Staffing Companies Qualify for Section 80JJAA Deduction, but Transfer Pricing Enhancements Exclude Chapter VI-A Benefits
Issue
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Whether a manpower and staffing agency qualifies for deduction under Section 80JJAA as an employer qua deployed personnel, and whether a one-day delay in filing Form 10DA is fatal to the claim.
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Whether Section 80JJAA deductions spanning consecutive years (1st, 2nd, and 3rd year claims) are allowable subject to verification of earlier years’ claims.
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Whether Section 80JJAA deduction can be allowed on the enhanced portion of total income arising from a Transfer Pricing adjustment under Section 92C.
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Whether TP adjustments based on re-characterization of ITeS/BPO services as KPO and Nil determination of intra-group service charges without evaluating TP study documentation are sustainable.
Facts
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Section 80JJAA & Form 10DA: The assessee, engaged in recruitment, staffing, and training services, claimed Section 80JJAA deduction for AY 2021-22. The AO disallowed it alleging lack of employer-employee relationship with deployed personnel and a one-day delay in submitting Form 10DA.
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Multi-Year Deduction Claim: The assessee claimed ₹31.24 crores under Section 80JJAA across 3 years (AY 2019-20 to AY 2021-22), restricted to ₹11.64 crores up to gross total income.
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TP Adjustment & Chapter VI-A Interplay: The AO enhanced total income via transfer pricing adjustments under Section 92C and restricted Section 80JJAA deduction to gross total income computed excluding the TP enhancement.
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KPO Re-characterization & Intra-Group Services: The TPO re-characterized the assessee’s IT/ITeS services as high-end KPO services and made TP adjustments using fresh comparables. Additionally, the TPO benchmarked ‘Salesforce Global Allocation’ intra-group payments at Nil under the ‘Other Method’ despite documentation submitted in the TP Study Report (TPSR).
Decision
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80JJAA Allowed & Form 10DA Delay Condoned: Following preceding years’ orders, the tribunal held that an established employer-employee relationship exists qua deployed workers. The one-day delay in Form 10DA was condoned as directory, especially considering COVID-19 pandemic timeline relaxations [Paras 13-15]. (In favour of assessee)
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Verification of Multi-Year Claims Remanded: The AO was directed to verify 2nd and 3rd-year claims (AY 2019-20 and AY 2020-21) in line with the Co-ordinate Bench’s order and allow deduction after verification [Para 17]. (In favour of assessee)
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No Chapter VI-A Benefit on TP Adjustments: As per the first proviso to Section 92C(4), no Chapter VI-A deduction is permissible on income enhanced through transfer pricing adjustments. The lower authorities’ restriction was upheld [Paras 19-20]. (In favour of revenue)
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BPO vs. KPO & Intra-Group Services Remanded: Issues regarding re-characterization of ITeS services into KPO and Nil ALP determination of intra-group services were remitted back to the AO/TPO for fresh adjudication after evaluating segmental details, functional similarity, and TPSR documentation [Paras 23, 25, 29]. (Matter remanded)
Key Takeaways
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Employer Status in Staffing Models: Manpower and staffing firms paying wages and managing employment count as employers for Section 80JJAA benefits.
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Form 10DA Timeline is Directory: Procedural delays in filing Form 10DA audit reports do not extinguish substantive statutory deduction claims under Section 80JJAA.
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Section 92C(4) Proviso Bar: Taxpayers cannot claim Section 80JJAA or other Chapter VI-A deductions against additional income added through Transfer Pricing ALP adjustments.
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Evidentiary Basis for Intra-Group ALP: TPOs cannot arbitrarily benchmark intra-group charges at Nil without reviewing detailed TPSR documentation and benefit-test evidence.
IN THE ITAT DELHI BENCH ‘I’
Manpower Group Services India (P.) Ltd.
v.
