Appeals Dismissed: Addition for Seconded Employees' Payments Rejected by Tribunal

The Revenue's appeals against the CIT(A) order for AY 2013-14 & 2014-15, regarding addition made on account of claims of amount paid for employees taken on secondment, were dismissed by the Tribunal. The CIT(A) had deleted the addition, stating that the seconded employees were originally employed by another company and seconded to the assessee without any mark-up. The Tribunal found no fault in the CIT(A)'s decision and dismissed the Revenue's appeals for both assessment years.

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Issues:
Appeals filed by Revenue against CIT(A) order for AY 2013-14 & 2014-15 regarding addition made on account of claims of amount paid for employees taken on secondment.

Analysis:
The appeals by Revenue were directed against the CIT(A) order for AY 2013-14 & 2014-15. The issue was whether the addition of Rs. 7.16 crore made by AO but deleted by CIT(A) was justified. The AO noted high percentage of salary expenses attributed to secondment costs and questioned the genuineness of the agreement. The AO disallowed 50% of the secondment cost, considering the employees not working exclusively for the assessee. However, CIT(A) deleted the addition citing that the seconded employees were originally employed by another company and seconded to the assessee without any mark-up. The assessee earned revenue from management services provided to group entities. The Revenue contended that the employees were not working wholly for the assessee, but the CIT(A) found no fault in the arrangement.

The AR argued that the seconded employees were taken on cost-to-company basis without any mark-up and pointed out that no disallowance was made in earlier years. The Revenue did not counter this argument. The Tribunal observed the inconsistency in AO's stance of disallowing only 50% despite questioning the genuineness of the agreement. The Tribunal found no fault in the CIT(A)'s decision and dismissed the Revenue's appeal for AY 2013-14.

For AY 2014-15, both parties agreed that the issue was identical to AY 2013-14. The Tribunal, based on the reasoning for AY 2013-14, dismissed the Revenue's appeal for AY 2014-15 as well. Consequently, both appeals by the Revenue were dismissed by the Tribunal.

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