IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “A” BENCH : MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER Assessment Year : 2013-14 Alex Grinders Pvt. Ltd., DCIT, Circle-4(1)(1), 32, Diamond Queen, Aayakar Bhavan, West Avenue, Santacruz, vs. Maharshi Karve Road, Mumbai-400054. New Marine Lines, PAN : AAACA3664K Churchgate, Mumbai-400020.

(Appellant) (Respondent)

For Assessee : Shri Bharat Kumar For Revenue : Shri Surendra Mohan, Sr.DR Date of Hearing : 03-11-2025 Date of Pronouncement : 24-11-2025

O R D E R

PER VIKRAM SINGH YADAV, A.M :

This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld. CIT(A)‟], dated 04-02-2025, pertaining to Assessment Year (AY) 2013-14, wherein the assessee has taken the following ground(s)

of appeal:

“On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming the disallowance of ₹26,60,000/- paid to the labour union, which was incurred wholly and exclusively for the purposes of the business and should be allowed as a deduction on grounds of commercial expediency."

2. Briefly the facts of the case are that the assessment in this case was completed u/s. 143(3) of the Income Tax Act, 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 explanation on the above payment. In response, vide letter dated 15.01.2016, the AR stated that there was constant disruption of work because of labour trouble at Lonavala factory owing to which production was suffering and there were some notorious workers also. Hence, to run the business smoothly and continuously by seeking cooperation from the said Union, the assessee had to contribute this amount. The AR submitted a copy of the receipt issued by the said Union. However, it is observed from the said Union's letter dated 12.12.2012 addressed to the assessee, it was a mere request for extending financial support for the welfare of its members. Therefore, the contention made by the AR appears to be contradictory from the contents of the letter issued by the Union. The contents of the Union's letter is general in nature and not specific related to the workers of the assessee company.

3.2 Further notice u/s 142(1) of the Act was issued on 22.01.2016 mentioning the above observations and accordingly, the assessee was again requested to justify its claim of said payment as business expenditure. In reply, the AR vide letter dated 05.02.2016 after reiterating its earlier submissions contended that the assessee's turnover had jumped from Rs. 18.76 crores to Rs.28.45 crores and net profit increased from Rs.5.72 crores to Rs.12.31 crores after making the payment to the said payment to the said Union. The AR further contended that had the issue not been settled with the Union by making the above payment, the asse