Assistant Commissioner of Income-tax
SATBEER SINGH GODARA, Judicial Member
and Manish Agarwal, Accountant Member
and Manish Agarwal, Accountant Member
IT Appeal No. 5922 (Delhi) of 2024
[Assessment year 2021-22]
[Assessment year 2021-22]
AUGUST 25, 2026
Rohit Tiwari, Ms. Tanya, Advs. and S.K. Aggarwal, AOR for the Appellant. Mahesh Kumar, CIT(DR) for the Respondent.
ORDER
Manish Agarwal, Accountant Member. – The present appeal is filed by the assessee against the assessment order dated 29.10.2024 passed by Ld. DCIT/ACIT TP-2(2)(2), Delhi u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 [“the Act”], in conformity with the directions dated 30.09.2024 issued by the Dispute Resolution Panel-2, New Delhi (‘the DRP’) under section 144C(5) of the Act, for the Assessment Year 2021-22.
2. Brief facts of the case are that the appellant is a company engaged in the business of providing manpower with permanent, temporary contract recruitment, employment assessment, training, career transition, organizational consulting services and vendor management services. 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 assessee is not eligible for such deduction of INR 11,64,42,796/- (total claim was of INR 31,23,99,623 which was restricted at INR 11,64,42,796/- i.e. upto the Gross total income) and further made disallowance of INR 3,00,830/- of delayed payment of employees contribution of PF & ESI. Accordingly, the total income was proposed to be assessee at INR 97,99,45,953/-.
3. Against the said order, the assessee filed objections before the ld. DRP who vide its order dated 30.09.2024 has given various directions to the AO/TPO and after considering the direction given, total adjustment made by the TPO at INR 86,32,02,327/- in the order dated 15.12.2022 were reduced to INR 51,04,15,097/- where adjustments towards provision of services was reduced to INR 3,91,99,222/- originally proposed at INR 39,19,46,452/- and remaining two adjustments towards intra-group services and deemed international transactions of provisions of services remained the same. Thereafter, the AO passed the final assessment order u/s 143(3) r.w.s. 144C(13) of the Act at an income of INR 1,00,29,05,363/- by making addition on account of transfer pricing issue of INR 51,04,15,097/- and other two disallowances [u/s 80JJAA and 36(1)(va)] as proposed in the draft assessment order remained the same.
4. Against the said order, the assessee is in appeal before the Tribunal by taking various Grounds of appeal mentioned in the appeal memo. Thereafter vide letter dt. 04.12.2025, additional Ground of appeal was taken which reads as under:-
13. “On the facts and circumstances of the case and in law, the unutilized deduction available under Section 80JJAA of the Act to be allowed against the addition made under Section 92CA(3) of the Act if Proviso to Section 92C(4) applies only to deductions under Chapter VI-A computed on profits and gains, whereas deduction under Section 80JJAA is linked to additional employee cost and is not affected by the said proviso. Accordingly, the Appellant is entitled to claim such deduction against the enhanced income.”
4.1 Further vide letter dt. 16.01.2026, another additional Ground of appeal was taken which reads as under:-
14. “On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer has erred in not completing the assessment proceedings as per time limit prescribed u/s 153(1) read with section 153(4) of the Income Tax Act, 1961 (‘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 v. CIT [1998] 229 ITR 383 (SC)
6. On the other hand, ld. CIT DR for the Revenue though has not objected the admission of the additional Grounds of appeal however, stated that these grounds requires verification from the AO and therefore, sought direction to obtain the report from the AO.
7. On careful consideration of the facts and the issues raised in the additional grounds of appeal, it is observed that the additional grounds of appeal are purely legal in nature and the issues raised are verifiable from the Assessment order itself and thus no verification is required. Under these circumstances and in the larger interest of justice and by respectfully following the judgement of Hon’ble Supreme Court in the case of NTPC Ltd. (supra), we admit them for adjudication.
8. Grounds of appeal Nos. 1 & 2 raised by the assessee are with respect to the arithmetical error in the orders which as per the assessee has been rectified by the AO later by passing a separate order therefore, are not pressed and thus, dismissed.
