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Income Tax Act

National Cooperative Development Corporation vs Assistant Commissioner of Income Tax 2025 INSC 1414 - Income Tax Act - Long Term Finance Business

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Income Tax Act, 1961 - Section 36- Section 36(1)(viii) of the Act is not a general exemption granted to a statutory corporation for all its business activities, rather, it is a specific incentive attached strictly to the profits arising from a defined activity namely, the provision of long-term finance - a vital judicial distinction exists between the general genus of "Business Income" and the specific species of "profits derived from the business of providing long-term finance." (Para 32-34) Dividend income does not qualify as profits derived from business of providing long-term finance.(Para 23) Interest earned from bank deposits fails this test as it is, at best, attributable to the business, but certainly not derived from the activity of providing long-term finance.(Para 28) A fee received for agency services cannot be equated with "profits derived from the business of providing long-term finance," which implies the deployment of the corporation's own funds and the earning of interest thereon. (Para 31)

Interpretation of Statues - A judgment based on the old, broader law cannot be used to interpret the new, stricter provision. (Para 27)

Case Info


Case Details

  • Case name: National Cooperative Development Corporation vs Assistant Commissioner of Income Tax
  • Neutral citation: 2025 INSC 1414
  • Coram: Justice Pamidighantam Sri Narasimha; Justice Atul S. Chandurkar
  • Judgment date: 10 December 2025

Caselaws and Citations

  • Cambay Electric Supply Industrial Co. Ltd. v. CIT — (1978) 2 SCC 644
  • CIT v. Sterling Foods — (1999) 4 SCC 98
  • Pandian Chemicals Ltd. v. CIT — (2003) 5 SCC 590
  • Liberty India v. CIT — (2009) 9 SCC 328
  • CIT v. Meghalaya Steels Ltd. — (2016) 6 SCC 747
  • Orissa State Warehousing Corpn. v. CIT — (1999) 4 SCC 197
  • Bacha F. Guzdar v. CIT — (1954) 2 SCC 563
  • National Co-operative Development Corporation v. CIT — (2021) 11 SCC 357

Statutes/Laws Referred

  • Income Tax Act, 1961:
    • Section 36(1)(viii) and Explanation (definition of “long-term finance”)
    • Section 28 (Profits and gains of business or profession)
    • Section 37 (General deduction for business expenditure)
    • Section 10(29) (exemption provision discussed via precedent)
    • Sections 80-IB, 80HHC, 80JJA (context on “derived from” across provisions)
  • Finance Act, 1995 (amendment narrowing deduction to “profits derived from” long-term finance)
  • Companies Act, 1956:
    • Section 85 (preference shares as share capital)
National Cooperative Development Corporation vs Assistant Commissioner of Income Tax 2025 INSC 1414 - Income Tax Act - Long Term Finance Business
National Cooperative Development Corporation vs Assistant Commissioner of Income Tax 2025 INSC 1414 - Income Tax Act - Long Term Finance Business.pdf
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