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2015 (10) TMI 928 - AT - Income TaxDeduction u/sec. 36 (l)(viia) denied - CIT(A) not accepting the fact that the Branch at 'Naigaon-Juhchandra' which is a rural place has a population of only 4,679 - assessee has made a claim for deduction under section 36(1)(viia) 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 - assessee is a co-operative bank and in the banking business Held that:- An identical question fell for consideration of Hon'ble Kerala High Court in the case of CIT vs. Lord Krishna Bank Ltd. (2010 (10) TMI 860 - Kerala High Court) wherein held that 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 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. In view of the above discussion 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. - Decided in favour of assessee.
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