9. Ground of appeal Nos. 3 to 3.2 and additional Ground of appeal No. 13 are with respect to the disallowance made u/s 80JJAA of the Act wherein assessee has challenged the disallowance on the merits and in additional Ground of appeal assessee has challenged the restriction of deduction upto gross total income computed without taking into consideration of addition made towards ALP adjustments u/s 92C of the Act.
10. As all the Grounds of appeal related to the deduction claimed u/s 80JJAA of the Act therefore, they are taken together for consideration and decided as under:
11. Before us, ld.AR for the assessee, submits that at the outset the issue of allowability of deduction u/s 80JJAA has already been decided in favour of assessee in terms of the order of the Co-ordinate Bench in assessee’s own case for AY 2020-21 wherein the Co-ordinate Bench has held that the assessee is eligible for deduction claimed u/s 80JJAA of the Act as employer and employee relationship existed between the assessee and its employees and all the conditions as provided in section 80JJAA for claiming the deduction are satisfied. It is thus, submitted that the issue being securely covered, deduction u/s 80JJAA of the Act should be allowed.
11.1 With regard to the additional Ground of appeal No.13, ld. AR submits that AO has restricted the deduction u/s 80JJAA of the Act upto the gross total income computed 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 adjustments made under this chapter. He thus stated that the claim of the assessee is contrary to the provisions of the Act and thus the lower authorities has rightly denied the same and he prayed accordingly.
13. Heard both the parties and after considering the overall discussions made herein above, it is observed that identical issue was came up for consideration before the Co-ordinate Bench in assessee’s own case for AY 2020-21 wherein the Co-ordinate Bench vide its order dated 25.09.2025 after considering the arguments of the both the parties has held that in the case of assessee, employer and employee relationship is existed between the assessee and employees and also satisfied all the conditions to claim deduction under the amended provisions of section 80JJAA of the Act and accordingly, allowed the said deduction to the assessee. The relevant observations as contained in para 13 to 25 of the order are reproduced as under:-
13. “We have heard the rival submissions and have perused the relevant material on record. A Co-joint reading of the terms of service agreements between the assessee and its customer and the fixed term employment contract between the assessee and its employees shows that the assessee, in its capacity of the employer of its employees, has the authority to deploy/assign employees for provision of services at its customer’s premises. Post assignment, the customer of the assessee, has the authority restricted only to supervise and instruct the work of the deployed employee. The customer cannot take any disciplinary action against the erring employee and can only seek replacement of such employees from the assessee. As per Service Contract, the supervision and control of the employees lies with the assessee company. Upon completion of the task at the customer’s premise or under any other circumstances, the employees return to the assessee, who may then reassign them to a different location or customer premise.
14. We find from the Service Contract and Service Agreement with the Customers that the customer supervision and instruction to the deputed employees is in relation to operations or work to be performed as per requirements of the customer. The assessee company has the supervision and control required to meet the test of employer-employee relationship. The assessee controls assignment of roles and responsibilities, 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 sub-section (1) shall be allowed,—
(a) if the business is formed by splitting up, or the reconstruction, of an existing business:
Provided that nothing contained in this clause shall apply in respect of a business which is formed as a result of re-establishment, reconstruction or revival by the assessee of the business in the circumstances and within the period specified in section 33B;
(b) if the business is acquired by the assessee by way of transfer from any other person or as a result of any business reorganisation;
(c) unless the assessee furnishes alongwith the return of income the report of the accountant, as defined in the Explanation to section 288 giving such particulars in the report as may be prescribed.
