Section 56 of the Income Tax Act

Income-tax Act, 2025: s.92

Section 56 of the Income-tax Act, 1961 corresponds to section 92 (Income from other sources) of the Income-tax Act, 2025.

Read section 92 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 56 is Totgars Co-operative Sale Society Ltd. v. ITO (322 ITR 283), cited in 1,283 of the 1,790 judgments on BharatTax that turn on this section.

Leading authorities on Section 56

Totgars Co-operative Sale Society Ltd. v. ITO
322 ITR 283 · 2010 · Supreme Court
1,283
citing judgments

The interest income earned by a cooperative society from investing its surplus funds in fixed deposits with banks is not "derived from" its eligible business activities and is taxable as "income from other sources" under Section 56, thus not qualifying for deduction under Section 80P.

Pr. CIT v. Totagars
395 ITR 611 · 2017 · High Court
1,074
citing judgments

Interest income earned by a cooperative society from surplus deposits or investments held with a cooperative bank is not eligible for deduction under Section 80P(2)(d) of the Act.

Mavilayi Service Co-operative Bank Ltd. v. CIT
431 ITR 1 · 2021 · Supreme Court
999
citing judgments

Section 80P(4) serves as a proviso to Section 80P(1) and (2), excluding only cooperative banks that are cooperative societies and possess an RBI license for banking business. Its purpose is to exclude cooperative banks operating like commercial banks that lend money to the public.

Tumkur Merchants Souharda Credit Cooperative Ltd. v. ITO
230 Taxmann 309 · 2015 · High Court
527
citing judgments

A cooperative society is eligible for deduction under Section 80P(2)(a)(i) if it is engaged in cooperative activities. It also clarifies the allowability of deduction under Section 80P(2)(d) for interest income received from investments made in cooperative banks, after duly considering the Supreme Court's decision in Totgars Co-operative Sale Society Ltd.

Citizen Co-operative Society Ltd. v. ACIT
397 ITR 1 · 2017 · Supreme Court
499
citing judgments

A co-operative credit society engaged in banking business with the general public, accepting deposits from non-members and advancing loans to non-members, is treated as a co-operative bank. Such a society falls under the exclusionary clause of Section 80P(4) and is not eligible for deduction under Section 80P(2)(a)(i).

Totgar's Co-operative Sale Society Ltd. v. ITO
188 Taxmann 282 · 2010 · Supreme Court
486
citing judgments

Interest income earned by a co-operative society from investments, particularly with co-operative banks, is not eligible for deduction under Section 80P as it is not attributable to the core business activities of the society and constitutes "other income", not "profits and gains of business".

CIT v. Andhra Pradesh State
200 Taxmann 220 · 2011 · High Court
348
citing judgments

Interest earned by a Co-operative Society from investing fixed deposits in banks is entitled to a deduction under Section 80P(2)(a)(i) of the Income-tax Act.

Pr. CIT v. Totagars Co-operative Sales Society
83 Taxmann.com 140 · 2017 · High Court
306
citing judgments

Interest income earned by a co-operative society from deposits or investments made in a co-operative bank is not eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961, in view of Section 80P(4).

Tumkur Merchants Souharda Credit Co-op. Ltd. v. ITO
55 Taxmann.com 447 · 2015 · High Court
267
citing judgments

Interest income earned by a co-operative society from temporary deposits with other banks, when such deposits are made from its business funds, qualifies as business income eligible for deduction under Section 80P(2)(a)(i) and not as income from other sources.

Bangalore Club v. CIT
350 ITR 509 · 2013 · Supreme Court
247
citing judgments

The Supreme Court affirmed the doctrine of mutuality, holding that contributions received from and returned to members for a common purpose do not constitute taxable profits. However, income from transactions with non-members or interest earned from investments in external entities (like cooperative banks) may break the mutuality chain and be taxable under Section 56, falling outside the scope of Section 80P deductions.

