Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: TAX RATES - GOODS TAXABLE @ 4% :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT Audit :: form 3cd :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: list of goods taxed at 4% :: ACCOUNTING STANDARD :: empanelment :: TDS :: VAT RATES :: cpt :: ACCOUNTING STANDARDS :: due date for vat payment
 
 
« From the Courts »
 Micro Spacematrix Solution P Ltd vs. ITO (ITAT Delhi)
 CIT vs. Greenfield Hotels & Estates Pvt. Ltd (Bombay High Court)
 IndiaBulls Financial Services Ltd vs. DCIT (Delhi High Court)
 Maharao Bhim Singh of Kota vs. CIT (Supreme Court)
 Ravneet Takhar Vs. Commissioner Of Income Tax Ix And Ors.
 Jaiprakash Associates Ltd. Vs. Commissioner Of Income Tax
 Formula One World Championship Limited Vs. Commissioner Of Income Tax, International Taxation-3 And Anr.
 Commissioner Of Income Tax International Taxation-3 Delhi Vs. Formula One World Championship Ltd. And Anr.
 Reliance Communications Ltd vs. DDIT (ITAT Mumbai)
  Sushila Devi vs. CIT (Delhi High Court)
 Ashok Prapann Sharma vs. CIT (Supreme Court)a

Citizen Credit Co-operative Bank Limited Helena Apartments, 57 Mount Carmel Road, Bandra (West) Mumbai-400 050. Vs. ACIT Range 1(2) Mumbai.
July, 31st 2014
               IN THE INCOME TAX APPELLATE TRIBUNAL
                            "C" Bench, Mumbai
              Before Shri Vijay Pal Rao, Judicial Member and
               Shri D. Karunakara Rao, Accountant Member

                            ITA No.338/Mum/2012
                           (Assessment year: 2008-09)

Citizen Credit Co-operative                   ACIT ­Range 1(2)
Bank Limited                                  Mumbai.
Helena Apartments, 57 Mount          Vs.
Carmel Road, Bandra (West)
Mumbai-400 050.

(Appellant)                                      (Respondent)


    Permanent Account No. :         AAAAC 0016 F

                     Assessee by          :   Shri Vijay Kothari
                     Revenue by           :   Shri Ravinder Sindhu

      Date of hearing                 :       17/07/2014
      Date of Pronouncement           :       25/07/2014


                                  ORDER


Per Vijay Pal Rao, Judicial Member:

      This appeal by the assessee is directed against the order dated
19/10/2011 of CIT(A) for the assessment year 2008-09. The assessee
raised the following grounds :-

              "1. The learned Commissioner of Income-tax (Appeals) erred on
              facts and in law in denying to the appellant the deduction u/sec.
              36 (l)(viia) by not accepting the fact that the Branch at 'Naigaon-
              Juhchandra', which is a rural place has a population of only
              4,679, in support whereof the appellant had furnished before the
              learned Assessing Officer:

              (a) The letter from the Tehsildar confirming the population of
              'Naigaon-Juhchandra' as per published Census Report;
                                       2                   ITA No.338/M/12
                                                               AY:08-09





            (b) Had produced record of Property Taxes paid to the 'Gram
            Panchayat Juhchandra'; and

            (c) Had given a copy of the census of India specific to
            'Juhchandra'.

            2. The learned Commissioner of Income-tax (Appeals) erred on
            facts in observing -"It would not be out of place to point out that in
            subsequent assessments the appellant bank has not treated its
            Naigaon branch as a rural branch." In fact, the assessee has made
            a claim for deduction under section 36(1)(viia) of the Income-tax
            Act treating the Naigaon Branch as a rural branch in the past for
            assessment year 2007-08 as also in subsequent assessment year;
            and in the assessment for assessment year 2007-08 such a claim
            has been allowed."


2.    The only issue arising for our consideration and adjudication is
whether the assessee's branch at Naigaon-Juchandra is a rural branch
for the purpose of deduction under section 36(1)(viia) of the Income tax
Act. The assessee is a co-operative bank and in the banking business.
The assessee is having interalia a branch namely Naigaon-Juchandra,
Thane Dist. The assessee claimed deduction under section 36(1)(viia) of
the Income tax Act in respect of the aggregate average advances of its
rural branches including the branch Juhuchandra Naigaon. The AO
rejected the claim of the assessee on the ground that the advances given
by Naigaon-Juchandra branch of the assessee is not limited to the said
gram panchayat only but includes several other areas of Mumbai. The
AO accordingly has taken into consideration the population of three
panchayats of Naigaon and found that the population as per census of
2001 of these three panchayats exceeds ten thousand and therefore, the
Naigaon branch cannot be treated as a rural branch as per provisions of
Section 36(1)(viia). The assessee challenged the order of AO before CIT(A)
but could not succeed as CIT(A) confirmed the action of the AO in
disallowing claim of the assessee under section 36(1)(vii)(a) in respect of
the advances given by said branch.
                                     3                ITA No.338/M/12
                                                          AY:08-09


3.     Before us the ld. AR of the assessee has submitted that while
deciding the issue the AO has taken into consideration the population of
three panchayat areas and not the population of the village where the
bank is located. He has referred to the census report as per census of
2001 and submitted that the village Juhuchandra Naigoan is having
total population of 5911 and the entire population is rural population as
per census report. Therefore, for the purpose of classification of branch
being rural the criteria is the place where the branch is situated has a
population of not more than ten thousand according to the last census
of which the relevant figures have been published before the date of
previous year as defined under explanation -2 clause (ia) of section
36(1)(viia). He has also referred and relied upon house tax receipt issued
by the gram panchayat of Juhchandra Naigaon and submitted that the
said branch of the assessee is situated and housed in the premises 42C.
Thus the ld. AR of the assessee has submitted that the criteria to
determine the category/class of the branch being rural is having
population less than 10000 of the locality where the branch is situated
and not the population of the area of service of the branch. In support of
his contention he has relied upon the decision of the Hon'ble High Court
of Kerala in the case of CIT vs. Lord Krishna Bank Ltd. (339 ITR 606).

