Specific services to members test excludes penalty and re-admission fees from taxable income under section 28(iii).

Amounts collected as penalties for breaching an association's rules were not receipts for any individualized service to members; they were only consequences of default and therefore fell outside income from "specific services performed for members" under section 28(iii). The penalty receipts were held not taxable. Re-admission fees collected when a suspended member was reinstated were likewise treated as admission-related charges, not consideration for specific services, and were not taxable under section 28(iii). The tribunal applied the test that taxable receipts under this provision require a direct payment for a particular, identifiable benefit to the member, which was absent on both counts.

---

---

Issues: (i) Whether the amounts described as penalty were receipts from specific services performed for members and taxable under section 28(iii) of the Income-tax Act, 1961. (ii) Whether the amounts described as re-admission fee were receipts from specific services performed for members and taxable under section 28(iii) of the Income-tax Act, 1961.

Issue (i): Whether the amounts described as penalty were receipts from specific services performed for members and taxable under section 28(iii) of the Income-tax Act, 1961.

Analysis: The expression "specific services performed for its members" was understood to mean conferring a particular, identifiable benefit on a member, ordinarily for a specific charge, and not a general or collective benefit available to members at large. A penalty imposed for breach of the association's rules, such as dealing with a non-member, was not a payment made in exchange for any individualized service. It was merely a consequence of infringement of the rules and did not arise from the rendering of a specific service to the defaulting member.

Conclusion: The penalty receipts were not taxable under section 28(iii) and the finding against the assessee was reversed.

Issue (ii): Whether the amounts described as re-admission fee were receipts from specific services performed for members and taxable under section 28(iii) of the Income-tax Act, 1961.

Analysis: The true character of the amount collected on reinstatement of a suspended member was that of a re-admission fee. It was akin to an admission-related payment and did not represent consideration for any specific service rendered to the member. Since admission fee itself was not treated as taxable on this footing, the re-admission fee stood on the same footing and could not be brought within section 28(iii) as income from specific services.

Conclusion: The re-admission fee receipts were not taxable under section 28(iii) and the finding of non-taxability was upheld.

Final Conclusion: The receipts characterised as penalty and re-admission fee did not constitute income from specific services performed for members, so the assessee succeeded on the penalty issue and the revenue failed on the re-admission fee issue.

Ratio Decidendi: For a receipt to fall within income from "specific services performed for members," there must be a direct payment for an individualized service conferring a particular benefit on the member; amounts collected as penalties for breach of association rules or as re-admission charges do not satisfy that test.

---