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TMI Blog2009 (12) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... r of employees who have worked for the clients. This bill contains the amount paid to the employees plus the assessee's service charges and service tax thereon. Hence in a way all the expenses incurred on salaries, wages and allowances by the assessee got reimbursed by his clients. The assessee filed his return for the assessment year 2006-07 on October 27, 2006 along with an audit report under section 44AB declaring an income of Rs. 38,80,071. The assessee paid wages to the persons employed to be placed at sites of clients were above Rs. 12.61 crores. The Assessing Officer noted that out of the above payments, salary paid in cash is Rs. 36,00,341 The assessee filed salary receipt register, bonus receipt register and attendance register. On examination of the above, the Assessing Officer noted that the attendance register has not been maintained on regular basis and have been prepared in one go. In the salary receipt register, the same person has signed differently in different months. The Assessing Officer cited four instances about the difference in signature. The assessee was asked to explain. The assessee filed his reply on December 22, 2008 explaining the details and the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. This is based on the attendance record by the clients. At the end of each month the assessee raises bills to his clients. This bill contains the amount paid to the employees plus the assessee's service charges and service tax thereon. Hence all the expenses incurred on salaries, wages and allowances by the assessee are reimbursed by the clients. The amount so billed to the clients is shown as business receipts in the profit and loss accounts of the assessee. In addition to the above the assessee has also employed certain number of employees at his own office to carry on his business activities as explained above. It was further contended that for all the employees, there is an attendance register. For the fact that the assessee is in the business of manpower supply, the employees are employed at various different sites including NCR region. These employees are required to report to their point of assigned duties. The attendance is being kept at the point of duty by the client of the assessee. This is the basic document based on which the assessee is issuing the invoices. All the attendance records are being kept but they are at the client's place and at the assessee's place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd provident fund contribution in respect of all the employees is being regularly paid to provident fund authorities and relevant statutory returns are being filed. He has observed in his order that it is common knowledge that wherever names of certain non-existing employees are entered in the records, in case where provident fund is applicable, provident fund is always shown to have been paid for these persons also, otherwise it amounts to a serious violation of the provident fund laws. Thus, the payment of provident fund in the name of a person is not a conclusive evidence that he is actually working for the assessee. The learned Commissioner of Income-tax (Appeals) considering the submission and evidence on record held that the cash payment of salary is only 2.86 percent of the total expenditure under the head "Salary and wages". The persons employed by the assessees are supplied to various clients who made the payment on the basis of the attendance register maintained by them. Thus for the staff employed by the clients, the assessee could not have received the payments. The bills are raised only on the basis of the attendance register maintained by the clients as also maintaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the attendance register is not maintained on regular basis but so far as it is revealing the true picture the same do not call for the disallowance of the entire wages paid in cash. Similarly the difference in signature has also been explained properly. The assessee is employing various persons but these persons could not attend the work place of the assessee as they are supposed to work at the clients' work place. The persons are required to report to clients' site and hence the salary was collected on behalf of the employees by the head of the group deputed in this behalf. This was required so as not to disturb the working schedule of these employees. The employees in respect of whom discrepancies were noticed were also produced before the Assessing Officer. The Assessing Officer has chosen to remain silent on the examination. This leads us to believe that no discrepancy is noticed on their examination. The disallowance is only in respect of cash paid but the reasons for payment of cash has also been explained and payment by cash itself do not call for any disallowance. We, therefore, not only uphold the deletion of disallowance by the Commissioner (Appeals) but also delete disal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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