Explanation.—For the purposes of this section,—
| (i) | “additional employee cost” means the total emoluments paid or payable to additional employees employed during the previous year: |
Provided that in the case of an existing business, the additional employee cost shall be nil, if—
| (a) | there is no increase in the number of employees from the total number of employees employed as on the last day of the preceding year; |
| (b) | emoluments are paid otherwise than by an account payee cheque or account payee bank draft or by use of electronic clearing system through a bank account: Provided further that in the first year of a new business, emoluments paid or payable to employees employed during that previous year shall be deemed to be the additional employee cost; |
| (ii) | “additional employee” means an employee who has been employed during the previous year and whose employment has the effect of increasing the total number of employees employed by the employer as on the last day of the preceding year, but does not include— |
| (a) | an employee whose total emoluments are more than twenty-five thousand rupees per month; or |
| (b) | an employee for whom the entire contribution is paid by the Government under the Employees’ Pension Scheme notified in accordance with the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 or |
| (c) | an employee employed for a period of less than two hundred and forty days during the previous year; or |
| (d) | an employee who does not participate in the recognised provident fund: |
[Provided that in the case of an assessee who is engaged in the business of manufacturing of apparel, the provisions of sub-clause () 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 with an intent of encouraging employers to generate more employment opportunities. However, these provisions were meant for the manufacturing industry and its scope was limited to regular workman employed by industrial undertakings. Subsequently the provisions of Section 80JJAA of the Act were relaxed vide Finance Act 2016 to extend the scope of deduction to all taxpayers. Following relaxations were made in Sec. 80JJAA of the Act effective from AY 2017-18:
| a. | The deduction is not limited to the manufacturing activity, rather it is allowed to every assessee having profits and gains from business; |
| b. | The words ‘additional wages’ and ‘new regular workman’ has been replaced by ‘additional employee cost’ and ‘additional employee’; |
| c. | The earlier requirement of new workman in excess of 50 workmen is dispensed with. After the amendment, the deduction is allowable in respect of additional employee cost i.e., total emoluments paid to additional employees. |
| d. | The section before amendment specifically provided that a regular workman does not include: |
| i. | A casual workman or |
| ii. | A workman employed through contract labor or |
| iii. | Workman employed for a period of less than 300 days. |
| e. | After the amendment the term additional employees mean an employee employed during the previous year but does not include: |
| (i) | An employee employed for a period of less than 240 days, |
| (ii) | An employee who does not participate in the recognized Provident Fund. |
17. A comparative tabulation of the relevant provisions of the erstwhile Section 80JJAA and the provisions amended vide Finance Act 2016 is as under:
| Erstwhile Provision of Section 80JJAA (Before amendment vide Finance Act 2016) | Amended Provision of Section 80JJAA (After amendment vide Finance Act 2016 w.e.f. 01 April 2017) | |||||||||||||||||||||||||||||||||||||
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80JJAA. (1) Where the gross total income of an appellant includes any profits and gains derived from the manufacture of goods in a factory, 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 wages paid to the new regular workmen employed by the appellant in such factory, 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, the expressions,
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80JJAA. (1) Where the gross total income of an appellant to whom section 44AB applies, deludes any profits and aa. ins aerived from ausiness, there shall, subject to the conditions specified in sub-section (2), be atlowed a deduction of an amount enuol to thirty per cent of additional employee cost incurred in the course of such business in the previous year, for three nssessmrnt years including the assessment year relevant to the previous year in which such employment is provided.
Explanation. For pos purposes of this section, –
Provided that in the case of an existing business, the additional employee cost shall be nil, if
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iv. “factory” shall have the same meaning as assigned to it in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948).
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18. We find from the amended Sec. 80JJAA of the Act that there is no condition of ‘regular workman’, as construed by the AO, rather the section specifically provides for deduction in respect of employees employed for 240 days or more which indicates that the deduction is allowable in respect of fixed period employment. The thrust of the amended section is that the employee should participate in recognized provident fund. We further find that admittedly all these conditions are complied with in assessee’s case and the action of Assessing Officer in disallowing the deduction is based on considerations which were the requirements of erstwhile section before amendment.
