Tax sops for current jobs: I-T dept’s interpretation of Portion 80JJAA of I-T Act leaves staffing corporations petrified

An interpretation by the earnings tax authorities that manpower corporations don’t allotment an “employer-employee” relationship with the folk they outsource, as a ground to disclaim tax benefits to a firm, has left the staffing services and products industry petrified.

The Bengaluru-basically basically based exclusively staffing firm has now filed an allure against the evaluation screech of the I-T department.

In a recent screech, disallowing deductions below Portion 80JJAA of the I-T Act, 1961, the authorities held that the manpower provider provider most productive had a compelled/correct “employer-employee relationship” because it complied with statutory deductions esteem PF, ESI, gratuity, etc., but did no longer command adjust over its workers.

Beneath Portion 80JJAA, on every current job added, a particular deduction is allowed on the employer’s earnings for computing tax, topic to fulfilling distinct stipulations. Staffing corporations, which add thousands of jobs within the salary brackets the regulation stipulates, are one amongst the mountainous beneficiaries of this provision.

Within the case of this staffing firm, the I-T authorities held that the “manpower hired/employed by the assessee firm” did no longer work for it, but for its customers.

This evaluation screech comes months after the I-T authorities implemented a evaluate on Quess Corp in reference to the firm’s claims below the identical provision.

Within the most contemporary case, the assessing officer has contended that the predominant reason of introducing the allotment became to generate employment. But on this case, the firm most productive offers manpower to its consumer to step into jobs created there, but would no longer originate jobs on its have.

An electronic mail sent to the earnings-tax authorities seeking comment did no longer elicit a response till press time Tuesday.

The interpretation strikes at the core of labour regulation regulations and how the staffing industry works, said the finance head at a manpower firm. “The tax authorities agree that the staffing corporations are correct employers when it involves statutory compliances. They are speaking of a various opinion known as economic employer when it involves deductions to disclaim the tax incentives,” he said.

“Such provisions within the regulation had been supposed to propel formal job creation at the entry level, thus encouraging the work done by outsourcing corporations on this regard will toughen formalisation and jobs with social safety schemes,” said Suchita Dutta, executive director at the Indian Staffing Federation in an electronic mail response to ET.

Currently, a desirable segment of the formal workforce addition has near from provider suppliers esteem the staffing corporations, she said, urging the authorities to lend a hand the sphere so that more folk would shift into the formal workforce. The federation represents 98 manpower corporations which together employ about 1.2 million folk.

The regulation presents for tax breaks to corporations for 3 years on every current job added with a month-to-month salary cap of Rs 25,000. The employee against whom the deduction is claimed, on the opposite hand, must calm have worked for no lower than 240 days in the course of the twelve months in that organisation.

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