Judgments on Section 56

Asstt. Commissioner of Income Tax, Central Circle.1(3), Ahmedabad vs. M/S.Aaryavart Infrastructure Pvt. Ltd., Ahmedabad

In the result, appeal of the Revenue is partly allowed

ITSSA 70/AHD/2021[2017-18]Status: DisposedITAT Ahmedabad22 Jan 2025AY 2017-18

Bench: Dr. B.R.R. Kumar, Vice-Ms. Suchitra Kambleit(Ss)A No. 70/Ahd/2021 (Assessment Year: 2017-18) Deputy Commissioner Of M/S. Aaryavart Vs. Income-Tax, Infrastructure Pvt. Ltd., Central Circle-1(3), 17-A, First Floor, Pariseema Ahmedabad Complex, C.G. Road, Navrangpura, Ahmedabad-9 [Pan : Aadca 4844 Q] (Appellant) .. (Respondent) Appellant By : Shri Aseem L. Thakkar, Ar Respondent By: Shri V. Nandakumar, Cit-Dr Date Of Hearing 20.11.2024 Date Of Pronouncement 22.01.2025 O R D E R Per Dr. B.R.R. Kumar, Vice-: This Appeal Has Been Filed By The Revenue Against The Order Passed By The Learned Commissioner Of Income-Tax (Appeals)-11, Ahmedabad (Hereinafter Referred To As "Cit(A)" For Short) Dated 18.03.2021 Passed Under Section 250 Of The Income-Tax Act, 1961 [Hereinafter Referred To As "The Act" For Short], For Assessment Year (Ay) 2017-18. 2. The Brief Facts Of The Case Are That The Assessee-Company Is Engaged In Executing Government Contracts Obtained From Sardar Sarovar Narmada Nigam Ltd For Construction Of Canals, Laying Of Irrigation Pipelines Within Gujarat State, Building Of Railway Bridges At Chhota-Udaipur, Dabhoi, Gujarat. The Assessee-Company Is Also Engaged In Trading Of Building Materials Like Tmt Bars, Cement, Pipes, Grit-Kapchi Etc & Investment In Immovable Properties. The Assessee Filed Return Of Income U/S 139(1) Of It(Ss)A No. 70/Ahd/2021 Acit Vs. Aaryavart Infrastructure Pvt Ltd Asst. Year :– 2017-18 - 2–

For Appellant: Shri Aseem L. Thakkar, ARFor Respondent: Shri V. Nandakumar, CIT-DR
Section 131Section 133ASection 139(1)Section 139(5)Section 143(3)Section 244ASection 250

Deputy Commissioner of Income Tax Circle 1(1)(1), Vadodara vs. Gujrat State Electricity Corporation Limited, Vadodara

In the result, both the appeals of the Revenue are dismissed

ITA 1656/AHD/2024[2016-17]Status: DisposedITAT Ahmedabad20 Jan 2025AY 2016-17

Bench: Shri T.R. Senthil Kumar & Shri Makarand V. Mahadeokarआयकर अपील सं /Ita Nos.1654/Ahd/2024 & 1656/Ahd/2024 िनधा"रण वष" /Assessment Years : 2012-13 & 2016-17 Respectively Deputy Commissioner Of Gujrat State Electricity बनाम/ Income Tax Corporation Limited V/S. Circle-1(1)(1) Sardar Patel Vidyut Bhavan Vadodara 390 007 Race Course Circle Alkapuri, Baroda – 390 007 (Gujarat) "थायी लेखा सं./Pan: Aaacg 6864 F (अपीलाथ%/ Appellant) (&' यथ%/ Respondent) Assessee By : Shri Manish J. Shah & Shri Jimi Patel, Ars Revenue By : Shri Prathvi Raj Meena, Cit-Dr सुनवाई की तारीख/Date Of Hearing : 16/01/2025 घोषणा की तारीख /Date Of Pronouncement: 20/01/2025 आदेश/O R D E R Per Makarand V. Mahadeokar, Am: Both The Appeals By The Revenue For Assessment Years (Ays) 2012-13 & 2016-17 Are Directed Against The Orders Of The Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre-Nfac, Delhi [Hereinafter Referred To As “Cit(A)”] Passed Under Section 250 Of The Income Tax Act, 1961[Hereinafter Referred To As “The Act”]. The Cit(A) Orders Arose From The Assessment Orders Passed Under Section 143(3) Of The Act, By The Deputy

For Appellant: Shri Manish J. Shah &For Respondent: Shri Prathvi Raj Meena, CIT-DR
Section 143(3)Section 250Section 56

