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

DCIT, Circle.6(2)(1), Mumbai vs. Cyquator Media Services Private Limited, Mumbai

In the result, overall, the appeal of the Revenue in ITA No

ITA 4312/MUM/2017[2012-13]Status: DisposedITAT Mumbai06 Mar 2023AY 2012-13

Bench: Shri Aby T. Varkey, Jm & Shri Gagan Goyal, Am आयकर अपील सं/ I.T.A. No.4312/Mum/2017 (निर्धारण वर्ा / Assessment Year: 2012-13) Dcit-6(2)(1) बिधम/ M/S. Cyquator Media R. No. 504, 5Th Floor, Services Pvt. Ltd. Vs. Aayakar Bhavan, M. K. 135, Continental Building, Road, Mumbai-400020. Dr. A. B. Road, Worli, Mumbai-400018. Cross Objection No. 302/Mum/2018 Arising Out Of I.T.A. No.4312/Mum/2017 (निर्धारण वर्ा / Assessment Years: 2012-13) Cyquator Media Services बिधम/ Dcit-6(2)(1) Pvt. Ltd. Aayakar Bhavan, Vs. 18Th Floor, A Wing, Mumbai-400020. Marathon Futurex, N. M. Joshi Marg, Lower Parel, Mumbai-400013. आयकर अपील सं/ I.T.A. No.4478/Mum/2017 (निर्धारण वर्ा / Assessment Year: 2012-13) M/S. Cyquator Media बिधम/ Dcit-6(2)(1) R. No. 504, 5Th Floor, Services Pvt. Ltd. Vs. 135, Continental Building, Aayakar Bhavan, M. K. Dr. A. B. Road, Worli, Road, Mumbai-400020 Mumbai-400018. Dcit-6(2)(1) R. No. 504, 5Th Floor, Aayakar Bhavan, M. K. Road, Mumbai-400020. स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Aaecp0069P (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee By: Shri Jay Bhansali/Ms. Slachi Jain Revenue By: Shri H. N. Singh (Dr) & Mr. R. A. Dhyani (Sr. Ar) सुनवाई की तारीख / Date Of Hearing: 12/12/2022 घोषणा की तारीख /Date Of Pronouncement: 06/03/2023 C.O. 302/Mum/2018 A.Ys. 2012-13 Shri Cyquator Media Services Pvt. Ltd.

For Appellant: Shri Jay Bhansali/Ms. Slachi JainFor Respondent: Shri H. N. Singh (DR) & Mr. R
Section 143(3)Section 56Section 56(1)Section 68

M/S. Prathamika Krushi Pattina Sahakara Niyamita, Hosapete vs. Income Tax Officer, Ward-2, Ballari

In the result, the appeal filed by the assessee is allowed for statistical purposes

ITA 23/BANG/2023[2017-18]Status: DisposedITAT Bangalore14 Feb 2023AY 2017-18

Bench: Shri Laxmi Prasad Sahuprathamika Krishi Pattina Vs The Income Tax Officer Sahakara Sangha Niymit Ward - 2 No. 350, Ward No. 15, Hospet 583201 Amaravathi Village, Hospet Tq. Ballari - 583201 Pan – Aaajp0326N (Appellant) (Respondent) Assessee By: Shri Siva Prasad Reddy, Irs (Retd) Revenue By: Shri Ganesh R. Ghale, Standing Counsel Date Of Hearing: 13.02.2023 Date Of Pronouncement: 14.02.2023 O R D E R Per: Laxmi Prasad Sahu, A.M. This Is An Appeal Filed By The Assessee Against The Order Passed By The Learned Cit(A)/Nfac, Delhi In Appeal Din & Order No. Itba/Nfac/S/ 250//2022-23/1047496227(1) Dated 18.11.2022 For Ay 2017-18. 2. The Assessee Has Raised The Following Grounds Of Appeal: - “1. The Impugned Assessment Order Made U/S 143(3) Of The Act Dated, 25-11-2019, Is Arbitrary & Opposed To The Facts Of The Case & The Principles Of Natural Justice & Therefore, The Same Is Liable To Be Vacated As Void. 2. The Learned Cit(A) Failed To Appreciate: (I) That The Interest Income Accruing From The Investments Made In Statutory Compliance Of The Provisions Of The State Co-Operative Societies Act, 1959 Is Eligible For The Deduction As Business Income U/S 80P(2)(A)(I) Of The Act.

For Appellant: Shri Siva Prasad Reddy, IRS (Retd)For Respondent: Shri Ganesh R. Ghale, Standing Counsel
Section 143(3)Section 234ASection 56Section 57Section 80Section 80PSection 80P(2)Section 80P(2)(a)Section 80P(2)(d)