1982 (7) TMI 168 - AT - Income Tax

Summary

Issues:
1. Addition of accrued interest in the income of the assessee.
2. Disallowance of interest received from members and exemption under s. 80P(3).
3. Treatment of increased value of closing stock in sarson account.
4. Allowance of percentage expenses attributable to non-member's income.
5. Set off of loss of the last year.

Analysis:

1. The first issue pertains to the addition of accrued interest in the income of the assessee. The CIT(A) upheld the addition of Rs. 5,200 as accrued interest from a society, as per the audit report. The assessee claimed the interest was on a sticky loan and should not be included in income. However, since the assessee followed the mercantile system of accounting, the interest was rightly included in the income. The Tribunal declined to admit the plea regarding the nature of the interest and upheld the addition, stating no interference was required with the lower authorities' orders.

2. The second issue involves the disallowance of interest received from members and exemption under s. 80P(3). The assessee claimed deduction under s. 80P(2) for interest charged on debit balances of members. The ITO disallowed the deduction, stating it was not covered under s. 80P(2)(a)(i) as the assessee did not provide credit facilities by way of loan or finances. The CIT(A) upheld this finding, rejecting the claim under other sub-clauses as well. The Tribunal, after considering various judicial pronouncements, held in favor of the assessee, stating that where the primary object of a society is to provide credit facilities to its members, it is entitled to deduction under s. 80P(2)(i), allowing the deduction of Rs. 71,467.

3. The third issue concerns the treatment of the increased value of closing stock in the sarson account. The CIT(A) failed to record a finding on this issue, and the Tribunal directed the CIT(A) to determine the matter after hearing both parties.

4. The fourth issue relates to the allowance of percentage expenses attributable to non-member's income. This ground was not pressed at the hearing and was rejected.

5. The fifth issue involves the set off of the loss of the last year. The CIT(A) did not consider this ground of appeal raised as an additional ground. The Tribunal directed the CIT(A) to consider the admissibility of the additional ground and record a finding after giving both parties an opportunity if the ground is admitted.

In conclusion, the appeal was partly allowed, with decisions made on each issue as outlined above.