19. We also find that the Assessing Officer view that the employer employee relationship does not exist between the assessee and the employees hired by the assessee is without any foundation. The AO has not correctly appreciated the terms of Service agreements 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 the nature of supervision, in which Air India was entitled to have an opinion or say in ensuring effective utilization of resources, monetary or otherwise. The said supervision is merely to ensure due maintenance of standards and quality in the said canteen. Thus, it was held that contractor’s workmen could not be said to be under effective and absolute control of Air India, as Air India merely had the control of supervision over the working of the contractor’s employee. |
| • | Hon’ble Supreme Court also referred to its earlier decision in the case of Haldia Refinery Canteen Emps. Union & others -vs.- M/s. Indian Oil Corporation Ltd. 2005 (5) SCC 51 wherein under similar circumstances it was held that the control exercised by the respondent management is to ensure that the canteen is run in an efficient manner, however, this does not mean that the employees working in the canteen have become the employees of the management. Relevant extracts of the order of Hon’ble Supreme Court are produced as under: |
“14. no doubt, the respondent management does exercise effective control over the contractor on certain matters in regard to the running of the canteen but such control is being exercised to ensure that the canteen is run in an efficient manner and to provide wholesome and healthy food to the workmen of the establishment. This however does not mean that the employees working in the canteen have become the employees of the management.
16. The management has kept with it the right to test, interview otherwise assess or determine the quality of the employees/workers with regard to their level of skills, knowledge, proficiency, capability etc. so as to ensure that the employees/workers are competent and qualified and suitable for efficient performance of the work covered under the contract. This control has been kept by the management to keep a check over the quality of service provided to its employees. It has nothing to do with either the appointment or taking disciplinary action or dismissal or removal from service of the workmen working in the canteen. Only because the management exercises such control does not mean that the employees working in the canteen are the employee of the management. Such supervisory control is being exercised by the management to ensure that the workers employed are well qualified and capable of rendering 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, whether the person was fully integrated into the employer’s concern or remained independent of it. Thus, where the contractor had the power to select, dismiss, pay remuneration, deduct insurance contributions, organize the work, and the establishment merely had the ‘control to supervise’ and not complete control, it was held that the contractor was the employer of the employees and not the establishment.
23. In the present factual matrix of the case in hand of the assessee, all the relevant criteria to establish the employer-employee relationship such as the right to appoint, pay remuneration, work schedule regulation, relocation, reassignment, disciplinary actions and termination is undertaken by the assessee. The assessee also fulfills obligations related to statutory withholdings, and social security contributions. Further, the administrative control over such employees is exercised by the assessee and it is merely the supervision and instruction, which is exercised by the customers in order to ensure that the work assigned is given effect to in an efficient manner. In fact, the assessee appoints a coordinator to facilitate supervision and instruction at the customer’s premises which further supports the assessee’s control over its deputed employees even in the customer’s premises.
24. We find from the Fixed term contract between the assessee and its employees, that there exists an employer-employee relationship where the assessee has the right to appoint, and decide the employees remuneration as well as regulate work schedule and take disciplinary/termination action. A perusal of the service contract between the assessee and its customer also demonstrate that contrary to the AO’s view, it provides for control and supervision of the deputed employees with the assessee. We have seen some of the Service agreements of the assessee with its customers like Ericsson India Pvt Ltd which in clause 7.3 and 7.5 of the agreement, provides that “The personnel deployed by the Resource Provider (MSPL) will work under the sole supervision and control of the Resource Provider, including the manner and method of carrying out the services. Similarly, the service agreement with DLF Ltd provides for at clause 1.1 as follows:
“The MPG will provide the services at the premises, by deputing / deploying at the premises, a reasonable 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 by the assessee. We also note that the Department accepted the claim of deduction u/s 80JJAA in the immediately preceding AY 2019-20 after due enquiry u/s 143(3). We therefore hold that the assessee satisfies all the eligibility criteria under amended section 80JJAA of the Act and the AO is directed to allow the deduction u/s 80JJAA. Ground 1 is allowed.”
