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2016 (11) TMI 537 - AT - Income TaxAddition treating the donation received as professional income - settlement of the disputes between the workers and their employers - Held that - As in the case of the sister concern of the assessee, the settlement of the disputes between the workers and their employers was negotiated by the assessee to avoid any stand of between the employers and the workers by playing a vital role. The contribution received by the assessee is only in respect of and on account of its activities in achieving the objects, as per Constitution. The amount received by the assessee from the employers/employees has a direct nexus with the negotiation and settlement arrived at between the parties. Thus, the activity of the assessee cannot be generalized in the nature of professional services simplicitor. The contribution from the employer is received as per agreement and incidental to the activities of the services rendered by the assessee in resolving the disputes between the member workers and the employers with the intention of welfare of the members/workers. Thus, following the aforesaid decisions, it is noted that there is no material brought on record by the Assessing Officer evidencing that the amount received by the assessee from the employers as well as from the workers are not voluntary. In the absence of any contrary material and it has been accepted that the contribution of workers are exempt under section 10(24). Similar is the situation in respect of amounts received from counterparty, being employer, in pursuant to settlement / resolution of disputes, as exempt under section 10(24) of the Act. Following the aforesaid order, we are of the view that the amounts so received by the assessee cannot be treated as business or profession, consequently should have been treated as exempt under section 10(24) of the Act as well as on the principle of mutuality being distributed among the members. - Decided in favour of assessee Addition on account of workers aid - addition made on the plea that the assessee could not produce vouchers, evidencing payments and merely filed affidavit of nine persons only - Held that -So far as, non-production of vouchers is concerned, the assessee has filed affidavit from Shri N.R. Agrawal & Company, who audited the account of the assessee and has duly confirmed that they saw the vouchers at the relevant time and due to reasons stated before us as well as before the Ld. Commissioner of Income Tax (Appeals), such vouchers could not be produced. Identical affidavits were filed form the General Secretary of the Union, from accountant of the union, three affidavits from the workers as a sample, detailed chart with name of each worker to whom the aid was provided, resolution of the Managing commission etc. It is also noted that such expenses are authorized by the Constitution of the Union and such aid is paid to the workers when the units of a particular union of workers are on strike and such workers are unable to meet their household expenditure. It is also noted that no such addition was made for Assessment year 2003-04 which is also based on similar facts. The original assessment for earlier three Assessment years was made under section 143(3) of the Act and no addition was made - Decided in favour of assessee Reopening of assessment after a lapse of four years - Held that - Since, there was no new tangible material available with the Assessing Officer while resorting to section 147/148 of the Act, more specifically, while framing original assessment u/s 143(3) of the Act, there was full disclosure of material facts by the assessee and on the basis of those facts, assessment was completed u/s 143(3) of the Act, therefore, on the legal issue we decide the issue in favour of the assessee.
Issues Involved:
1. Treatment of donations received by the assessee as professional income. 2. Levy of interest under section 234B(3) of the Income Tax Act. 3. Validity of reopening the assessment under section 147/148 of the Income Tax Act. 4. Disallowance of expenses claimed by the assessee. 5. Application of the principle of mutuality to contributions received by the assessee. Detailed Analysis: 1. Treatment of Donations as Professional Income: The primary issue was whether the donations received by the assessee, a registered trade union, should be treated as professional income. The assessee argued that the donations were voluntary contributions related to the settlement of disputes between workers and employers, and thus should be exempt under section 10(24) of the Income Tax Act. The Tribunal referred to previous decisions, including the case of M/s Engineering Mazdoor Sabha vs ACIT, where similar donations were not treated as professional income but as contributions aimed at achieving the union's objectives. The Tribunal concluded that these donations were incidental to the union's activities and should not be regarded as business income, thus exempt under section 10(24). 2. Levy of Interest under Section 234B(3): The assessee contested the levy of interest under section 234B(3), arguing that they had filed a return claiming a refund. The Tribunal directed the Assessing Officer to reconsider the issue in light of the Tribunal's decision in Datamatics Ltd. vs ACIT, which held that interest under section 234B is not justified when a refund is claimed. 3. Validity of Reopening the Assessment: The reopening of the assessment was challenged on the grounds that there was no new material or information that justified the reassessment. The Tribunal noted that no incriminating material was found during the search, and the reopening was based on the same set of facts already considered in the original assessment. The Tribunal held that the reopening was invalid as it was merely a change of opinion without any fresh tangible material. 4. Disallowance of Expenses: The assessee claimed expenses under the head "compensation/aid paid to workers." The Assessing Officer disallowed these expenses due to the non-production of vouchers. The Tribunal accepted the assessee's explanation that the vouchers were destroyed and noted that similar expenses were allowed in previous years. The Tribunal allowed the expenses, noting that they were authorized by the union's constitution and necessary for the welfare of the workers. 5. Application of the Principle of Mutuality: The Tribunal considered whether the contributions received from workers and employers fell under the principle of mutuality. The Tribunal noted that the contributions were used for the benefit of the workers and were distributed among them, thus satisfying the principle of mutuality. The Tribunal concluded that these contributions should not be treated as business income and were exempt under section 10(24). Conclusion: The Tribunal allowed the appeals of the assessee in part, holding that the donations received were not professional income and were exempt under section 10(24). The Tribunal also directed the Assessing Officer to reconsider the levy of interest under section 234B(3) and allowed the expenses claimed by the assessee. The reopening of the assessment was held to be invalid. The appeals of the Revenue were dismissed.
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