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TMI Blog2012 (12) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... e said issue are stated in brief. The assessee claimed deduction towards provision for bad and doubtful advances u/s 36(1)(viia) of the Act at 7.5% of the Gross total income amounting to ₹ 32,72,731/- and further deduction of ₹ 7,30,66,667/- being 10% of the aggregate advances made by the rural branches. The AO disallowed the claim of ₹ 32.72,731/- as no provision was made, as required u/s 36(1)(viia) of the Act. The AO also disallowed the claim of ₹ 7,30,66,667/- also on the ground that the assessee bank does not have any rural branch, i.e., the location of the branches of the bank are not "rural". The assessee filed appeal before Ld CIT(A) on both the issues, but could not succeed. Hence, the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 57. The relevant observations made by the Hon'ble Jurisdictional Kerala High Court are extracted below, for the sake of convenience:- "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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) on this issue and restore that of the assessing officer. 7. Before us, the Ld A.R took an alternative plea with regard to the issue of determination of "rural branch" by submitting that the definition of "rural branch" given in sec. 36(1)(viia) shall not apply to the Co-operative banks and hence the order of Hon'ble Jurisdictional High Court shall not apply to the assessee herein. 7.1 In order to understand this alternative plea, it is necessary to explain the relevant provisions. The section 36(1)(viia) opens with the words "in respect of any provision for bad and doubtful debts made by - (a) a scheduled bank not being a bank incorporated by or under the laws of a country outside India or a non-sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised before the lower authorities. Hence, the alternative ground should not have been accepted normally. However, since the alternative plea of the assessee involves interpretation of the various provisions/clauses of the Act/other Central Act only, in the interest of natural justice, we proceed to address the alternative plea of the assessee in the coming paragraphs. 8. The Explanation below section 36(1)(viia) defines various terms. Some of the definitions, which are relevant to the issue under consideration, are extracted below:- "non-scheduled bank" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank. "scheduled bank" mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 5 of the Banking Regulation Act, 1949, which reads as under:- Sec. 5(c): "banking company" means any company which transacts the business of banking in India. For understanding the meaning of "Co-operative Bank" we have to refer to Part V of the Banking Regulations Act, 1949. The said Part V starts with section 56, which reads as under:- 56:- Act to apply to Co-operative societies subject to modifications:- The provisions of this Act, as in force for the time being, shall apply to, or in relation to cooperative societies as they apply to, or in relation to banking companies subject to the following modifications namely:- Throughout this Act, unless the context otherwise requires:- References to a "ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rural branch" are identical with the case of Kannur Dist. Co-op Bank Ltd. (supra) referred supra, we are inclined to follow the said decision. We notice that the decision reached by the Ld CIT(A) is identical with the view taken by the Tribunal. Accordingly, we uphold his decision on this issue. 5. The next issue relates to the claim of ₹ 32,72,731/-, being 7.5% of the total income (computed before making any deduction under clause 36(1)(viia) and Chapter VIA) made as per the provisions of sec. 36(1)(viia) of the Act. The AO has pointed out that the assessee has not created any Provision for bad and doubtful debts as mandated by sec. 36(1)(viia) of the Act. Hence, he disallowed the above said claim and the same was upheld by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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