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

Courtyard Real Estate Pvt. Ltd, `Mumbai vs. ACIT Cent. Cir -5(4), Mumbai

In the result, appeal of the assessee is Allowed

ITA 2312/MUM/2021[2017-18]Status: DisposedITAT Mumbai26 Jul 2022AY 2017-18

Bench: Shri Abyt Varkey & Shri Gagan Goyalm/S Courtyard Real Estate Private Limited 1St Floor, Windsor, Cst Road, Kalina, Santacruz East Mumbai-400098 Pan: Aadcr0870K ...... Appellant Vs. Assistant Commissioner Of Income Tax, Central Circle 5(4), Air India Building, Nariman Point, Mumbai-400021 ..…Respondent Appellant By : Shri. Jitendra Jain, Ca Respondent By : Shri Shyam Joshi, Sr. Dr Date Of Hearing : 19/05/2022 Date Of Pronouncement : 26/07/2022 Order Per Gagan Goyal, Am: This Appeal By The Assessee Is Directed Against The Order Of Commissioner Of Income Tax (Appeals)-53, Mumbai [Hereinafter Referred To As Cit (A)] Vide Order Dated 26.10.2021 For The Assessment Year (Ay) 2017-18. The Solitary Issue Disputed In Appeal Is As Under: “1. The Cit(A) Erred In Confirming The Action Of Ao In Treating The Interest Income Earned On Fixed Deposits (Fd) Of Rs. 60,49,527/- As “Income From Other Sources” For The Year As Against Reducing The Same From The Total Cost Of Work In Progress. 2. The Appellant Submits That On The Facts & Circumstances Of The Case The Interest Income Earned On Fd Of Rs. 60,49,527/- Reduces The Interest Cost On Funds Borrowed For The Project & Thus Has Been Rightly Reduced From The Cost Of Project. 3. Your Appellant Craves Leave To Add, To Alter, Or To Amend The Aforesaid Grounds Of Appeal. 2 M/S Courtyard Real Estate Pvt. Ltd. 2. Brief Facts Of The Case Are That The Assessee-Company Is In The Business Of Real Estates Development & Construction. It Filed Its Return Of Income For Ay 2017- 18 On 30.3.2018 Declaring Income For The Year At Rs. 56,72,910/-. During The Year Under Consideration, The Assessee Was Constructing A Residential Project At Pokhran Road No 2, Thane. It Was Following Percentage Completion Method (Pcm) Of Accounting For Revenue Recognition.

For Appellant: Shri. Jitendra Jain, CAFor Respondent: Shri Shyam Joshi, Sr. DR

DCIT Corporate Circle 1(2), Chennai vs. Chennai Metro Rail Limited, Chennai

In the result, both the appeals filed by the Revenue are dismissed

ITA 2181/CHNY/2018[2014-15]Status: DisposedITAT Chennai24 Jun 2022AY 2014-15

Bench: Shri V. Durga Rao & Shri G. Manjunathaआयकर अपील सं./I.T.A. Nos.2180 & 2181/Chny/2018 िनधा"रण वष"/Assessment Years: 2013-14 & 2014-15 The Deputy Commissioner Of Vs. M/S. Chennai Metro Rail Limited, Income Tax, Administrative Building, Chennai Metro Corporate Circle 1(2), Rail Depot, P.H. Road, Opp. To Daniel Chennai 600 034. Thomas School, Koyambedu, Chennai 600 107. [Pan: Aadcc2233K] (अपीलाथ"/Appellant) (""थ"/Respondent) अपीलाथ" की ओर से / Appellant By : Shri M. Rajan, Cit ""थ" की ओर से/Respondent By : Shri G. Baskar, Advocate सुनवाई की तारीख/ Date Of Hearing : 10.05.2022 घोषणा की तारीख /Date Of Pronouncement : 24.06.2022 आदेश /O R D E R Per V. Durga Rao: Both The Appeals Filed By The Revenue Are Directed Against The Common Order Of The Ld. Commissioner Of Income Tax (Appeals) 4, Chennai Dated 14.05.2018 Relevant To The Assessment Years 2013-14 & 2014-15. Since Common Ground Involved, Both The Appeals Were Heard & Being Disposed Of By This Common Order For The Sake Of Convenience. The Only Common Ground Raised In Both The Appeals Relates To Deletion Of Addition Made Towards Interest Income.

For Appellant: Shri M. Rajan, CITFor Respondent: Shri G. Baskar, Advocate
Section 14Section 4

DCIT Corporate Circle 1(2), Chennai vs. Chennai Metro Rail Limited, Chennai

In the result, both the appeals filed by the Revenue are dismissed

ITA 2180/CHNY/2018[2013-14]Status: DisposedITAT Chennai24 Jun 2022AY 2013-14

Bench: Shri V. Durga Rao & Shri G. Manjunathaआयकर अपील सं./I.T.A. Nos.2180 & 2181/Chny/2018 िनधा"रण वष"/Assessment Years: 2013-14 & 2014-15 The Deputy Commissioner Of Vs. M/S. Chennai Metro Rail Limited, Income Tax, Administrative Building, Chennai Metro Corporate Circle 1(2), Rail Depot, P.H. Road, Opp. To Daniel Chennai 600 034. Thomas School, Koyambedu, Chennai 600 107. [Pan: Aadcc2233K] (अपीलाथ"/Appellant) (""थ"/Respondent) अपीलाथ" की ओर से / Appellant By : Shri M. Rajan, Cit ""थ" की ओर से/Respondent By : Shri G. Baskar, Advocate सुनवाई की तारीख/ Date Of Hearing : 10.05.2022 घोषणा की तारीख /Date Of Pronouncement : 24.06.2022 आदेश /O R D E R Per V. Durga Rao: Both The Appeals Filed By The Revenue Are Directed Against The Common Order Of The Ld. Commissioner Of Income Tax (Appeals) 4, Chennai Dated 14.05.2018 Relevant To The Assessment Years 2013-14 & 2014-15. Since Common Ground Involved, Both The Appeals Were Heard & Being Disposed Of By This Common Order For The Sake Of Convenience. The Only Common Ground Raised In Both The Appeals Relates To Deletion Of Addition Made Towards Interest Income.

For Appellant: Shri M. Rajan, CITFor Respondent: Shri G. Baskar, Advocate
Section 14Section 4
Section 56 Income Tax Act (2025: s.92) — Case Laws | BharatTax