TaxTMI 
TaxTMI 
2026 (9) TMI 122
X X X X Extracts X X X X
X X X X Extracts X X X X
....rvices. The return of income was filed on 15.03.2022 declaring total income of INR NIL under normal provisions of the Act and book profit of INR 9,79,33,576/- was declared u/s 115JB of the Act. Return was revised on 31.03.2022 at the same income. The case was selected for scrutiny under CASS and notice u/s 143(2) was issued on 27.06.2022. Since the assessee has entered into various transactions with its AEs therefore, a reference was made t the Transfer Pricing Officer (TPO) for determination of Arm Length Price (ALP) of the transactions carried out by the assessee with its AE's. The TPO in terms of its order dated 15.12.2022 made proportional adjustments towards provision of services of INR 39,19,46,452/-; intra group services of INR 30,78,361/- and provisioning of services (deemed international transactions) of INR 46,81,37,514/-. Accordingly, total ALP adjustments of INR 86,32,02,327/- were proposed by the TPO. Thereafter, the AO has passed the draft assessment order u/s 144C(1) of the Act wherein the AO has proposed the additions towards ALP adjustments made by the TPO of INR 86,32,02,327/- and further disallowed deduction claimed u/s 80JJAA of the Act by holding that the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....('the Act'), thereby making the assessment proceedings barred by limitation." 4.2 Further vide letter dt. 10.03.2026, another additional Ground of appeal was taken which reads as under:- 15. 'On the facts and in the circumstances of the case and in law, the final assessment order deserves to be quashed as the learner Dispute Resolution Panel ('Ld. DRP"), while issuing directions under section 144C, has impermissibly remanded the matter to the learned Transfer Pricing Officer ("Ld. TPO") for re-examination of facts and evidence, in clear violation of section 144C(8) of the Act. Since the statute categorically bars the DRP from setting aside or remanding any proposed variation, the directions so issued are without jurisdiction and the assessment framed pursuant thereto is unsustainable in law." 5. In the applications filed alongwith the additional Grounds of appeal taken by the assessee for the admission of the additional grounds, assessee claimed that these are purely legal in nature and required no fresh investigation therefore the same be admitted in terms of judgment of Hon'ble Supreme Court in the case of NTPC vs CIT reported in 229 ITR 383 (SC). 6. On the othe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under the normal provisions of Act without considering the adjustments made towards transfer pricing adjustment and therefore, the assessee be allowed deduction u/s 80JJAA on the amount of gross total income computed after including the TP adjustments. He prayed accordingly. The ld. AR placed reliance on various judicial pronouncements which are stated in the written submissions placed in records. 12. On the other hand, ld. DR for the Revenue vehemently supported the orders of lower authorities and submits that the assessee has filed Form 10DA delayed for the year under appeal and therefore, was not entitled for deduction u/s 80JJAA of the Act. He further submits that AO has discussed all the agreements and thereafter, reaches to the conclusion that claim of the assessee was not in accordance with the provisions of the Act as there was no employer and employee relationship existed between the parties and accordingly, has restricted the amount of deduction to the total income computed under the normal provisions of the Act. Regarding the additional ground of appeal, ld. CIT DR stated that in terms of section 92C(4A), no deduction under chapter VI-A could be allowed on the adjustm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies, deputation, relocation, imposition of disciplinary sanction, remuneration or termination of its employees. Accordingly, the assessee is the employer qua the employees employed by it and there is an established relationship of employer-employee between them which should not be intertwined with the service arrangement which only provides a mechanical and temporary right to the customer to supervise the work performed by the employees of the assessee. 15. In so far as the eligibility of the assessee under the provision of section 80JJAA of the Act is concerned, the same is reproduced below: [Deduction in respect of employment of new employees. 80JJAA. (1) Where the gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional employee cost incurred in the course of such business in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided. (2) No deduction under su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vided that in the case of an assessee who is engaged in the business of manufacturing of apparel, the provisions of subclause () shall have effect as if for the words "two hundred and forty days", the words "one hundred and fifty days" had been substituted;] (iii) "emoluments" means any sum paid or payable to an employee in lieu of his employment by whatever name called, but does not include- (a) any contribution paid or payable by the employer to any pension fund or provident fund or any other fund for the benefit of the employee under any law for the time being in force; and (b) any lump-sum payment paid or payable to an employee at the time of termination of his service or superannuation or voluntary retirement, such as gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension and the like. (3) The provisions of this section, as they stood immediately prior to their amendment by the Finance Act, 2016, shall apply to an assessee eligible to claim any deduction for any assessment year commencing on or before the 1st day of April, 2016.] 