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TMI Blog2020 (4) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... hould not be nipped at the bud, at the stage of assessment. This writ petition is dismissed though granting 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The 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 placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of being entitled to a relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, 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 CIT (A) rightly granted the relief to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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