2014 (9) TMI 833 - DELHI HIGH COURT

Exemption u/s 80P(2)(a)(i) - Interest income from FDRs – Held that:- The present case is of surplus funds, which were not required for carrying on business of providing credit facilities to members. Half of the funds mobilised/collected from the members could be used for providing credit to the members. The balance amount had to be retained and used for specified purpose, other than providing credit facilities to members. This amount was deposited in FDRs for an average period of 500 days. Bye-laws of the appellant cooperative society prescribed that 50% of the amount mobilised/collected would not be given on credit to the members. These constituted surplus funds as has been held by the Assessing Officer and by the Tribunal. It is on these funds that the interest was earned. The interest earned from the aforesaid funds as held by the Supreme Court in Totgars’ Cooperative Sale Society Ltd. [2010 (2) TMI 3 - SUPREME COURT], would fall under Section 56 and would be taxable under the head "income from other sources”.

With regard to the claim for deduction under Section 80P(2)(i), we find that there was no discussion or finding by the Commissioner of Income Tax (Appeals) , though this ground/issue was raised. This has happened because the Commissioner of Income Tax (Appeals), as noted above, had granted exemption to the entire income earned by the appellant-assessee under Section 80P(2)(i)(a). Learned counsel for the respondent-Revenue submits that this issue could be examined by the Commissioner of Income Tax (Appeals) on merits.