The Supreme Court in the case of National Co-operative Development Corporation v. Commissioner of Income Tax on 11th September 2020, gives its judgment after 44 years of dispute. The bench consisting of justice Sanjay Kishan Kaul and Justice Indu Malhotra have stated that the Section 56 of the IT Act is a residuary clause which means that if the income of every kind which helps to not be excluded from total income under this act would be chargeable under this head if it is not chargeable under section 14. The court further stated that postscripts on the account of backbreaking dockets which keep on increasing and become a move towards the trust between the tax department and the assessee will hopefully reach a consideration. The issue involved in this case was that whether the interest income which is earned on the funds received under section 13(1) and are then disbursed by the way of grants to National or state level cooperative societies are eligible for detection for determining the taxable income of the appellant-Corporation. The assessing officer did not give judgment in favor of the appellant corporation and stated that the non-refundable grants are in the nature of the capital expense and capital expenses cannot be equated to revenue expenses and therefore on basis of this disallowed the deduction.

Then the appeal was filed before the Commissioner of Income-tax in New Delhi who stated that the grants made by the appellant-Corporation fall within the ambit of authorized activities that are connected with the main business of advancing loans to state governments and cooperative societies. They further also stated that the sums which are received by the appellant-corporation from the central government are not income and the same cannot be treated as revenue expenses. An appeal was filed in Delhi High Court where they made a reference under section 256 clause 1 of the IT Act and stated that these are revenue expenditure and are not allowed to be calculated in the total income of the assessee. The final appeal was filed under Supreme Court where the revenue officer presented the contentions and the court ruled that these funds will be treated as taxable income.

This article does not intend to hurt the sentiments of any individual, community, sect, or religion, etcetera. This article is based purely on the author’s personal opinion and views in the exercise of the Fundamental Rights guaranteed under Article 19(1)(A) and other related laws being enforced in India for the time being.