C I T-1 JAIPUR vs. M/S JAIPUR CENTRAL COP BANK LTD

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ITA/237/2012HC RajasthanRJHC02070950201227 August 2012Author: ARUN MISHRA,NARENDRA KUMAR JAIN2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the cooperative bank was rightly granted a 10% allowance under Section 36(1)(viia) of the Income Tax Act, 1961. The Court referred to the text of Section 36(1)(viia) which allows for a deduction of an amount not exceeding 7.5% of the total income AND an amount not exceeding 10% of the aggregate average advances made by the rural branches. The definition of a 'rural branch' in Explanation (ia) states it is a branch situated in a place with a population of not more than ten thousand. The Court found it apparent that when the population of the place where the bank is situated falls within the rural category (not more than ten thousand), the entitlement is 10% of the aggregate average advances. Therefore, the 10% allowance was rightly granted by the CIT(A) and upheld by the ITAT. The appeal of the Department was dismissed as the orders of the CIT(A) and ITAT were found to be in accordance with law. No substantial question of law was involved.

What were the facts?

This case involves an appeal by the Commissioner of Income Tax-I, Jaipur against an order of the Income Tax Appellate Tribunal (ITAT). The assessee is M/s. Jaipur Central Co-operative Bank Ltd. The dispute concerns the assessment year(s) not explicitly stated in the judgment. The core issue is the deductibility of provisions made by the cooperative bank under Section 36(1)(viia) of the Income Tax Act, 1961. The Revenue contended that only a 7.5% allowance is admissible, while the assessee and the lower appellate authorities allowed 10%. The High Court is reviewing the ITAT's decision which upheld the 10% allowance.

What were the issues?

1. Whether the cooperative bank is entitled to a deduction of 10% of its aggregate average advances made by rural branches under Section 36(1)(viia) of the Income Tax Act, 1961, or only 7.5% of its total income. Assessee's Contention: The assessee, supported by the CIT(A) and ITAT, argued for the admissibility of a 10% allowance. They relied on the provision of Section 36(1)(viia) which, read with the definition of a 'rural branch' in Explanation (ia), allows for a deduction of up to 10% of aggregate average advances made by rural branches if the population of the place where the branch is situated is not more than ten thousand. Revenue's Contention: The Revenue contended that only a 7.5% allowance is admissible to the cooperative bank, implying a disagreement with the interpretation of Section 36(1)(viia) as applied to the assessee's situation.

Which sections of the Income-tax Act were involved?

Section 36(1)(viia)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR D.B. INCOME TAX APPEAL No.237/2012 Commissioner of Income Tax-I, Jaipur (Raj.) vs. M/s.Jaipur Central Co-operative Bank Ltd.

DATE OF JUDGMENT : 27th August, 2012 HON'BLE THE CHIEF JUSTICE MR.ARUN MISHRA HON'BLE MR. JUSTICE NARENDRA KUMAR JAIN-I Mr.J.K. Singhi Sr. Counsel assisted by Mr. Anuroop Singhi & Mr. O.P. Pareek, for appellant. Heard. The question raised in this appeal is that only 7.5% allowance is admissible to the Cooperative Bank not 10% as allowed as per the provision contained in 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 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 :-

2

“(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”. It is apparent 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%. Thus, 10% allowance has been rightly granted by the CIT(A). In view of the aforesaid, the appeal of the Department has rightly been dismissed by the ITAT. Orders of Commissioner of Income Tax (Appeal) and Income Tax Appellate Tribunal are found to be in accordance with law. No substantial question of law is involved in the appeal.

The appeal is dismissed. (NARENDRA KUMAR JAIN-I),J. (ARUN MISHRA),CJ. Sanjay S.No .

“All corrections made in the judgment/order have been incorporated in the judgment/order being emailed.” Sanjay Solanki JUNIOR PERSONAL ASSISTANT.

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