IRULA SNAKE CATCHERS INDUSTRIAL CO-OP. SOCIETY LTD.,CHENNAI vs. ITO, WARD-22(1), CHENNAI

Before us, it is submitted by the ld.AR that the decision of the Hon'ble Supreme Court in Totgars Co-operative Sale Society Ltd. v.

He also placed reliance on the decision of the Hon'ble Calcutta High Court in the case of West Bengal State Co-Operative Agriculture & Rural Development Bank Ltd. v. DCIT [2025] 177 taxmann.com 469 (Calcutta), wherein it is held as below, “13.the original source of investment made by the petitioner- Society in nationalised banks is admittedly the income of the petitioner derived from the activities listed in sub-clauses (i) to (vii) of clause [a] and the character of such income may not be lost, especially when the statue uses the expression 'attributable to' and not any one of the two expressions, namely 'derived from' or 'directly attributable to. In Pr. CIT v. GunjaSamabay Krishi Unnayan Samity Ltd [2023] 147 taxmann.com 518/292 Taxman 46 (Cal) it was held that where the assessee/Co-operative Society earned interest income on surplus fund invested in deposits with banks and Government securities, since neither the said amount of deposit was due to its members nor was it a liability to its members, same would quality for deduction u/s. 80P(2)(a)(i)."

Also, this Hon'ble Tribunal in the case of Potheri Village Weaning Food Manufacturing Womens Development Industrial Coop V. ITO in held as below: "8....it is observed that the interest income earned by the society is in its regular course of its operations and does forms part of the revenue 'attributable' to the operations of the society as a cottage industry and in our considered view the assessee is eligible for deduction 80P(2)(a)(ii) itself. On ITA 1790 Chny 2025 (A Y 2020-21) Irula Snake Catchers Ind Co-Op Soct Ltd Vs ITO Ward 22 (1) perusal of the decision of the Hon'ble High court of Kamataka in the case Tumkur Merchants Souharda credit Co-Op. Ltd Vs. ITO, Ward V, Tumkur (supra), the said interest income is attributable to the profits and gains of the business only. Therefore, respectfully following the decision of the court, we are of the view that the lower authorities have grossly erred in disallowing the said deduction U/s.80P(2)(d), without appreciating the fact that, the claim of the assessee as a cottage industry and the entire Income was claimed as deduction u/s. 80P(2)(a)(ii). Therefore, considering the facts and circumstances of the present case, we are of the view that, the assessee is a cottage industry and the entire income is attributable to business of the society and hence eligible to claim Interest earned on deposit also as deduction U/s.80P(2)(a)(ii) of the Act and allow the appeal of the assessee."

Thus, from the above submissions, ld.AR submitted that it is clear that any income which is attributable to the business of the co- operative society, including interest income, is eligible for deduction u/s.80P(2)(a)(vi) of the Act. It is prayed by ld.AR that the disallowance of interest earned from the commercial bank of Rs.1,21,269/- be allowed in full.

We have carefully considered the rival submissions, perused the material available on record, and examined the judicial precedents relied upon. Undisputed facts are that the assessee is a co-operative society registered under the Tamil Nadu Co-operative Societies Act, 1983, established by the Government of Tamil Nadu with the object of promoting the livelihood of the Irula tribal community. The activities of the society comprise snake catching, venom extraction,

The short issue for adjudication before us is whether the interest income earned by the assessee from its savings bank account is eligible for deduction under section 80P(2)(a)(vi) of the Act.

Section 80P(2)(a)(vi) grants deduction in respect of profits and gains attributable to the collective disposal of the labour of the members of a co-operative society. The expression “attributable to”

In the present case, it is an admitted position that: the funds deposited in the savings bank account are generated • out of the operational receipts arising from the collective labour of the members; • such funds are part of the working capital of the society and are utilized for its day-to-day activities and welfare of members; and • the deposits are neither amounts retained on behalf of members nor liabilities payable to members.

We find support for this view from the decision of the Hon’ble Calcutta High Court in West Bengal State Co-Operative Agriculture & Rural Development Bank Ltd. v. DCIT [2025] 177 taxmann.com 469 (Cal), wherein it has been held that where the original source of investment in bank deposits is income derived from activities eligible under section 80P(2)(a), the character of such income is not lost merely because it is temporarily invested, particularly when the statute uses the expression “attributable to”. The Hon’ble High Court further relied upon its earlier decision in Pr. CIT v.

Further, the coordinate bench of this Tribunal in Potheri Village Weaning Food Manufacturing Women’s Development Industrial Co- operative v. ITO in has held that interest income earned in the regular course of operations forms part of the revenue “attributable” to the business of the co-operative society

Applying the above legal principles to the facts of the present case, we are of the considered view that the interest income earned by the assessee from its savings bank account is incidental to and attributable to its main activity of collective disposal of the labour of its members. Merely because such income arises by way of interest does not disentitle the assessee from claiming deduction under section 80P(2)(a)(vi), so long as the nexus with the eligible activity is established, which stands proved in the present case.

In view of the foregoing discussion and respectfully following the judicial precedents cited above, we hold that the disallowance of Rs.1,21,269/- made by the Assessing Officer and sustained by the learned CIT(A) is unsustainable in law.