TMI Blog2008 (5) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant claimed the deduction, the learned CIT(A) was not at all justified in not allowing the appellant's claim of deduction as made under s. 36(1)(viia) of the Act. 3. The learned CIT(A) erred on facts and in law in not allowing the appellant proper or sufficient opportunity to have its say or make compliance of the reasons relied upon by him in disallowing the appellant's claim in the present case." 3. The facts of the case are that the assessee is a co-operative society and carrying on banking business. It is duly registered with Registrar of Co-operative Societies and it has been granted licence to carry out banking business under s. 22 of the Banking Regulation Act, 1949 by the RBI. Assessment in this case was completed on a net loss of Rs. 2,20,21,770 as against net loss of Rs. 3,13,66,650 vide order dt. 28th Feb., 2006 passed under s. 143(3). The assessee had claimed a sum of Rs. 95,46,813.59 as bad and doubtful debts which was debited in the reserve account. Total receipts as per P L a/c were shown at Rs. 40,38,588.41. The AO observed that as per provisions of s. 36(1)(viia) only 5 per cent is allowable under this head which comes to Rs. 2,01,929.42. Hence, the exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king Regulation Act. Accordingly, a 'co-operative bank' would be treated as a 'non-scheduled bank' and therefore. benefit of s. 36(1)(viia) would be available to the assessee. The learned Authorised Representative for the assessee relied on the decision of Hon'ble Bombay High Court in the case of Shamrao Vithal Co-operative Ltd. vs. Star Glass Works AIR 2003 Bom 205 for the proposition that s. 56 of Banking Regulation Act is applicable to a co-operative society also. 7. Against this, the learned Departmental Representative submitted that deduction under s. 36(1)(viia) would be available either to a scheduled bank or to a non-scheduled bank. Both these terms are defined in Explanation below cl. (viia) of sub-s. (1) of s. 36. This definition is exhaustive and therefore, no other interpretation or meaning other than what is provided can be implied. The learned Departmental Representative further submitted that definition of a 'scheduled bank' given in RBI Act, 1934 is different than the definition of 'scheduled bank' given in IT Act, 1961. The co-operative society is included in the definition of 'scheduled bank' as per definition given in s. 2(e) of RBI Act, 1934 whereas a 'co-oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king Regulation Act, the learned Departmental Representative submitted that for the purposes of regulating the conduct of banking business done by banks, provisions of Banking Regulation Act have been made applicable to co-operative banks as well, but it does not mean that s. 56 of Banking Regulation Act would override the definition of 'non-scheduled bank' given in IT Act, 1961. The learned Departmental Representative also relied on the decision of Tribunal in the case of Hardoi District Cooperative Bank Ltd. referred to by the learned CIT(A) in his order. 8. We have considered the rival submissions and perused the material on record. The short question involved in the present appeal is whether assessee which is a co-operative bank can be treated as a 'non-scheduled bank' and therefore, it would be entitled to the benefit of s. 36(1)(viia)? In this regard, we refer to s. 36(1)(viia) and Explanation therein as under: "36. Other deductions-(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in s. 28- (viia) in respect of any provision for bad and doubtful debts made by- (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause." 10. Upto this stage, there is no dispute between the Revenue and the assessee. Both of them agreed that for finding out as to what would be covered in the definition of 'non-scheduled bank' one has to go to s. 5(c) of the Banking Regulation Act. According to this section, 'banking company' means any company which transacts the business of banking in India. The dispute between the two parties starts from this point. The learned Departmental Representative is of the view that for the purposes of getting the coverage under the words "banking company" one has to go to the definition of a company as provided in s. 5(d) of Banking Regulation Act or s. l4(d) (sic) of IT Act, 1961. According to learned Departmental Representative, the "company" is defined under s. 5(d) of Banking Regulation Act and it means any company as defined in s. 3 of Companies Act. Sec. 3 of Companies Act defines 'company' as under: "3. (1) In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any' have been used in the Banking Regulation Act, it would be deemed to have reference to a co-operative bank. Thus, the words 'company' or 'banking company' are interchangeable with co-operative bank. 13. In our considered view, borrowing of various concepts from Banking Regulation Act for the purposes of allowing exemption, deduction or computation of income under IT Act cannot be extended endlessly. The limit is provided by the IT Act itself. One has to borrow the definition or concept from a different Act only to the extent as provided under the IT Act and not beyond. If Expln. (i) to s. 36(1)(viia) provides that a non scheduled bank would be a banking company as defined in s. 5(c) of Banking Regulation Act, then our search as to what will be covered under a 'non-scheduled bank' would be limited to s. 5(c) of Banking Regulation Act only and wherever we have to further find the meaning of various words used in that definition i.e. s. 5(c) of Banking Regulation Act as provided in that other Act (i.e. Banking Regulation Act) then we have to search for the definitions of those words in that Act under relevant section of definition. If we find definitions of such other words in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, respectfully following above decision, we also hold that one has to look at the definition of 'resident' only in the FERA and need not come back to the IT Act unless it is so specifically provided. There is another logic in this conclusion. It is clear that s. 5(iib) and Explanation thereto of GT Act says that we had to follow the definition of s. 2(q) for determining whether person is 'resident outside India' or not. This is not disputed. Once this is so then for finding out the meaning or concept of the words used in that definition, one has to look to that Act only and need not travel outside unless it is so specifically provided in the main statute, i.e., GT Act or in the referred Act, i.e. FERA. The question will arise as to why one is required to come back only to IT Act and why not elsewhere in any other statute which may also provide the definition of 'resident', In our considered view search in other statute can be done only when the referred Act, i.e., FERA, does not provide the meaning or concept of the words used in s. 2(q). Once the meaning and concept of the words used in s. 2(q) are clearly available in s. 2(p) of VERA then we do not see any reason to come bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence to a 'company' in Banking Regulation Act would mean a reference to a co-operative bank. If we understand the context in which s. 56 of Banking Regulation Act is operating then one can also understand that the reference to co-operative bank as contained in that section is concerned with different object and purpose. In any case, this section is neither a definition section nor an interpretation section as compared to s. 5 of Banking Regulation Act which clearly provides interpretation of the words used in that Act. Certainly, it cannot mean that the concept provided in s. 56 can penetrate into the definition of banking company as provided in the definition of non-scheduled bank as per Expln. (i) to s. 36(1)of IT Act. If intention of legislature was to use the term 'non-scheduled bank' as referring to 'co-operative bank' for the purpose of s. 36(1)(viia) then it would have been convenient to use the words 'banking concern', rather than separately defining 'non-scheduled' and 'scheduled bank'. If legislature intended to provide the benefit of s. 36(1)(viia) they could have so specifically said in the definition of non-scheduled bank as they have specifically said so that co-opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under s. 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the RBI Act, 1934 (2 of 1934), (vi) 'co-operative bank', 'primary agricultural credit society' and 'primary co-operative agricultural and rural development bank' shall have the meanings respectively assigned to them in the Explanation to sub-s. (4) of s. 80P." 17. We notice that exclusion of a co-operative bank from the definition of scheduled bank has been omitted by this amendment. In other words, it is a clear intention of the legislature to provide the benefit under s. 36(1)(viia) to a co-operative bank by including the co-operative bank in s. 36(1)(viia). Further, as per Second Schedule to the RBI Act various co-operative banks are included in the definition of scheduled bank. Now, by excluding the words "it does not include a co-operative bank" in the definition of scheduled bank, the concept of scheduled bank has been enlarged under IT Act also by covering co-operative bank in the ambit of scheduled bank. 18. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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