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2020 (3) TMI 795 - HC - Income TaxDeduction u/s 80P - claim to be Primary Agricultural Co-operative Credit Societies, to deduction under Section 80P - HELD THAT - As decided in K. 2058, SARAVANAMPATTI PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY LTD. VERSUS THE INCOME TAX OFFICER 2020 (2) TMI 214 - MADRAS HIGH COURT assessee would be entitled to deduction under Section 80P. The reasoning was that under the TNCS Act, a member and an associate member are one and the same and an associate member has also been held to be holding the character of a member. 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 CIT (A) rightly granted the relief to the assessee as confirmed by the Tribunal.
Issues:
Challenge to order of assessment for Assessment Year 2017-18 rejecting deduction under Section 80P of the Income Tax Act, 1961 for a Co-operative Thrift and Credit Society. Analysis: The High Court considered the challenge to an order of assessment for the Assessment Year 2017-18 where a Co-operative Thrift and Credit Society contested the rejection of a deduction under Section 80P of the Income Tax Act, 1961. The Court referred to a previous judgment involving Primary Agricultural Co-operative Societies, emphasizing the entitlement to deduction under Section 80P. The issue revolved around the principle of mutuality and the rejection of the claim based on distinctions between different classes of members within the society. The Assessing Authority differentiated between A and B class members, highlighting that B class members lacked certain rights enjoyed by A class members, leading to the rejection of the claim based on the Supreme Court's judgment on cooperative banks. The Division Bench of the Madras High Court had previously held that under the Tamil Nadu Cooperative Societies Act, both members and associate members were considered equal, thus rejecting the distinctions drawn by the Supreme Court. The Court noted that several orders of assessment had been challenged based on this interpretation, with the Revenue withdrawing a Special Leave Petition due to low tax effect. The Court reiterated the definition of 'members' under the TNCS Act, emphasizing that all members, including associate members, were entitled to relief under Section 80P if the society engaged in providing credit facilities to its members. The Court further discussed the implications of the Finance Act, 2006, and the restrictions on deduction for cooperative banks as opposed to primary agricultural credit societies. Citing a previous Supreme Court decision, the Court emphasized that primary agricultural credit societies were still eligible for the deduction under Section 80P. The judgment highlighted errors made by the Assessing Officer in not granting relief to the society and confirmed that the society met the criteria for the deduction. The Court directed the petitioners to file a statutory appeal before the Commissioner of Income Tax (Appeals) within three weeks, with a stay on recovery of the demand until the appeal's disposal. In conclusion, the High Court disposed of the Writ Petition, allowing the petitioner to file a statutory appeal challenging the order of assessment. The judgment reiterated the equal treatment of members and associate members under the TNCS Act for the purpose of claiming deductions under Section 80P, emphasizing the eligibility of primary agricultural credit societies for such benefits. The Court's decision provided clarity on the interpretation of the law in this context and directed the petitioners on the next steps for appeal, ensuring a fair process for resolving the dispute.
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