INCOME TAX ACT, 1961

Section 10(24) & 2(24)

Exemption under section 10(24) - Allowability - Contribution received from employees by trade union in terms of settlement of disputes -

Assessee was a registered trade union bearing Registration, Managing Committee of the Union passed an unanimous resolution that as a result of compromise arrived at between Gujarat Rajya Kamdar Sabha and Perstop Chemical (I) (P) Ltd. in court, whatever amount was received from the company, would be fully distributed to workers of Perstop Chemical (I) (P) Ltd., Vapi. In such circumstances a settlement was arrived at on 15-5-2008 which was reduced to writing in the form of memorandum of settlement between the company, i.e., employer and 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. In view of aforesaid settlement, union received payment of Rs. 60 lakhs, which was credited to separate bank account. AO held the same amount liable to be charge to taxed under section 4 read with section 2(24) and 56.Held: Once the factum of settlement was not disputed coupled with the factum of receipt of a particular amount from Company, and as observed by AO in the assessment order that amount had been distributed amongst employees, the case squarely stood covered under section 10(24). Though contribution from employer was received as per settlement agreement, it was only incidental to activities of services of the assessee-union in resolving the dispute between the member workers and the employer with the intention of advancement of welfare of members and not to earn any income or profit therefore, contribution received from employers on account of settlement between workers and the employers could not be said to be business/professional or occupational income of assessee. Therefore, amount of contribution received from employers at the most would be income of assessee as income from other sources and once income was termed to be from other sources, the same would be covered by section 10(24) and assessee would be exempt from paying any tax on the same.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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