PRAMOD LAKRA DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -11(1), KOLKATA, KOLKATA vs. NIS MANAGEMENT LIMITED, KOLKATA

The Revenue is in appeal before the Tribunal raising the following grounds of appeal: I. ITA No. 188/KOL/2025, A.Y. 2012-13:

We shall first take up the appeal for the AY 2012-13. Brief facts of the case are that the assessee had e-filed the return of income showing total income of ₹3,75,96,580/- which was selected for scrutiny. The Assessing Officer (hereinafter referred to as Ld. 'AO') noted that the assessee had debited a sum of ₹61,86,72,133/- on account of ‘cost to contract labour’, the breakup of which is mentioned at page 2 of the assessment order. The assessee was required to provide further breakup of wages & salary of ₹53,40,46,838/- included in the expenditure of ₹61,86,72,133/- and justification for allowability of the expenses of ₹9,69,07,425/- on account of ‘other allowances’ being part of ‘cost to contract labour’. The assessee responded as under: I.T.A. Nos.: 188 & 189/KOL/2025 AYs: 2012-13 & 2013-14 NIS Management Limited. “We have considered wages/salary and other pay-out of our contractual employees in this head of expenses. They are regulated by Contract Labour Regulation & Abolition Act, 1970. As per the Act M/s NIS Management Private Limited is contractor and our client is their Principal employer. We have recruited them to engage in our client premises to provide service to our client as per service level agreement. We have raised bill to our client to reimburse their employment expenses e.g., salary & wages, bonus, leave, PF, ESIC etc. with our service charge as per agreement with the client.”

The Ld. AO did not find the explanation satisfactory and, therefore, disallowed a sum of ₹1,93,81,485/- being 20% of other allowances claimed at ₹9,69,07,425/-. Further, addition was made on account of employees' contribution to ESI & PF at ₹27,65,360/- and the total income was assessed at ₹5,97,43,420/- under the normal provision and ₹3,93,67,295/- u/s 115JB of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who deleted the disallowance of 20% made under the head ‘other allowances’ and upheld the addition of ₹19,32,477/- on account of delayed deposit of employees’ contribution to ESI & PF by relying upon the decision of Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. dated 12.10.2022 and the appeal was party allowed.

Aggrieved with the order of the Ld. CIT(A), the Revenue has filed the appeal before this Tribunal.

The only ground of appeal of the Revenue is regarding the deletion of addition of ₹1,93,81,485/- without any verification on the issue and relying upon the earlier appellate order in the case of the assessee for AY 2010-11. 7. The Ld. AR drew our attention to the sample pay slips showing breakup of salary/wages from pages 1 to 9 of the paper book filed, which details were also filed before the Ld. AO as well as before the Ld. CIT(A). I.T.A. Nos.: 188 & 189/KOL/2025 AYs: 2012-13 & 2013-14 NIS Management Limited. It was stated before the Ld. CIT(A) that the assessee is a domestic company and had provided security services, manpower supply services and cleaning services to its customers/clients all over India, especially in the eastern part of the country. The business was established in 1985 as a sole proprietorship by Mr. Debajit Choudhury, which expanded and was converted into a closely held Private Limited Company in 2006 with Mr. Debajit Choudhury and his wife Mrs. Rina Choudhury as shareholders. During the relevant assessment year, the appellant Company had above 12,000 employees. As per the agreement he was required to follow the corporate pay structure in which breakup of minimum wages, basis allowances, special allowances etc. are given. Our attention was drawn to the paper book being a letter for renewal of contract for providing Monitor Operator at Birla Building Ltd. in which salary details are mentioned at page 1 of the paper book for 8 hrs./26 days and on page 2 Other Allowances for 4 hours are mentioned at ₹2,252/- being 19.52% of the total and the service charges @ 7% are mentioned at ₹734/-, being 6.36% of the total with the monthly bill of ₹11,540/-. Similar renewal of contract/agreement for Bhagirathi Neotia Woman & Child Care Centre, Amalgamated Ben Coffee Trading Co. Ltd., Kolkata and Cox & King Ltd., Kolkata have been filed. it was submitted that since the assessee was following the corporate pay structure, there was no justification for making 20% disallowance out of the expenses claimed as has been done by the Ld. AO which has been rightly deleted by the Ld. CIT(A) by following the decision for AY 2010-11. The Ld. DR relied upon the order of the Ld. THE LD. AO and requested that the order of the Ld. CIT(A) may be upheld.

We have considered the submissions made and the evidences produced before us. The Ld. DR vehemently relied upon the order of the I.T.A. Nos.: 188 & 189/KOL/2025 AYs: 2012-13 & 2013-14 NIS Management Limited. Ld. Assessing Officer. However, it could not be established as to why 20% of the disallowance on account of revenue leakage should be upheld; therefore, the disallowance being made without any basis is hereby deleted and the appeal of the Revenue is dismissed.

As regards the appeal for AY 2013-14, since the facts and issues are similar, the finding for AY 2012-13 shall mutatis mutandis also apply to the appeal for AY 2013-14 and the appeal filed by the Revenue for A.Y. 2013-14 is also dismissed.

In the result, both the appeals for AY 2012-13 and AY 2013-14 filed by the Revenue are dismissed. Order pronounced in the open Court on 16th July, 2025. [Pradip Kumar Choubey] [Rakesh Mishra] Judicial Member Accountant Member Dated: 16.07.2025 Bidhan (Sr. P.S.) I.T.A. Nos.: 188 & 189/KOL/2025 AYs: 2012-13 & 2013-14 NIS Management Limited. Copy of the order forwarded to:

CIT-

CIT(DR), Kolkata Benches, Kolkata.

Guard File. //// By order