Tribunal Affirms Disallowance of Interest on Capital for Co-operative Society under s. 80P(2)(a)

The Tribunal upheld the AAC's decision in the case involving a Co-operative Society assessed as an AOP for the asst. yrs. 1975-76 and 1976-77. The disallowance of interest on capital in the 'Stores branch' was contested, with the AAC directing deduction under s. 80P(2)(a)(i) due to credit facilities provided to members. The Tribunal affirmed this decision, stating s. 80P(2)(a) applied. Disallowance of Rs. 1,27,907 was upheld, emphasizing assessment of the Co-operative Society's real income. The Revenue's appeals were dismissed, confirming the AAC's rulings on s. 80P(2)(a) application and income assessment.

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Issues:
- Appeal by the Revenue against the assessee, a Co-operative Society, assessed as AOP for the asst. yrs. 1975-76 and 1976-77.
- Disallowance of interest on capital employed in 'Stores branch'.
- Allowance of deduction under s. 80P(2)(a)(i) directed by the AAC.
- Application of s. 80P(2)(a) in the case of the assessee.
- Disallowance of Rs. 1,27,907 and assessment of real income in the hands of the Co-operative Society.

Analysis:
The appeals by the Revenue concern the assessment of a Co-operative Society as an AOP for the asst. yrs. 1975-76 and 1976-77. The appeals revolve around the disallowance of interest on capital employed in the 'Stores branch' and the allowance of deduction under s. 80P(2)(a)(i) directed by the AAC. The AAC held that s. 80P(2)(a) of the Act applied to the assessee's case, which involved providing credit facilities to its members. The AAC directed the ITO to allow the deduction under s. 80P(2)(a), not s. 80P(2)(c). The Tribunal upheld the AAC's decision, stating that no interference was warranted since the Co-operative Society was engaged in providing credit facilities, making s. 80P(2)(a) applicable.

Regarding the disallowance of Rs. 1,27,907, the Tribunal emphasized that the assessment should focus on the real income of the Co-operative Society, not its departments or branches like the 'Stores branch'. The income accruing to the Co-operative Society is chargeable under the IT Act, and the impugned order of the AAC on this matter required no interference. Consequently, the appeals by the Revenue were dismissed, affirming the AAC's decision on the application of s. 80P(2)(a) and the assessment of the Co-operative Society's real income.

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