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TMI Blog2020 (1) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. in the Court, whatever amount is received from the Company, would be fully distributed to the workers of Perstop Chemical (I) Pvt. Ltd., Vapi. 2.2 In such circumstances, referred to above, a settlement was arrived at on 15th May, 2008 which was reduced into writing in the form of memorandum of settlement between the Company, i.e, the employer and the assessee-Union. By virtue of the memorandum of settlement, all disputes pending before the Industrial Tribunal, Surat including the individual disputes pending before the Labour Court, Valsad came to be settled. Clause-40 of the Settlement Deed reads thus; "40) it is agreed by and between the parties that on an authorized resolution of the committed and written authorization of individual workmen, the company will deduct 20% as union contribution to be deducted from all the amount of arrears back wages, legal dues and strike wages, as the case may be payable to workmen as a result of this settlement. Such deducted/recovered amount shall be remitted by cheque in the name of union within a period of 15 days from payment made to workmen." 2.3 In view of the aforesaid settlement, the Union received payment of Rs. 60,96,818/-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has not shown the said interest income from bank, which is undisclosed income and therefore requires to be added to the total income of the assessee for the year under consideration. Penalty proceedings u/s.271(1)(c) of the I.T. Act are separately initiated for concealment of income." 2.5 Ultimately, the assessment was undertaken under Section 143(3) of the Act and order was passed to calculate the tax and interest payable under Section 234B of the Act. The Income Tax Officer issued demand notice including penalty notice under Section 271(1)(c) of the Act for concealment of income. 2.6 The assessee carried the assessment order in appeal before the Commissioner of Income Tax. The Commissioner of Income Tax (Appeals), vide order dated 17th October, 2017, dismissed the appeal. While dismissing the appeal, the Commissioner of Income Tax (Appeals), observed as under; "In the appellate proceedings, the appellant has objected to the reopening of assessment vide ground of appeal No.1. The AR of the appellant contended that the reopening was bad in law as no income escaped assessment and it was further contended that the A.O. did not properly dispose of the specific objections ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch receipts cannot be tax exempt on the principle of mutuality neither these receipts can be treated as income from house property or other sources which is exempt u/s. 10(24) of the Act for the registered trade union. In the absence of any evidences of incurrence of any expenditure for welfare of member workers or expenses for pursuing the dispute on behalf of member workers, these receipts take the form of professional fee of the union in facilitating the dispute resolution between the employees and the employer. Almost whole receipts were found lying idle in the bank account till 31.03.2009 which further corroborate the fact that the said receipts were outright income of the appellant trade union. The appellant has relied on the decision of Mumbai ITAT in the case of Mumbai Mazdoor Sabha wherein the Hon'ble Bench had allowed the voluntary contribution deducted by employer and paid to the union as exempt income on the principle of mutuality. In the said case, the Hon'ble Bench had found that the union had incurred expense for welfare of member workers as well as expenses for pursuing the legal disputes in the courts and other forums. The Hon'ble Bench also found that after incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Authorised Representative of the assessee. Therefore, the receipts under consideration becomes a receipt which is not in the form of contributions from the members, neither voluntary contributions received from employer towards the expenses incurred on behalf of the members welfare. Therefore, such receipts cannot be treated as exempted u/s. 10(24) of the Act. 10. It is further noticed that almost the whole receipts were lying idle in the bank account till 31.03.2009 which corroborates the fact that the said receipts were not professional income of the assessee trade union. Therefore, the decision relied in the case of Mumbai Majdur Sabha (supra) is rightly distinguished by the Id. CIT(A). Since the amount claimed to have been received on behalf of union was not shown in the books of accounts. Therefore, concept of principle of mutuality between the members does not supply to the present facts of the case. Hence, the decision relied in the CIT vs. Bus Operators Association (supra) and CIT vs. Standing Conference of Public Enterprises of the case are not applicable to present facts of the case. In the light of these facts and considering the finding of the lower authorities, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer is that the income could be termed as one from other sources and once the income is termed to be from other sources, the same would be covered by Section 10(24) of the Act and the assessee would be exempt from paying any tax on the same. 6. In such circumstances, referred to above, Mr. Shah prays that there being merit in his appeal, the same be allowed and the substantial question of law, as formulated by this Court, may be answered in favour of the assessee and against the Revenue. Submissions on behalf of the Revenue 7. On the other hand, this appeal has been vehemently opposed by Ms. Raval, the learned standing counsel appearing for the Revenue. Ms. Raval would submit that no error, not to speak of any error of law, could be said to have been committed by the Tribunal in dismissing the appeal and thereby affirming the two orders passed by the subordinate authorities. 8. Ms. Raval very fairly submitted that it is not in dispute that the amount has been disbursed amongst the employees. According to Ms. Raval, the factum of settlement is also not in dispute. However, the only issue in dispute is with regard to the distribution of the amount amongst the employees. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) any sum chargeable to income- tax under clauses (ii) and (iii) of section 28 or section 41 or section 59; (va) any sum chargeable to income- tax under clause (iiia) of section 28;] (vb) any sum chargeable to income- tax under clause (iiib) of section 28; 6 (VC) any sum chargeable to incometax under clause (iiic) of section 28;] (vd) the value of any benefit or perquisite taxable under clause (iv) of section 28; (ve) any sum chargeable to income- tax under clause (v) of section 28;] (vi) any capital gains chargeable under section 45; (vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a cooperative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule; (viii) Omitted by the Finance Act, 1988 , with effect from April, 1988 . It was inserted by the Finance Act, 1964 , w. e. f 1- 4- 1964 .] (ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever;] (x) any sum received by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6) 75 taxmann.com 134. The facts of the said case are almost identical with the case on hand. We are quite convinced with the line of reasoning assigned by the Tribunal with respect to exemption under Section 10(24) of the Act. We quote the relevant portion of the said judgment. "It is not a case of receiving any amount or income by doing an activity which is not for achieving the objects of the assessee. The amount received by the assessee from the employers has a direct nexus with the negotiation and settlement arrived between the parties. The role of the assessee of negotiating on behalf of the workers for settlement of disputes between the worker and the employers is limited only in respect of the disputes between the member workers and employers. Therefore, the activity of the assessee cannot be generalized in the nature of professional service or occupational service open to general public but it is, otherwise, permitted under the by-laws and constitution of the assessee as well as Trade Union Act. Though the contribution from employer is received as per the tripartite agreement, however, it is only incidental to the activity of services of the assessee in resolving the di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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