Deputy Commissioner of Income Tax Circle 1(1)(1), Vadodara vs. Gujarat State Electricity Corporation Limited, Vadodara

In the result, both the appeals of the Revenue are dismissed

ITA 1654/AHD/2024[2012-13]Status: DisposedITAT Ahmedabad20 Jan 2025AY 2012-13

Bench: Shri T.R. Senthil Kumar & Shri Makarand V. Mahadeokarआयकर अपील सं/Ita Nos.1654/Ahd/2024 & 1656/Ahd/2024 निर्धारण वर्ष / Assessment Years : 2012-13 & 2016-17 Respectively Deputy Commissioner Of Income Tax Circle-1(1)(1) Vadodara 390 007 बनाम / V/S. Gujrat State Electricity Corporation Limited Sardar Patel Vidyut Bhavan Race Course Circle Alkapuri, Baroda – 390 007 (Gujarat) स्थायी लेखा सं./Pan: Aaacg 6864 F (अपीलार्थी/ Appellant) (प्रत्यर्थी / Respondent) Assessee By: Shri Manish J. Shah & Shri Jimi Patel, Ars Revenue By : Shri Prathvi Raj Meena, Cit-Dr सुनवाई की तारीख /Date Of Hearing : 16/01/2025 घोषणा की तारीख / Date Of Pronouncement: 20/01/2025 आदेश/Order Per Makarand V. Mahadeokar, Am: Both The Appeals By The Revenue For Assessment Years (Ays) 2012-13 & 2016-17 Are Directed Against The Orders Of The Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre-Nfac, Delhi [Hereinafter Referred To As “Cit(A)”] Passed Under Section 250 Of The Income Tax Act, 1961[Hereinafter Referred To As “The Act”]. The Cit(A) Orders Arose From The Assessment Orders Passed Under Section 143(3) Of The Act, By The Deputy Commissioner Of Income Tax, Circle 1(1)(1), Vadodara [Hereinafter Referred To As “Ao"], Dated 25.02.2015 (Ay 2012-13) & 28.12.2018 (Ay 2016-17). 2. The Primary Issue In Both The Appeals Concerns The Treatment Of Interest Income On Loans & Advances Provided To Employees, Amounting To Rs.4,56,05,000/- (Ay 2012-13) & Rs.8,00,35,000/- (Ay 2016-17). 2.

For Appellant: Shri Manish J. Shah &For Respondent: Shri Prathvi Raj Meena, CIT-DR
Section 143(3)Section 250Section 56

Ranjitsinh Narsinh Vaghela, Gandhinagar vs. The Income Tax Officer, Ward-3, Gandhinagar

In the result, the appeal of the assessee is treated as partly allowed for

ITA 451/AHD/2024[2012-13]Status: DisposedITAT Ahmedabad15 Jan 2025AY 2012-13

Bench: Shri T.R. Senthil Kumar & Shri Makarand V. Mahadeokarआयकर अपील सं/Ita No.451/Ahd/2024 निर्धारण वर्ष / Assessment Year : 2012-13 Ranjitsinh Narsinh Vaghela 3337, Nr. Palaiya Mahakali Mandir Pethapur, Gandhinagar Gandhinagar – 382 610 बनाम / V/S. The Income Tax Officer Ward-3 Gandhinagar स्थायी लेखा सं./Pan: Afepv 3269 D (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) Assessee By: Shri Hardik Vora, Advocate Revenue By : Shri R.N. Dsouza, Cit-Dr सुनवाई की तारीख / Date Of Hearing : 10/01/2025 घोषणा की तारीख / Date Of Pronouncement: 15/01/2025 आदेश/Order Per Makarand V. Mahadeokar, Am: This Appeal Has Been Preferred By The Assessee Against The Order Of The Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre (Nfac), Delhi (Hereinafter Referred To As “Cit(A)”], Dated 19/01/2024, For The Assessment Year (Ay) 2012-13, Which Upheld The Order Of The Assessing Officer [Hereinafter Referred To As “Ao"] Dated 30/12/2019, Passed Under Section 144 R.W.S.147 Of The Income Tax Act, 1961 [Hereinafter Referred To As "The Act"].

For Appellant: Shri Hardik Vora, AdvocateFor Respondent: Shri R.N. Dsouza, CIT-DR
Section 10(37)Section 144Section 147Section 148