16. We find that the section 80JJAA was introduced in 1998 w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h employment is provided. Explanation. For the purposes of this section, the expressions, i "additional wages" means the wages paid to the new regular workmen in excess of fifty workmen employed during the previous year ii. "regular workman", does not include a) a casual workman; or b) a workman employed through contract labour; or c) any other workman employed for a period of less than three hundred days during the previous year; ✓ ii. "ade emp emp of er of th iii. "workman" shall have the meaning assigned to it in clause (s) of section 211 of the Industrial Disputes Act, 1947 (14 of 1947); a) b) 80JJAA. (1) Where the gross total income of an appellant to whom section 44AB applies, includes any profits and gains derived from business, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional employee cost incurred in the course of such business in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided. Explanation For the purposes of this section,- i "additional emplo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ents with the customers, fixed term employment contract with the employees, and the amended provisions of Section 80JJAA of the Act applicable to this assessment year. 20. It is important to note that the provisions of Income Tax Act do not define the term 'Employer' or 'Employee' or 'Employer-employee relationship'. Therefore, meaning of the term 'Employer-employee relationship' needs to be derived from its general context and prevalent judicial precedents. We find substantial force in the reliance placed by the ld. counsel for the assessee on the following judicial precedents to evaluate existence of Employer-Employee relationship: * Hon'ble Supreme Court of India in Balwant Rai Saluja v. Air India Ltd (AIR 2015 SC 375), on similar question of law i.e., whether workmen engaged in statutory canteens, through a contractor, can be treated as employees of the establishment (Air India) in which such canteen is situated, held that the mere fact that Air India had a certain degree of control over the employees does not mean that the employees were Air India's employees. It was held that the control exercised by Air India was in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....endering the proper service to the employees of the management" 21. The ld AR has further drawn reference to the Hon'ble Supreme Court from its earlier decision in the case of International Airport Authority of India -vs.- International Air Cargo Workers 2009 (13) SCC 374, wherein it was held that if the contract is for supply of labour, necessarily, the labour supplied by the contractor will work under the directions, supervision and control of the recipient entity, however, that would not make the worker a direct employee of the recipient entity, if the salary is paid by the contractor, if the right to regulate the employment is with the contractor and the ultimate supervision and control lies with the contractor. 22. We thus find that in all the above rulings, it is held that mere exercise of operational supervision on the assigned employees pursuant to a contractual arrangement, cannot be read as the recipient entity is the employer of such contracted employees. In determining the relationship of employer and employee, all relevant facts and circumstances have to be considered including the terms of the contract. Further, what is imperative is to see, whet....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... number of qualified and experienced concierge........ under its direct employment, control and supervision along with such items/apparatus/vehicles etc., as required and are necessary according to the assessment and in the judgement of the MPG." Likewise with E.I.Dupont India Pvt Ltd in clause 1.2 provides "ManpowerGroup Services India Pvt. Ltd. shall deploy its own employee / personnel, or performing the services as per Statement of Work who shall be supervised and controlled by ManpowerGroup Services India Private Limited." 25. In view of the above discussion, we are of the considered view that the assessee is the employer qua the employees employed by it and there is an established relationship of employer-employee between them. The fact is established from the declaration by customer acknowledging deputed personnel as employees of assessee. The payments towards salaries to the employees is subject to Tax withholding u/s 192 of the Income Tax Act, 1961 and TDS certificate in Form 16 is issued by the assessee to its employees on an annual basis. Not only salary, the accompanied obligations of employees towards Provident Fund and Employee State Insurance are discharged b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dmission of similar deduction u/s 80JJAA as an additional claim raised for the first time before the 1" appellate authority (even though there was a delay of 4 years in filing such claim) with a direction to the assessing officer that correctness of the claim may kindly be verified as per Section 80JJAA of the Act and if the Ld. AO finds the claim as correct then the same would be allowed to the assessee. The assessee also relied on the Hon'ble Delhi Tribunal while adjudicating similar case of Sai Computers Ltd. (2023) 155 taxmann.com 607 (Delhi-Trib.) also ruled that belated filing of prescribed Form 10DA is not fatal in the sense that the requirement of Rule 19AB and Rule 12(2) are not mandatory per se but are essentially directory in nature. Similarly, reliance was also placed on the decision of Hon'ble Madras High Court in Svasti Microfinance (P.) Ltd. (2024) 164 taxmann.com 229 (Madras) wherein Hon'ble HC dealing with an identical case of delay of 38 days in filing Form 10DA considered the genuine hardship caused to the assessee company and condoned the delay in filing Form 10DA. Following the above judicial precedent, we condone the delay of one day in filing Form....