ITAT Allows Welfare Society to Adjust Its Member Benefit Payments Against Taxable Interest Receipts
The Income Tax Appellate Tribunal (ITAT), Delhi, has ruled in favour of a society trust by allowing it to set off the payments made for member benefits, such as death claims, pension, and retirement benefits, against its interest income.
The assessee, All India Oriental Bank of Employee Welfare Society, has been registered since 1976, and its main aim is to work for the social, economic and cultural welfare of the members of the society. The society filed its return on 16.03.2016, declaring NIL income. However, the AO assessed its income at Rs 2,86,64,884. The AO said that the members’ subscriptions are not taxable, as they fall under the principle of mutuality. However, the AO claimed that the interest received on the fixed deposits and the savings account is taxable because the same are not covered by the ‘Principle of Mutuality.’
This decision of the AO was also confirmed by the CIT(A). Therefore, the assessee society has approached the ITAT.
The main contention of the assessee was that as a part of its objectives, the society has paid death claims, retirement benefits and pensions to its members, and these payments should be set off against the taxable interest income. The society said that its income should be calculated after deducting these payments from the taxable receipts.
The Tribunal observed that the assessee has only subscription and interest income as its common fund, which is used to meet its objectives. The Tribunal agreed with the assessee’s contention to adjust the payments made to members against the taxable income earned during the year.
Therefore, the tribunal allowed the assessee to set off the claims made for the benefit of members against the taxable receipts.
Case Citation: All India Oriental Bank of Employees Welfare Vs ITO (ITAT Delhi); ITA No.7645/Del/2018; 06/03/2026; 2015-16