14. The facts being identical and the allegation made by the AO as well ld. CIT(A) are similar qua the claim of the assessee where under identical circumstances, the Co-ordinate Bench has allowed the deduction u/s 80JJAA of the Act thus, by respectfully following the order of the coordinate bench stated supra in assessee’s own case for AY 2020-21, we hold that the assessee is eligible for deduction u/s 80JJAA of the Act. Accordingly, Ground of appeal Nos. 3 to 3.2 and additional Ground of appeal No.13 of the Assessee are allowed.
15. Regarding the Ground of appeal No. 3.3 for delay of one day in filing Form No.10DA for claiming the deduction u/s 80JJAA for the year under appeal, it is observed that Co-ordinate Bench in its order stated (supra) vide para 26 & 27 as condoned such delay and allowed the deduction. The relevant observations are as under:-
26. “Regarding technical Ground No. 2 the Assessing Officer found that the assessee has not filed Form No.10DA before the due date of filing of the return of income and there is delay of one day. The ld. counsel for the assessee submitted that A.Y 2020-21 was an exceptional year as it was plagued with Covid, hence the delay of only one day and, therefore, could not comply with the provisions of Section 80 JJAA of the Act.
27. We have heard the rival submissions and have perused the relevant material on record. The statutory extended due date of filing of return of income was 15 February 2021. Accordingly, as per the amended Section 80JJAA, filing of Form 10DA r.w. Rule 19AB of the Income Tax Rules, 1962 for AY 2020-21, was due to be filed by 15 January 2021.The appellant filed Form 10DA claiming deduction u/s 80JJAA on 16 January 2021 with a minor delay of 1 day. The reasons for this inadvertent delay is the Revision in timelines for filing of Form 10DA effective AY 2020-21 and the Global pandemic of Covid-19. The ld AR has relied on the Hon’ble Delhi Tribunal in the case of Shivalik Prints Ltd. (ITA No. 2296/Del/2017) which allowed admission 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. (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. (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 10DA. Ground 2 is allowed.”
16. The Ground of appeal No. 4 is with respect to the disallowance of claim of deduction allowable for three consecutive years i.e. for AYs 2019-20 to 202122. It was the claim of the assessee that in preceding two assessment years, deduction u/s 80JJAA of the Act had been allowed to the assessee therefore, no disallowance for the amount of deduction pertaining to these two assessment years could be disallowed. It is observed that the 30% of additional employee cost is allowable as deduction u/s 80JJAA of the Act for three consecutive assessment years. In other words, in addition to the deduction towards the 30% of the additional wages, the 30% additional wages paid in preceding Two assessment years is also eligible for deduction. The only restriction is that the same cannot be exceed the amount of gross total income. The assessee in the year under appeal has claimed deduction for three assessment years which is tabulated as below:-
| AY | Year of claim | Ded. u/s 80JJAA in (Rs.) |
| 2019-20 | 3rd Year | 64,81,198/- |
| 2020-21 | 2nd Year | 5,27,13,485/- |
| 2021-22 | 1st Year | 25,32,04,940/- |
| Total | 31,23,99,623/- | |
| Restricted to gross total income | 11,64,42,796/- | |
17. Similar issue was came up for consideration before the Co-ordinate bench in AY 20202-21 wherein the Co-ordinate Bench has allowed the claim and for the limited purposes of verification of the claim pertaining to 2nd year & 3rd year, the matter was remanded to the file of AO. Considering these facts and by respectfully following the judgement of Co-ordinate Bench in AY 2020-21, we direct the AO to verify the claim pertaining to 2nd and 3rd year and direct him to allow the same after verification. Thus, Ground of appeal No.4 raised by the assessee is allowed for statistical purposes.
18. Now coming to the additional Ground of appeal taken by the assessee wherein claim of the assessee was that the gross total income as computed after inclusion of adjustment made u/s 92CA of the Act should be taken for allowing the deduction under Chapter VI-A of the Act which includes the deduction u/s 80JJAA of the Act on account of additional employee cost.
