TMI Blog2020 (4) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... nting liberty to the petitioner to file a statutory first appeal within a period of three weeks from today. Let recovery of the demand not be enforced till disposal of the appeals by the Commissioner of Income Tax (Appeals). No costs. - Writ Petition No.2222 of 2020 - - - Dated:- 4-2-2020 - DR. JUSTICE ANITA SUMANTH J. For Petitioner : Mrs. N.V. Lakshmi for Mr. N.V. Balaji For Respondent : Mr. A.P. Srinivas Senior Standing Counsel O R D E R The petitioner challenges an order of assessment dated 30.12.2020 passed in respect of assessment year (AY) 2017-18. Since the identical issue that arises in this writ petition has been considered by me in a batch of writ petitions in W.P.Nos. 17 of 2020 etc. by order dated 31.01.2020, I propose to follow the same order in the present matter as well. The matter is thus taken up for final hearing even at the time of admission by consent expressed by learned counsel for both parties. 2. The petitioner claims to be a society carrying on the activity of providing credit facilities to its members and claimed, in its return of income, exemption under section 80P of the Income Tax Act, 1961 (in short Act ). The return was tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioners argued before the Assessing Authority that their income would be exempt on the ground of application of mutuality, since the inflows as well as outflows related to one common group of members with which the Society is in complete identity. 25. However, the officer draws a distinction between the two classes of members - B class members are non-shareholding members admitted only for the purpose of availing loans against specified securities. Non-refundable admission fee is remitted by them and the duration of their membership is restricted to a maximum of three years. B class members are not allotted shares and their membership does not carry with it the right to vote and participate in elections, become office bearers or participate in General Body Meetings. They also do not hold any right to the profits or gains of the Society, while shareholding members, i.e., A class members enjoy all the aforesaid rights denied to the B class members. 26. The Assessing Authority was thus of the view that the claim of the petitioners is liable to be rejected in the light of the judgment of the Supreme Court in the case of Citizen (supra). Reliance was specifically place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment has withdrawn the Special Leave Petition on account of low tax effect. The question of law has been kept open. In such circumstances, the order of the Division Bench of this Court would hold the field till such time it is modified or reversed. The relevant portion of the order is as follows: 12. Admittedly, the assessee society is registered under the provisions of the TNCS Act. It defines the word members under Section 2(16) to mean a person joining in the application for the registration of society and a person admitted to the membership after registration in accordance with the provisions of the Act, the Rules framed thereunder and the By-laws and includes an associate member. The expression associate member is defined under Section 2(6) of the TNCS Act to mean a member, who possesses only such privileges and rights of a member and who is subject only to such liabilities of a member as may be specified in this Act, the Rules and the Bylaw. 13. Thus, the definition of the word members includes an associate member and therefore, the Assessing Officer fell into an error in drawing a distinction between A Class members and B Class members. For the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act by the Finance Act, 2006, such deduction should not be admissible to a cooperative bank and that if it is a primary agricultural credit society or a primary cooperative agriculture and rural development bank, the deduction would still be provided. 17. In the preceding paragraphs, we have pointed out the definitions of the expressions members and associate member under the TNCS Act and held that an associate member is also a member in terms of Section 2(16) of the TNCS Act. Furthermore, the Assessing Officer himself found that the associate members are also admitted as members of the society. In such circumstances, the Assessing Officer fell into an error in not granting any relief to the assessee society, which was rightly granted by the CIT (A) as confirmed by the Tribunal. In addition to that, the Assessing Officer has not pointed out that loans have been disbursed to all and sundry in terms of the provisions of the TNCS Act and in terms of Clause (b) to Sub-Section (4) of Section 80P of the Act, the society has an area of operation, operates within the taluk and will provide long term credit for agricultural and rural development activities as well. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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