C.I.T.-UDAIPUR vs. M/S DUNGARPURCENTRAL CO-OPERATIVE BANK

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ITA/169/2014HC RajasthanRJHC01026975201418 August 20153 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that there was no substantial question of law arising from the ITAT's order. The Tribunal had relied on its earlier decision in the case of ACIT, Circle-3, Jaipur Vs. M/s. Jaipur Central Co-operative Bank Ltd., which was confirmed by the High Court in D.B. Income Tax Appeal No.237/2012. This precedent established that Co-operative Banks are to be treated as non-scheduled banks for the purpose of Section 36(1)(viia). Furthermore, the definition of a 'rural branch' in Explanation (ia) was considered, and in the absence of tangible evidence to the contrary, the ITAT's finding that the assessee was entitled to the 10% allowance was upheld. The High Court found the appeal to be devoid of merit. The operative direction was to dismiss the appeal.

What were the facts?

The appeal was filed by the Commissioner of Income Tax, Udaipur against an order dated 20.02.2014 of the Income Tax Appellate Tribunal (ITAT), Jodhpur. The dispute concerned the allowance under Section 36(1)(viia) of the Income Tax Act, 1961. The assessee, M/s. Dungarpur Central Co-operative Bank Ltd., claimed a 10% allowance, while the Revenue contended it was entitled to only 7.5%. The ITAT, relying on a previous decision of the ITAT Jaipur Bench confirmed by the High Court, allowed the 10% allowance. The High Court noted that the definition of a 'rural branch' in Explanation (ia) to Section 36(1)(viia) was considered, and in the absence of tangible evidence to the contrary, the 10% allowance was granted.

What were the issues?

1. Whether the assessee, a Co-operative Bank, was entitled to a 10% allowance under Section 36(1)(viia) of the Income Tax Act, 1961, or only 7.5%. Assessee's Contention: The assessee argued that it was entitled to the 10% allowance. This was based on the ITAT's finding that Co-operative Banks are considered non-scheduled banks for the purpose of Section 36(1)(viia) and that its branches qualified as rural branches as per Explanation (ia), where the population was not more than ten thousand. Revenue's Contention: The Revenue contended that the assessee was only entitled to a 7.5% allowance. The Revenue's argument appears to be that the Co-operative Bank should not be treated as a non-scheduled bank eligible for the higher allowance, or that its branches did not meet the criteria for rural branches. The judgment does not explicitly detail the Revenue's arguments beyond the initial contention regarding the percentage.

Which sections of the Income-tax Act were involved?

Section 36(1)(viia)

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR J U D G M E N T D.B. INCOME TAX APPEAL NO.169/2014 Commissioner of Income Tax, Udaipur V/S M/s. Dungarpur Central Co-operative Bank Ltd., Dungarpur Date of Judgment : 18.08.2015 PRESENT HON'BLE MR. JUSTICE AJAY RASTOGI HON'BLE MR. JUSTICE VIJAY BISHNOI Mr. K.K. Bissa, for appellant. The instant appeal is directed against the order dated 20.02.2014 of Income Tax Appellate Tribunal, Jodhpur. The question raised in this appeal is that whether assessee was entitled for 7.5% allowance admissible to the Co-operative Bank and not 10% as per Section 36(1)(viia) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act of 1961'). Provision contained in Section 36(1)(viia) of the Act of 1961 is quoted below :- “(a) a scheduled bank [not being a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank [or a co- operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank], an amount [not exceeding seven and one-half per

2 cent] of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding [Ten] per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner.” The definition of Rural Bank has been given in Explanation (ia), the same is also quoted below :- “(ia) “rural branch” 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 preceding census of which the relevant figures have been published before the first day of the previous year”. The learned tribunal has taken into consideration the material available on record and the judgment of ITAT Jaipur Bench rendered in the case of ACIT, Circle-3, Jaipur Vs. M/s. Jaipur Central Co-operative Bank Ltd. which was confirmed on an appeal preferred by the CIT-I, Jaipur in D.B. Income Tax Appeal No.237/2012 [Commissioner of Income Tax-I, Jaipur (Raj.) Vs. M/s. Jaipur Central Co-operative Bank Ltd.] decided on 27th August, 2012 and finally observed that the Co- operative Banks are non-scheduled banks for the purpose of Section 36(1)(viia) of the Act of 1961 and the branch of Rural Bank has been defined in Explanation (ia) and in counter when there was no tangible evidence available on 3 record there appears reason to allow 10% allowance admissible to the Co-operative Bank, the assessee herein. There is no dispute on the fact which has been noticed by CIT(A) and ITAT and has dismissed the appeal of provision referred to, it emerges that when the population where bank is situated was within the category of rural area i.e. not more than ten thousand, entitlement is of 10% and this what being considered by CIT(A) and confirmed by ITAT. After hearing counsel for the appellant, we do not find any substantial question of law which emerges in this appeal. Consequently, the appeal is devoid of merit and dismissed. [ VIJAY BISHNOI ], J. [ AJAY RASTOGI ], J. Abhishek 35

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