18.1 Heard the contentions of both the parties and perused the material available on record. It was the claim of the assessee that deduction u/s 80JJAA of the Act claimed is linked to the expenses 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 recomputed by reason of such determination of arm’s length price in the case of the first mentioned enterprise. “
19. From the perusal of the first proviso to section 92C(4) of the Act, it is observed that statute has placed restriction for allowing any deduction under Chapter VI-A on the amount of the income by which the total income of the assessee is enhanced after computation of income under this, sub-section. In the instant case, the income of the assessee is enhanced by the AO on account of adjustments made in ALP as per section 92C of the Act and thereafter, deduction u/s 80JJAA is allowed to the assessee to the extent of total income excluding the adjustment made u/s 92C of the Act. We find no error in the orders of the lower authorities. The claim of the assessee is that section 80JJAA of the Act where deduction is on account of expenditure, cannot be accepted as in the proviso very specifically stated that “no deduction under Chapter 6A shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced.”
20. In the aforesaid proviso, there is no room to make other interpretation to claim deduction related to the expenditure. Since in the proviso, reference is made with respect to gross total income as enhanced by the income computed under Chapter X of the Act and therefore, we find no merits in the claim of the assessee. The judgments relied upon by the assessee are on the issue whether the deduction related to expenses can be allowed against income computed. However, in view of the express provisions as contained in section 92C(4) as reproduced herein above, we find no force in such arguments of the assessee. Our view is supported by the judgements of the Co-ordinate Bench in following cases:-
| [i] | Asstt. CIT v. Bechtel India (P.) Ltd. (Delhi – Trib.) ; |
| [ii] | Gate Global Solutions Ltd. v. Assistant CIT [2008] 24 SOT 3/[2007] 112 TTJ 1002 (Bangalore) (Banglore – Trib.) ; and |
| [iii] | Approva Systems (P.) Ltd. v. Dy. CIT (Pune – Trib.) |
20.1 The additional ground of appeal taken is thus, dismissed.
21. Ground of appeal No.5 raised by the assessee is also covered by our observations made herein above where we have allowed the deduction u/s 80JJAA to the assessee upto the extent of gross total income computed without giving including the addition made on account of TP adjustments. 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 Manpower Services India Pvt Ltd v. ACIT [S.A No. 371/Del/2024 and ITA No.3585/Del/2024, dated 25-9-2025] 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 directed to examine the comparables which are functionally similar and having segmental information, as proposed above, and arrive at a finding with regard to the Transfer Pricing adjustment to be made, if any, on this regard. The ground 5 is allowed for statistical purposes.”
24. Further, the aforesaid observations were modified in terms of the order passed in Manpower Services India Pvt. Ltd. v. Asstt. CIT [MA No.445/Del/2025 dated 11-02-2026] wherein para 4, the Co-ordinate Bench has further directed the AO to examine the issue of recharacterization and then decided whether the assessee falls within the scope of KPO considering the documentary evidences furnished by the assessee as well.
25. Since the issue in hand before us is identical, therefore, following the aforesaid order, we set aside the issue to the file of AO/TPO for fresh adjudication after considering the assessee’s comparables and also examined the issue of re-characterization with the same directions as made in AY 2020-21. Accordingly, Ground of appeal Nos.6 to 6.7 raised by the assessee are allowed for statistical purposes.
26. Ground of appeal No.7 to 7.4 of the assessee is with respect to the adjustment on account of intra-group charges. The assessee has availed intra group services which includes global information charges of INR 1,23,12,549/-; global insurance charges of INR 71,26,354/-; business promotion charges of INR 3,48,834/- and other charges of INR 1,29,98,853/-. As per AO/TPO, the breakup of other charges of INR 1,29,98,853/- was provided by the assessee and it was explained that these charges relates to services like legal, strategic, communication, marketing, sales and human resources. The TPO/AO observed that other charges include INR 30,78,361/- on account of ‘Salesforce Global Allocation’. The claim of the assessee was that the manpower group US provided services to develop manpower group portfolio branch undertaking marketing research, test and other surveys that provides comprehensive information as to changes needed to develop brand, creation of global social media framework etc. and for this purpose these expenses were incurred.
