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

आदेश / O R D E R

PER MANU KUMAR GIRI, Judicial Member:

The captioned appeal by the assessee is arising out of the

order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi

dated 31.01.2025 for AY 2017-18.

society registered under the Tamil Nadu Co-operative Societies Act,

1983. It was established by the Government of Tamil Nadu in 1978

with the objective of promoting the livelihood of the Irula tribal

ITA 1790 Chny 2025 (A Y 2020-21) Irula Snake Catchers Ind Co-Op Soct Ltd Vs ITO Ward 22 (1) :: 2 ::

community, who are traditionally engaged in snake catching and

venom extraction. All activities of the society, including snake

catching, venom extraction, and supply of venom to government

and research institutions, are carried out collectively by its

members. The entire income of the society is derived from the

collective disposal of the members’ labour and is therefore eligible

for deduction u/s. 80P(2)(a)(vi) of the Income-tax Act, 1961.For the

Assessment Year 2020-21, the Assessee filed its Return of Income

on 28.12.2020 declaring “NIL” income after claiming deduction u/s.

80P(2)(a)(vi) of the Act. During the scrutiny assessment, the

Assessing Officer disallowed Rs.1,21,269/- out of the total interest

income of Rs.1,74,067/- earned from the savings bank account,

treating it as income from other sources and holding it to be

ineligible for deduction u/s. 80P. In doing so, the Assessing Officer

relied on the judgment of the Hon’ble Supreme Court in Totgars Co-

operative Sale Society Ltd. v. ITO (322 ITR 283), wherein it was

held that interest earned from bank deposits does not constitute

business income.

an appeal before the Commissioner of Income-tax (Appeals). The

CIT(A), however, dismissed the appeal vide order dated

ITA 1790 Chny 2025 (A Y 2020-21) Irula Snake Catchers Ind Co-Op Soct Ltd Vs ITO Ward 22 (1) :: 3 ::

05.05.2025. Consequently, the present appeal has been filed by the

assessee.

Hon'ble Supreme Court in Totgars Co-operative Sale Society Ltd. v.

ITO (Supra) is factually distinguishable as the Hon'ble Supreme

Court was dealing with the case where the assessee therein, apart

from providing credit facility to the members, was also in the

business of marketing of agricultural produce grown by its members

and the sale consideration received from marketing agricultural

produce of its members was retained in many cases and retained

amount which was payable to its members from whom produce was

bought, was invested in a short term deposit/security.However, in

the present case as the amount which was deposited in the bank

was not an amount due to the members and it was not the liability

of the society to the members and, therefore, the interest earned

from such deposits in the bank should be held to be eligible for

deduction u/s. 80P(2)(a)(vi) of the Act. He furthermore submitted

that the interest in question arises not from any surplus or idle

funds, but from operational receipts in savings accounts with Indian

Bank. These funds are part of the society's working capital

generated from members' collective labour and are held for the

ITA 1790 Chny 2025 (A Y 2020-21) Irula Snake Catchers Ind Co-Op Soct Ltd Vs ITO Ward 22 (1) :: 4 ::

society's day-to-day activities and welfare. The interest earned

thereon is therefore incidental to, and attributable to, the main

business activity of the assessee. The legislature has consciously

used the expression "profits and gains attributable to" in Section

80P(2)(a)(vi), which is of wider import than "derived from."

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)." 6. Also, this Hon'ble Tribunal in the case of Potheri Village Weaning Food Manufacturing Womens Development Industrial Coop V. ITO in ITA No.1055/Chny/2024, 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) :: 5 ::

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." 7. 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.

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,

ITA 1790 Chny 2025 (A Y 2020-21) Irula Snake Catchers Ind Co-Op Soct Ltd Vs ITO Ward 22 (1) :: 6 ::

and supply of venom to Government departments and research

institutions, all of which are carried out collectively by its members.

