Non-payment of interest to co-operative bank would not attract disallowance u/s. 43B

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HIGH COURT OF BOMBAY

Commissioner of Income-tax – 2

v.

Upendra T. Kapadia

IT APPEAL NO. 602 OF 2011

OCTOBER 30, 2012

 

Section 43B of the Act is applicable only in respect of any amount paid as interest to a scheduled bank. A scheduled bank as defined in Explanation 4 to Section 43B of the Act would have the same meaning as contained in the Explanation to Section 11(5) (iii) of the Act. The Explanation to Section 11(5)(iii) of the Act defines a scheduled bank to mean various banks referred to therein i. e. State Bank of India, its subsidiaries, Nationalized Banks and any bank included in the second schedule to Reserve Bank of India Act, 1934. The Shree Mahalaxmi Co. op. Bank Ltd. Is not mentioned in the second schedule to the Reserve Bank of India Act, 1934 nor covered by any other Banks mentioned to the Explanation to Section 11(5)(iii) of the Act. Consequently, the Tribunal was correct in its conclusion that non payment of interest amount to a co-operative bank would not attract the provisions of Section 43B of the Act. This is for the reason that in terms of Explanation (4) to Section 43B of the said Act scheduled bank would have a meaning given to it in the Explanation to Section 11(5)(iii) of the Act. Therefore, one has to merely look at the Explanation to Section 11(5)(iii) of the Act to determine whether or not Shree Mahalaxmi Mercantile Co-operative Bank limited is included within the meaning of a Scheduled Bank. Sub-Clause (iii) of sub section (5) of Section 11 speaks about the deposit of any amount in a scheduled bank or co-operative Society engaged in banking but the same is of no consequence. This is for the reason that for purposes of Section 43B of the Act we would be governed by the meaning given in the Explanation to Section 11(5) (iii) of the Act and not by the main part thereof. Therefore, no fault can be found with the order of the Tribunal dated 26/10/2009.