2026 (3) TMI 390

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....he assessment order dated 11.12.2017 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') passed by ITO, Ward-1(1) for AY: 2015-16. 2. Heard and perused the record. Appellant, All India Oriental Bank of Commerce Employees Welfare Society, is registered with the Registrar of Societies since 27.12.1976 and has been assessed to tax since then. The Memorandum of Association of the Society inter alia states the aims and objects of the Society as under:- "(a) to work for the social, cultural and economic welfare of the members of the society; (b) to work for the dissemination of knowledge, holding seminars, arranging library facilities etc.; (c) to provide games outdoor and indoor and other p....

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....er:- 1. Determining taxable income at Rs. 2,86,64,884/- against Nil income; 2. Making an addition of Rs. 2,86,64,884/- being the gross amount of interest earned on Fixed Deposits with Banks by denying exemption on the principle of mutuality; 3. Taxing gross amount of interest earned without allowing proportionate expenses incurred on earning the income. All the above actions being arbitrary, erroneous and unlawful must be quashed with directions for appropriate relief." 4. The contention of ld. Counsel is that the AO completely missed out the fact that, in pursuance of the objectives of the Society, the Appellant had paid claims, benefits including retirement benefits and pension as under all of which ....

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....the contrary has relied the impugned orders and submitted that assessee is not entitled to any payments in regard to interest income taxable under the head income from other sources and it is only expenditure made in order to earn that income is allowable. 7. It comes up admittedly, the subscriptions which have been received from the members of the Employees Welfare Society is in the nature of corpus. In that way it lies in the field of capital and, therefore, it is not income in the commercial sense. It is also governed by the Principle of Mutuality and is thus immune from taxation. The Ld. AO has impliedly conceded this point in to consider that subscriptions forming part of gross receipts of Rs. 2,57,88,398/- is immune from taxation. ....

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....vernment Officers Vs. Watkins[9], where member of a club orders dinner and consumes it, there is no sale to him. At the same time, as in case of Commissioner of Income Tax, Bihar Vs. Bankipur Club Ltd.[10], where a club makes 'surplus receipts' from the subscriptions and charges for the various conveniences paid by members, even though there is no direct benefit of the receipts to the customers, the fact that they will eventually be used in furtherance of the services of the club must be considered as a furtherance of the mandate of the club." 10. The assessee before us is not a group of persons like club with mandate to give services which other wise may be commercial in nature but one show only aim is to generate corpus for benefits of....