27. After considering the submissions of the assessee, the AO/TPO was of the opinion that by making market tangible both the assessee as well the manpower US received multi-benefits where manpower US not only commercially but also increase its global footprint by efforts of India 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 deleted.
28. 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 addition.
29. On careful consideration of the aforesaid discussion made herein above and facts and circumstances of the case, it is observed that the lower authorities have failed to appreciate the nature of intra group services obtained by the assessee for which detailed documentation was filed in the TP study report. Considering these facts, this issue is remitted back to the AO/TPO for fresh adjudication after considering the details filed by the assessee in its TPSR. Thus, Ground of appeal No.7 of the assessee is allowed for statistical purposes.
30. Ground of appeal No.8 to 8.4 of the assessee is with respect to the TP adjustment of INR 46,81,37,514/- by taking deemed international transactions services on sales attributable to GAP & GSS programmes.
31. The TPO/AO has observed that 15% of the assessee’s revenue generated from these programmes based on the global revenue generated from these programmes thus, by holding the same as deemed international transactions u/s 92B(2) and by using the mark up of 15% made the adjustment of INR 46,81,37,514/-.
32. Before us, ld.AR for the assessee submits that assessee is an independent legal entity and providing staff solutions to its customers for which the assessee enters into services contracts with Indian customers where the pricing and all other commercial terms are independently evaluated and initiated by the assessee as per its international policy and process. It is submitted that manpower group US operates certain global sales programmers such as GAP & GSS which programmes merely to facilitate group level cooperation and support for global account and had not centrally determined or contracting terms for local entities. As per ld. AR, before the AO/TPO assessee had submitted customer-wise details of the revenue, their copy of agreements and contemporaneous details etc. Ld.AR further submits that Revenue under GAP & GSS programmers includes the revenue from the customers like Apple India Pvt. Ltd, Samsung, Sony, Tata Consultancy Ltd. and there was no contrary material brought on record by the AO/TPO in support of the allegation that negotiations / control over these transactions were managed and controlled by the AEs and therefore, the statutory 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 of the Act and thus was forced to take 15% adhoc rate of markup for making the adjustment. Considering the overall facts and circumstances of the case, we are of the considered view that this issue needs thorough verification of the facts from the details furnished by the assessee thus we remit this issue back to the file of AO/TPO for re-consideration of the matter on the basis of the material and details provided by the assessee with respect to the revenue generated by using GAP & GSS programmers of its AE and decide the same in accordance with law. With these directions, Ground of appeal No.8 of the assessee is allowed for statistical purposes.
36. Ground of appeal No.9 of the assessee is with respect to the set off of brought forward MAT credit which is consequential in nature and thus, the AO is directed to allow the same on the income finally determined after giving effect to the order of Tribunal as per law.
37. Ground of appeal No.10 of the assessee is with respect to the levy of interest u/s 234B and 234D of the Act which are also consequential in nature.
38. Ground of appeal No.11 is with respect to the initiation of penalty u/s 271A (9) which are pre-mature at this stage thus, dismissed.
39. Now coming to additional Ground of appeal No. 14 of the assessee challenging the validity of the order passed on account of limitation as prescribed u/s 151(1) r.w.s. 153(4) of the Act.
40. During the course of hearing, this Ground of appeal was not pressed thus, the same is dismissed.
41. In additional Ground of appeal No.15, assessee has challenged the directions issued by ld. DRP directing the TPO for re-examination of the facts and evidences which was clear violation of section 144C(8) of the Act. Before us, this Ground of appeal was not pressed thus the same is dismissed.
42. In the result, appeal of the assessee is partly allowed.