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Facts
Engineering Mazdoor Sabha, a registered trade union, appealed against the disallowance of Rs. 2,30,000 paid as compensation/expenses to its 19 members (workers) during a strike or layoff period for Assessment Year 2011-12. The Assessing Officer and Ld. CIT(A) had disallowed the amount, doubting the genuineness of payments due to alleged lack of voucher numbers and all payments being made on the same day.
Held
The Tribunal held that the assessee, a registered trade union, was legitimately empowered to assist its members as per the Indian Trade Union Act. The assessee had provided full details, payment vouchers, a resolution, and affidavits, while the Assessing Officer failed to verify the facts or produce any adverse material. Consequently, the addition made by the Assessing Officer was found unjustified and deleted.
Key Issues
Whether the disallowance of Rs. 2,30,000 paid by a registered trade union to its members as subsistence/compensation during strike/layoff period was justified, given that the Assessing Officer failed to bring any adverse material on record regarding the genuineness of the payments.
Sections Cited
254(1)
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PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of Ld. CIT(A)/NFAC dated 22.07.2025 for assessment year (AY) 2011-12. The assessee has raised solitary grounds of appeal for disallowance of compensation aid/expenses paid by assessee to its members (workers) of Rs. 2,30,000/-.
Rival submissions of both the parties have been heard and record perused.
The learned Authorised Representative (ld. AR) of the assessee submits that assessee is a registered trade union, registered under the provisions of Trade Union Act, 1926. One of the objects of assessee union is to assist legally financially or otherwise its members (workers) in the event of their bona fide needs. The assess-union is working in accordance with the provisions of Trade Union Act. The assessee during the year under consideration paid subsistence to its members for their welfare during the strike period or strike, closure or lay off period. The assessee trade union before making such payment based resolution in its general body meeting. Copy of such resolution is placed on record at page no. 79 of paper book. The assessee also furnished the names and other details of 19 such workers to whom Rs. 10,000/- or Rs. 15,000/- were paid during the relevant financial year. The assessee also furnished copy of vouchers bearing the signature of all such workers (member of assessee-union). The assessee also furnished the affidavit of general secretary of assessee union and treasurer/accountant of assessee to substantiate such fact that such amount/subsistence was paid to 19 workers as per memorandum of association/constitution of assessee trade union. Being a registered trade union and its books of accounts are duly audited. The function of assessee is governed by Bombay Trade Union Regulation. Though, similar additions were made against the assessee-union on A.Y. 2005-06 to 2010-11, however, such addition was deleted as the same were not based on incriminating material found during the search action carried out on assessee unit. However, during the assessment as well as first appellate stage, the assessee furnished complete details of the persons/workers to whom such assistance was extended. The assessing officer doubted such payment on the ground that voucher number was not mentioned and all the payments were made on the same day. The evidence furnished by assessee was held to be afterthought. No verification of fact was carried out by assessing officer. The ld. CIT(A) confirmed the action of assessing officer without any independent finding.
On the other hand, learned senior departmental representative (ld. Sr. DR) for the revenue supported the order of lower authorities. The ld. Sr. DR for the revenue submits that all the payments were made on a single day. The lower authorities have passed a detailed order.
I have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. There is no dispute that assessee is a registered trade union. The assessee claimed that they have made payment to its members (workers) during strike period for urgent need when their wages were not paid their employer. I find that assessee furnished the name of all the workers along with their name of employer. The assessee has paid Rs. 15,000/- each to eight persons and Rs. 10,000/- each to eleven persons/workers. The assessee also furnished copy of payment voucher of all the workers. The assessing officer has not verified the fact from all such workers either by calling such person through assessee union or by issuing any notice or summon to them. I find that assessee being a registered trade union is legitimately empowered to assist their members in accordance with the provisions of Indian Trade Union Act. Thus, doubting such payment by assessing officer without bringing any adverse material on record is not justified. I also find that assessee has passed a resolution (espousal) before making such payment. To substantiate such fact, the assessee has also furnished affidavit of General Secretary and Accountant/treasurer assessee unit. Thus, in absence of adverse material that payments were not genuine, the assessing officer was not justified in making addition. Hence, entire addition made by assessing officer is deleted.
In the result, ground of assessee is allowed.
In the result, the appeal of assessee is allowed.