All India Oriental Bank of Employees Welfare Society Vs ITO (Exemption) (ITAT Delhi)
The appeal before the Income Tax Appellate Tribunal (ITAT), Delhi, arose from the order of the Commissioner of Income Tax (Appeals) confirming the assessment made under Section 143(3) of the Income Tax Act, 1961 for Assessment Year 2015–16. The assessee, an employees’ welfare society registered since 27.12.1976, had filed its return declaring nil income. The society’s objectives included promoting the social, cultural, and economic welfare of its members, disseminating knowledge through seminars and similar activities, providing recreational facilities, and offering relief measures for members and their dependants.
During assessment, the Assessing Officer determined the taxable income at ₹2,86,64,884. The assessee had received ₹2,57,88,398 as subscription from members and claimed that this amount was exempt from tax under the principle of mutuality. The Assessing Officer accepted that subscriptions from members were covered by the principle of mutuality and therefore not taxable. However, the officer treated interest income earned on fixed deposits with banks amounting to ₹2,86,60,231 and savings bank interest of ₹4,653 as taxable, as these amounts were received from third parties and therefore not covered by the principle of mutuality. This view was supported by reliance on the Supreme Court decision in Bangalore Club vs. CIT. The addition was upheld by the Commissioner (Appeals), leading to the present appeal before the Tribunal.
