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Issues:
- Taxability of re-admission fee and penalty under section 28(iii) of the Income-tax Act, 1961. - Interpretation of 'specific services performed for its members' under section 28(iii). Analysis: 1. The judgment by the Appellate Tribunal ITAT Amritsar involved seven appeals by the assessee and five cross-appeals by the revenue concerning the assessment years 1970-71 to 1976-77. The primary issue in the appeals was the taxability of re-admission fee and penalty under section 28(iii) of the Income-tax Act, 1961. 2. The assessee, a trade association of film distributors and exhibitors, provided general and specific services to its members in exchange for contributions. The specific services included print examination fee, letter circulation fee, arbitration of claims, etc. The classification of income and expenditure under 'service' and 'others' heads raised the question of taxability of re-admission fee and penalty. The Commissioner (Appeals) held penalty receipts as taxable and re-admission fee receipts as non-taxable under section 28(iii). 3. The Commissioner (Appeals) differentiated between penalty and re-admission fee, considering the true nature of the payments. The circulars issued by the association clarified that the penalty was for dealing with non-members, while the re-admission fee was for reinstating suspended members. The Tribunal approved this classification, emphasizing the distinction between penalty and re-admission fee. 4. The judgment delved into the interpretation of 'specific services performed for its members' under section 28(iii) by referencing a Supreme Court case. It highlighted that specific services entail conferring particular benefits on members for a fee. The concept of individualized services for members by paying fixed charges to the association was crucial in determining taxability. 5. The Tribunal concluded that penalties for rule infringements did not constitute specific services to members, thus not taxable under section 28(iii). The argument that penalties promoted the association's objectives was dismissed. Consequently, the appeals by the assessee were allowed, overturning the Commissioner (Appeals) decision on penalty taxability. 6. Regarding the revenue's appeals, the argument that penalties and re-admission fees were for specific services was countered by the assessee's counsel, citing precedents. The Tribunal upheld the classification of re-admission fee as non-taxable, aligning with the decision in a similar case involving a stock exchange association. 7. Ultimately, the Tribunal allowed the seven appeals by the assessee and dismissed the five appeals by the revenue, settling the taxability dispute over re-admission fee and penalty under section 28(iii) for the assessment years in question.
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