4.     On the other hand the ld. DR has heavily relied upon the orders of
authorities below and submitted that when the assessee is catering to
the needs of   people in a wide spread area by advancing loans to the
customers beyond the area of the village Juhuchandra Naigaon, then the
population of the entire area has to be taken into account for the
purpose of determining whether the branch of the assessee is rural or
not.

5.     We have considered the rival submissions as well as relevant
material on record. There is no dispute that the Juhuchandra Naigaon
                                      4                  ITA No.338/M/12
                                                             AY:08-09


Branch of the assessee bank is situated in village Juhuchandra             and
under the village panchayat of Juchandra Naigoan. It is also not
disputed by the revenue that the population of the village Juchandra
Naigoan is 5911 and the entire population is rural as per census report
of census India 2001. The AO has denied the deduction under section
36(1)(viia) on the ground that the area of catering the services by the
said branch is spread over to two other panchayats also and accordingly
the population of the area of all three panchayats was taken into
consideration for determining the classification of the said branch as
rural branch. At the outset we note that an identical question fell for
consideration of Hon'ble Kerala High Court in the case of CIT vs. Lord
Krishna Bank Ltd. (supra), wherein the Hon'ble High Court                  has
discussed and decided the issue in para-4 to 6 as under :-

            "4.    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 basis
            of classifying branches of the bank as rural branches and other
            branches. Rural branch is defined under Explanation (ia) to
            section 36(1)(viia) as follows :

                  " 'rural branch' means a branch of a scheduled bank or a
                  nonscheduled bank situated in a place which has a
                  population of not more than ten thousand according to the
                  last preceding census of which the relevant figures have
                  been published before the first day of the previous year."

            5.     What is clear from the above is that the classification
            between rural and other branches of a bank is made based on the
            population in the place where the concerned branch is located.
            While the assessee's 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" contained in the definition clause should
            mean a revenue village. No doubt, "place" as such is not defined in
            the definition clauses and so much so, we have to find out the
            scope and meaning of "place" referred to in the section. Standing
            counsel for the Department produced before us last published
            Census 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
                                       5                   ITA No.338/M/12
                                                               AY:08-09


            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."

            6.      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 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 branches located in a village where the
            population in the village as a unit is less than 10000. We,
            therefore, allow the appeal on this issue by reversing the order of
            the Tribunal and by restoring the assessment."

6.    The Hon'ble High Court has analysed the provision of section
36(1)(viia) and was of the view that the meaning of rural area contained
in the census report wherein the revenue village is treated as a unit of
rural area, can be, rightly adopted . It has been further observed that the
place referred to in the definition clause for the purpose of identifying
the branch of a bank is rural branch with reference to its location as the
                                     6                 ITA No.338/M/12
                                                           AY:08-09


revenue village and accordingly the Hon'ble High Court has rejected the
finding of the Tribunal that "place" referred to in the definition is the
Ward or local authority like panchayat or municipality. Thus it is clear
from the above decision of the Kerala High Court that a rural branch has
to be always in the rural area and the place referred can easily be taken
as village. In view of the above decision the scope of definition of a place
where the branch of the bank is situated cannot be extended beyond the
rural unit being village as recognized in the census report. It is not the
case of the AO that though the branch in question is situated in a rural
village however, the entire or majority part of the advances are given to
the customers belonging to the neighboring urban area so as to defeat
the very purpose and object of the incentive in the shape of deduction
under section 36(1)(viia) granted under the Act.




7.    In view of the above discussion and facts and circumstances of the
case, as well as following the decision of Hon'ble Kerala High Court in the
case of CIT vs. Lord Krishna Bank Ltd. (supra), we hold that Juchandra
Naigaon, branch situated at village Juhchandra Naigaon is a rural
branch in terms of section 36(1)(viia) of the Income tax Act and
accordingly entitled for deduction under the said section.

8.    In the result, the appeal is allowed.


Order pronounced in the open court on 25th July, 2014.



              Sd/-                               Sd/-
     (D. KARUNAKARA RAO)                   (VIJAY PAL RAO )
     ACCOUNTANT MEMBER                    JUDICIAL MEMBER



Mumbai, Dated: 25/07/2014.
Jv.
                                 7                ITA No.338/M/12
                                                      AY:08-09




Copy to: The Appellant
        The Respondent
        The CIT, Concerned, Mumbai
        The CIT(A) Concerned, Mumbai
        The DR " " Bench

True Copy
                                       By Order

                       Dy/Asstt. Registrar, ITAT, Mumbai.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Portfolio

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions