Engineering Mazdoor Sabha Vs ACIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, has allowed the appeal of the Engineering Mazdoor Sabha, a registered trade union, thereby deleting a disallowance of Rs. 2,30,000 in compensation expenses for the assessment year 2011-12. The tribunal’s decision was based on the finding that the tax authorities failed to provide any credible adverse material to substantiate the claim that the payments were not genuine, effectively overturning the orders of both the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals).
The case originated from a tax assessment where the Assessing Officer had disallowed a sum of Rs. 2,30,000 claimed by the assessee, the Engineering Mazdoor Sabha. This amount represented compensation or subsistence payments made to its members, who were workers facing hardships during a period of strike, closure, or layoff from their respective employers. The assessee, a trade union registered under the provisions of the Trade Union Act, 1926, argued that providing such financial and legal assistance to its members was one of its core objectives, in line with its memorandum of association.
During the assessment proceedings, the trade union presented a comprehensive set of documents to justify the payments. This included a copy of the resolution passed in its general body meeting, which authorized the payments. The assessee also provided a detailed list of the 19 workers who had received the assistance, specifying the amount paid to each individual, which was either Rs. 10,000 or Rs. 15,000. Furthermore, the union submitted copies of payment vouchers, each bearing the signature of the respective worker, as proof of receipt. To further strengthen its claim, the assessee also furnished affidavits from the general secretary and the treasurer/accountant of the union, affirming the genuineness of the payments. It was also noted that the union’s books of accounts were duly audited, lending further credence to its financial records.
