JCIT Vs Prompt Personnel Private Limited (ITAT Mumbai)
Employees at Client’s Doorstep Still Belong to Staffing Company-Rs.3.16-Crore Employment Deduction Allowed u/s 80JJAA
The dispute over who really employs whom
The assessee, Prompt Personnel Private Limited, was engaged in manpower supply & allied human-resource services. For AY 2020-21, it claimed deduction of Rs.3,16,68,362 u/s 80JJAA, restricted to its gross total income. The total eligible deduction was computed at 30% of aggregate emoluments of Rs.13.13 crore paid to 696 additional employees.
Its employee strength increased from 11,987 as on 31.03.2019 to 13,256 as on 31.03.2020. The employees considered eligible satisfied the prescribed monthly wage ceiling, minimum employment period of 240 days & provident-fund participation requirement. Their salaries were paid through banking channels & the claim was certified in Form 10DA.
The AO nevertheless disallowed the deduction. According to him, since the employees were deployed at clients’ premises & the corresponding salary cost was recovered from those clients along with a service margin, the assessee did not really incur the “additional employee cost”.
CIT(A) looks beyond the employees’ workplace
The CIT(A) found that every foundational condition u/s 80JJAA stood satisfied. The assessee was liable for audit u/s 44AB, earned business income, had not been formed by splitting up or reconstructing an existing business & had recorded a genuine increase in employee strength.
