FAR AS CO-OPERA TIVE 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 Y EAR IN QUESTION APPELLANTS/ASSESSEES HAVE CREATED PROVISION FOR BAD AND DOUBTFUL DEBTS IN THE BOOKS OF ACCOUNTS. SO FAR AS THIS ISSUE IS C ONCERNED OPINION OF THE ASSESSING OFFICER AND TWO APPELLATE AUTHORITIES IS JUSTIFIED AND WE NEED NOT INTERFERE WITH THE OPINION OF THE AUTHORITIES I N 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 WH ETHER A COOPERATIVE BANK IRRESPECTIVE OF HAVING RURAL BRANCH AS EXPLAI NED UNDER EXPLANATION IS ENTITLED TO HAVE THE BENEFIT OF SECOND PART OF S ECTION 36(1)(VIIA)(A) WE HAVE TO SEE IN THE ABSENCE OF COOPERATIVE 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 C ONVINCE THE COURT THAT ADJECTIVE OF RURAL WOULD MEAN IN RELATION TO OR CHA RACTERISTIC OF THE COUNTRYSIDE RATHER THAN THE TOWN; REMOTE RURAL AREA S. URBAN NO DOUBT IS OPPOSITE TO RURAL. URBAN IS IN RELATION TO OR CHARA CTERISTIC 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 REASON THAT EXPLANATION UNDER SECTION 36(1) ITSELF DEFINES WHAT COULD BE CONSIDER ED 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 B RANCH WITH REFERENCE TO SUB-CLAUSE (A) OF CLAUSE (VIIA) TO SECTION 36(1) ON E NEED NOT TO GO IN SEARCH OF THE MEANING OF RURAL OR WHAT EXACTLY WOUL D CONSTITUTE RURAL BRANCH. THIS COURT HAD AN OCCASION TO DECIDE THE SA ID CONTROVERSY PERTAINING TO BAD AND DOUBTFUL DEBTS OF A RURAL BRA NCH. WHILE EXPLAINING THE MEANING OF PLACE IN EXPLANATION (IA) TO SECTI ON 36(1)(VIIA) THEIR LORDSHIPS OPINED AS UNDER: NEXT QUESTION RAISED PERTAINS TO THE ASSESSEES CL AIM 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 BASIS O F CLASSIFYING BRANCHES OF THE BANK AS RURAL BRANCHES AND OTHER BRANCHES. R URAL BRANCH IS DEFINED UNDER EXPLANATION (IA) TO SECTION 36(1)(VII A) AS FOLLOWS: RURAL BRANCH MEANS A BRANCH OF A SCHEDULED BANK O R A NON- SCHEDULES BANK SITUATED IN A PLACE WHICH HAS A POPULATION OF NOR MORE THAN TEN I.T.A. NOS. 673-675/COCH/2013 22 THOUSAND ACCORDING TO THE LAST PRECEDING 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 POPUL ATION IN THE PLACE WHERE THE CONCERNED BRANCH IS LOCATED. WHILE THE AS SESSEES CASE THAT FOUND ACCEPTANCE WITH THE TRIBUNAL IS THAT PLACE REFERRED TO IN THE ABOVE DEFINITION CLAUSE IS THE WARD OF A PANCHAYAT OR MUNICIPALITY THE ASSESSING OFFICER TOOK THE VIEW THAT PLACE CONTAI NED IN THE DEFINITION CLAUSE SHOULD MEAN A REVENUE VILLAGE. NO DOUBT AS SUCH IS NOT DEFINED IN THE DEFINITION CLAUSES AND SO MUCH SO WE HAVE T O FIND OUT THE SCOPE AND MEANING OF PLACE REFERRED TO IN THE SECTION. STANDING COUNSEL FOR THE DEPARTMENT PRODUCED BEFORE US LAST PUBLISHED CE NSUS REPORT OF 2001. EVEN THOUGH 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 C ASE. WHAT IS WRITTEN IN THE CENSUS REPORT 2001 IS AS FOLLOWS: THE BASIC UNIT FOR RURAL AREAS IS THE REVENUE VILL AGE WITH DEFINITE SURVEYED BOUNDARIES. THE RURAL AREA IS HOWEVER TA KEN AS THE RESIDUAL PORTION EXCLUDING THE URBAN AREA AND FOR THAT NO ST RICT 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 ASSESSEES 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 I N 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 ON LY BRANCHES OF THE BANK LOCATED IN RURAL AREAS ARE COVERED. WHEN THE L EGISLATURE ADOPTS POPULATION AS THE BASIS FOR CLASSIFICATION OF RURAL BRANCHES THAT TOO WITH REFERENCE TO THE LAST CENSUS REPORT WE FEEL THE BA SIC UNIT AS AVAILABLE FOR IDENTIFICATION OF RURAL AREA IN THE CENSUS REPO RT CAN BE LEGITIMATELY ADOPTED. SO MUCH SO WE FEEL THE ABOVE MEANING OF R URAL AREA CONTAINED IN THE CENSUS REPORT WHEREIN REVENUE VILLAGE IS TRE ATED AS A UNIT OF RURAL AREA CAN BE RIGHTLY ADOPTED. SO MUCH SO PLACE R EFERRED TO IN THE ABOVE DEFINITION CLAUSE FOR THE