TaxTMI 
TaxTMI 
2025 (12) TMI 1271
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.... 1961 ("the Act") vide order dt. 12-02-2016, wherein the AO has brought to tax a sum of Rs. 26,60,000/- holding that the same has not been expended wholly and exclusively for the purposes of assessee's business and held disallowable u/s. 37(1) of the Act. 3. The relevant findings of the AO are contained in para 3 of the assessment order and the same reads as under: "3. Labour Welfare: On perusal of the Notes to Accounts an amount of Rs. 56,74,360/- was found debited under the head Welfare & other Expenses which comprised an amount of Rs. 26,60,000/- pertaining to Labour Welfare. Vide questionnaire dtd. 27.11.2015 the assessee was asked to give break-up of Rs. 56,74,360/- alongwith evidences thereof. The AR of the assessee vide its letter dtd. 29.12.2015 submitted the details in this regard. 3.1 From the details of welfare and other expenses submitted, it was seen that the assessee had made a payment of Rs. 26,60,000/- to Maharashtra Rajya Sramik Mathadi Transport, Suraksha Rakshan Aani General Kamghar Union (Regd.). During the course of assessment proceedings, vide ordersheet noting dated 30.12.2015, the AR of the assessee was requested to offer explan....
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.... it is also noticed that some of the employees were also retrenched. Even if it is accepted that the assessee was mulling over a period of time to settle the issues with the Union so that huge amount of orders can be executed, there appears to be no reason as to why the assessee had to retrench some of its employees, which would hamper the production capabilities of the factory. Moreover, the assessee has not placed on record any documentary evidence in the form of representation or strike notice earlier submitted by the Union threatening to go on strike in the event of their demands unmet. The letters issued to the Union calling for meeting or record of minutes of meeting held with the Union reflecting the discussion had with the Union leaders have also not been produced by the assessee in support of its contention. There is no evidence brought on record reflecting decrease of manufacturing activities at Lonavala factory due to the labour trouble. 3.4 Further, the Union in its letter dated 12.12.2012 had clearly stated that in times of global crises, workers in various industries have to face difficult financial situations for various reasons and the labour Unions have to....
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.... that the assessee-company made a payment of Rs. 26,60,000/- to Maharashtra Rajya Shramik Mathadi Transport, Suraksha Rakshak aani General Kamgar Union (Reg). The assessee-company is having registered office at Mumbai and factory at Lonawala. It is a 100% Export oriented unit and is manufacturing various parts as per requirement of foreign customers. During this year, the assessee-company had a labour problem at Lonavala factory. Some labourers joined this union, namely, Maharashtra Rajya Shramik Mathadi Transport, Suraksha Rakshak aani General Kamgar Union (Reg). It was submitted that due to this, there was a constant disruption of work and business was suffering and there were some notorious worker also and further submitted that to run the business smoothly and continuously, the assessee had to seek co-operation and help of this union and the assessee could purchase the peace from labour trouble by contributing this amount to the organization run by labour union. The Union permitted the assessee to get rid of the notorious workers as well as guaranteed us smooth functioning of factory. Had the assessee not reached to this settlement, then there would have been constant disruptio....
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....of expenditure which has been incurred wholly and exclusively for the purposes of assessee's business. It was accordingly submitted that the necessary relief be provided to the assessee. 9. Per contra, the Ld. DR vehemently argued the matter and has placed reliance on the findings of the AO as well as that of the Ld.CIT(A) and it was submitted that the payment has been made to the external trade union and which has no connection with the assessee's business and therefore, no nexus has been established with the assessee's business. He accordingly submitted that the order of the AO and that of the ld CIT(A) be sustained and appeal of the assessee be dismissed. 10. In his rejoinder, the assessee has submitted that the members of the trade union were the employees of the assessee-company and same is evident from the Memorandum of Settlement, wherein the name of the assessee's employees, who were also the Members of the trade union have been clearly mentioned. It was accordingly submitted that the settlement has been done through the assistance of the trade union, wherein the employees of the assessee were the Members and it is, therefore, not a case of payment to any external tra....