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nses and there is no relationship with the adjustment made u/s 92CA of the Act or the income computed by taking into consideration the other provisions of the Act. 18.2. Chapter X of the Act deals with the Transfer pricing (TP) adjustments and regulations related to international transactions and section 92C(4), provides as under:- 92C(4) "Where an arm's length price is determined by the Assessing Officer under sub-section (3), the Assessing Officer may compute the total income of the assessee having regard to the arm's length price so determined: Provided that no deduction under section 10-A or section 10-AA or section 10-B or under Chapter VI-A shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under this sub-section; Provided further that where the total income of an associated enterprise is computed under this sub-section on determination of the arm's length price paid to another associated enterprise from which tax has been deducted or was deductible under the provisions of Chapter XVII-B, the income of the other associated enterprise shall not be recomp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts. With these observations, Ground of appeal No.5 raised by the assessee is disposed off. 22. Ground of appeal Nos. 6 to 6.7 of the assessee are with respect to the transfer pricing adjustment of INR 3,91,99,222/- made by holding that the international transactions pertaining to the provision of information technology services and IT technology enabled services (ITeS) to its AE are in the nature of KPO services and do not satisfy the ALP as envisaged in the Act. 23. The TPO categorized the services rendered by the assessee as IT & ITeS services as KPO and conduct fresh benchmarking analysis and made the adjustment. It is observed that identical issue was considered by the Co-ordinate Bench in ITA. No. 371/Del/2024 and ITA No.3585/Del/2024 for AY 2020-21 wherein the Co-ordinate Bench vide its order dated 25.09.2025 has remanded this issue to the file of AO with the following directions:- 37. "..............We are therefore of the considered view that the issue of comparables be remitted back to the TPO for a fresh adjudication in the light of assessee's proposed comparables who are engaged in the business of KPO and are into IT and ITeS services also. The TPO is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a entity therefore, ALP of this payment for 'salesforce global' was taken at NIL and by applying other method, and adjustment was made. 27.1. Before us, ld.AR for the assessee stated that AEs provides similar services to all group companies in uniformity to enable to benefit share resources and global resources. As per ld. AR, these services are provided on a group-wide basis, enabling the assessee to leverage global expertise, brand strength, market intelligence, and established customer relationships, which may not be efficiently replicated through third-party vendors. Engaging third-party vendors locally to provide such services may not be feasible, as they may lack knowledge of group policies, internal processes, proprietary frameworks, and long-standing global relationships. Further, availing such services externally could impact consistency, confidentiality, and quality of services. Therefore reliance was placed on group entities for these services. Since the assessee maintained contemporaneous transfer pricing documentation and complied with the requirements of the Act and Rule 10D, and the transfer pricing analysis relating to IGS be accepted and the adjustment made be d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atutory pre-condition of section 92B(2) was not satisfied. Ld.AR further submits that TPO has applied 15% of the total revenue as international transactions without applying any of the method prescribed under Chapter X of the Act and therefore, the adjustment made by deleted. 33. On the other hand, ld. CIT DR for the Revenue vehemently supported the orders of the lower authorities and requested for the confirmation of the same. 34. Heard the contentions of both parties at length and perused the material available on record. From the order of TPO, it is observed that TPO in para 25 & 25.1, observed that assessee was asked to submit the details of sales made using GAP & GSS programmers of its AEs however, in absence of such details, the TPO applied adhoc rate of 15% on the Revenue generated by using these programmers and held the said receipts as Deemed International Transactions and made the adjustment of INR 46,81,37,514/-. 35. As could be seen that the assessee has not provided complete details thus, in absence of the same, the AO/TPO has not been able to examine the true nature of transactions and nor could be able to apply the correct method as provided under Chapter X ....