PURPOSE OF IDENTIFY ING THE BRANCH OF A BANK AS A RURAL BRANCH WITH REFERENCE TO ITS LOCATI ON 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 RU RAL BRANCH HAS TO BE ALWAYS IN RURAL AREAS AND THE PLACE REFERRED CAN EA SILY BE TAKEN AS A VILLAGE. SEVERAL WARDS MAY COME WITHIN A VILLAGE W HETHER IT BE IN CORPORATION MUNICIPALITY OR PANCHAYATS. THERE CAN BE NO VILLAGE IN A I.T.A. NOS. 673-675/COCH/2013 23 MUNICIPAL OR CORPORATION AREA WHERE THE POPULATION IS LESS THAN 10000. SO MUCH SO RURAL BRANCHES ARE SUCH OF THE BRANCHES LOCATED IN A VILLAGE WHERE THE POPULATION IN THE VILLAGE AS A UNIT IS LE SS 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 REVER SE THE JUDGMENT OF CIT(APPEALS) IN THE LIGHT OF THE DECISION IN LORD K RISHNA BANKS CASE (SUPRA). 12. THEN COMING TO THE CONTROVERSY WHETHER CO-OPERA TIVE BANK COULD CLAIM DEDUCTION OF 10% OF THE AGGREGATE AVERAGE ADV ANCES WHILE COMPUTING THE INCOME IRRESPECTIVE OF FALLING UNDER RURAL BRANCH AS PER EXPLANATION IN ORDER TO CONSIDER A COMPANY AS A BA NKING COMPANY IT MUST TRANSACT BUSINESS OF BANKING IN INDIA AS DEFIN ED U/S. 5(C) OF BANKING REGULATION ACT. EXPLANATION TO SECTION 5(C) CLEARLY INDICATES WHICH ARE THE TRANSACTIONS WHICH WOULD NOT COME WIT HIN THE MEANING OF BANKING BUSINESS. NON-SCHEDULE BANK MEANS A BANKING COMPANY AS DEFINED U/S. 5(C) WHICH IS NOT A SCHEDULED BANK. AS ALREADY STATED ABOVE CO-OPERATIVE BANK CANNOT BE CONSIDERED AS A SCHEDUL ED BANK AS SECOND SCHEDULE TO RESERVE BANK OF INDIA ACT DOES NOT INCL UDE ANY OF THE CO- OPERATIVE BANKS. READING OF SECTION 5(C) ALONG WITH EXPLANATION CLEARLY INDICATES THOUGH ANY COMPANY WHICH TRANSACTS BUSINE SS OF BANKING IN INDIA WOULD COME WITHIN THE MEANING OF NON-SCHEDULE D BANK BY VIRTUE OF EXPLANATION (1) UNDER THIS CLAUSE SCHEDULED BANK IS EXCLUDED. SO FAR AS SUB-CLAUSE(A) OF CLAUSE (VIIA) TO SECTION 36(1) TW O TYPES OF DEDUCTIONS ARE PROVIDED TO NON-SCHEDULED BANK A SCHEDULED BAN K AND A CO- OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CR EDIT SOCIETY ETC. IT IS TO BE NOTED THAT APPELLANTS/ASSESSEES ARE NOT PRIMARY AGRICULTURAL CREDIT COOPERATIVE 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 C ERTAIN NUMBER OF POPULATION. IT REFERS TO BRANCH OF A SCHEDULED BANK OR A NON-SCHEDULED BANK. APPARENTLY WE DO NOT FIND THE TERM CO-OPERAT IVE 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 NONSCHEDULED BANK. REA DING OF DEFINITION OF NON-SCHEDULE BANK ALONG WITH MEANING OF RURAL BRANC H UNDER EXPLANATION TO SECTION 36(1) OF THE ACT CLEARLY IN DICATE THAT CO-OPERATIVE BANK ALSO FALLS UNDER THE CATEGORY OF NON-SCHEDULE BANK FOR THE PURPOSE OF THIS SECTION. THEREFORE READING OF ENTIRE SECTI ON 36(1)(VIIA)(A) ALONG WITH EXPLANATION WOULD MEAN TWO KINDS OF DEDUCTIONS REFERRED TO IN THE I.T.A. NOS. 673-675/COCH/2013 24 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 BRA NCH MEANS A BRANCH AS EXPLAINED UNDER EXPLANATION (IA) AS OPIN ED 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. H ENCE THESE APPEALS ARE DISMISSED ANSWERING SUBSTANTIAL QUESTIO NS OF LAW IN FAVOUR OF REVENUE. 23. IN VIEW OF THE ABOVE ORDER OF THIS TRIBUNAL W E ARE INCLINED TO DECIDE THE ISSUE AGAINST THE ASSESSEE. ACCORDINGLY THIS GROUND RAISED BY THE ASSESSEES IN ALL THE APPEALS IS DISMISSED. 24. IN THE RESULT ALL THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED ACCORDINGLY ON 14- 11-2014 SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 14 TH NOVEMBER 2014 GJ COPY TO: 1. M/S. MADAI CO-OPERATIVE RURAL BANK LTD. PAYYANG ADI KANNUR-670 303. 2. THE INCOME TAX OFFICER WARD-2 KANNUR 3. THE COMMISSIONER OF INCOME-TAX(APPEALS) KOZHIKO DE. I.T.A. NOS. 673-675/COCH/2013 25 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. COC HIN