It is also not in dispute that the entire income of the assessee is

derived from the collective disposal of the labour of its members.For

the Assessment Year 2020-21, the assessee claimed deduction

under section 80P(2)(a)(vi) of the Income-tax Act, 1961, in respect

of its entire income, including interest earned from its savings bank

account maintained with Indian Bank.The Assessing Officer

disallowed a sum of Rs.1,21,269/- out of the total interest income of

Rs.1,74,067/-, treating the same as “income from other sources”

and holding that such interest was not eligible for deduction under

section 80P, relying upon the judgment of the Hon’ble Supreme

Court in Totgars Co-operative Sale Society Ltd. v. ITO (322 ITR

283). The said disallowance was confirmed by the learned CIT(A).

income earned by the assessee from its savings bank account is

eligible for deduction under section 80P(2)(a)(vi) of the Act.

gains attributable to the collective disposal of the labour of the

members of a co-operative society. The expression “attributable to”

ITA 1790 Chny 2025 (A Y 2020-21) Irula Snake Catchers Ind Co-Op Soct Ltd Vs ITO Ward 22 (1) :: 7 ::

used by the legislature is of wider amplitude than the expression

“derived from” and covers not only direct income but also income

having a proximate nexus with the eligible activity.

The reliance placed by the Assessing Officer and the CIT(A) on the

judgment of the Hon’ble Supreme Court in Totgars Co-operative

Sale Society Ltd. v. ITO (supra) is, in our considered view,

misplaced. In Totgars, the Hon’ble Supreme Court was dealing with

a case where the assessee had retained sale proceeds payable to its

members and invested such retained amounts in short-term

deposits, and it was in that factual context that the interest income

was held to be assessable as income from other sources.

In contrast, in the case before us, the deposits made by the

assessee are not out of amounts due to members nor do they

represent any liability of the society. The funds represent the

society’s own working capital arising from its core activity of

ITA 1790 Chny 2025 (A Y 2020-21) Irula Snake Catchers Ind Co-Op Soct Ltd Vs ITO Ward 22 (1) :: 8 ::

collective disposal of labour. Therefore, the factual matrix is clearly

distinguishable from that in Totgars.

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.

GunjaSamabay Krishi Unnayan Samity Ltd. [2023] 147

taxmann.com 518 (Cal), holding that interest earned on deposits

not representing amounts due to members or liabilities to members

qualifies for deduction under section 80P.

Weaning Food Manufacturing Women’s Development Industrial Co-

operative v. ITO in ITA No.1055/Chny/2024 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

ITA 1790 Chny 2025 (A Y 2020-21) Irula Snake Catchers Ind Co-Op Soct Ltd Vs ITO Ward 22 (1) :: 9 ::

and is eligible for deduction under section 80P(2)(a). The Tribunal,

following the decision of the Hon’ble Karnataka High Court in

TumkurMerchants Souharda Credit Co-op. Ltd. v. ITO, observed that

such interest income cannot be treated as income from other

sources when it has a direct nexus with the business activity of the

society.

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.

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.

ITA 1790 Chny 2025 (A Y 2020-21) Irula Snake Catchers Ind Co-Op Soct Ltd Vs ITO Ward 22 (1) :: 10 :: 16. In the result, the appeal filed by the assessee is allowed, and

the Assessing Officer is directed to grant deduction under section

80P(2)(a)(vi) of the Income-tax Act, 1961, in respect of the interest

income of Rs.1,21,269/-.

Order pronounced on the 11th day of February, 2026, in Chennai.

Sd/- Sd/- (एस. आर. रघुनाथा) (मनु कुमार िग�र) (S.R.RAGHUNATHA) (MANU KUMAR GIRI) लेखा सद)य/ACCOUNTANT MEMBER �या�यक सद)य/JUDICIAL MEMBER चे�नई/Chennai, *दनांक/Dated: 11th February, 2026. SNDP, Sr. PS आदेश क ��त,ल-प अ.े-षत/Copy to: