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July 14, 2021

Income Tax Dep survey find tax evasion regarding wrongful claims of deduction u/s 80JJAA

by CA Shivam Jaiswal in Income Tax

Income Tax Department conducts surveys find tax evasion regarding wrongful claims of deduction u/s 80JJAA

What is deduction 80JJAA?

Section 80JJAA is a facility for claiming a deduction for the recruitment of new or additional employees. The section has been made available in the Income Tax Act to encourage employers to recruit fresh employees on a periodic basis. This deduction of the Income Tax Act can be claimed by all assessees for creating employment generation opportunities. Section 80JJAA deduction is aimed at generating employment in all sectors of the Indian economy.

What are the conditions to claim deduction u/s 80-JJAA ?

Section 80JJAA deduction can be claimed by taxpayers whose total income includes profit or gains from business. To be eligible to claim deduction under Section 80JJAA, the taxpayer must satisfy all of the following conditions:

  • The assessee must having Income from the Business Head and he is liable to get his accounts audited as per the requirement of section 44AB along with a report of a CA in Form 10DA.
  • It should be a new business. It should not be formed by splitting up or reconstruction of an existing business.
  • Business is not acquired by way of transfer from any other person or as a result of any business reorganisation.
  • Deduction should be claimed in the income tax return.

Income Tax Department conducts surveys in Bengaluru

Income Tax Department carried out a survey operation on 08.07.2021 on two business premises in Bengaluru on one of India’s leading manpower services provider. The assessee has been claiming huge deduction u/s 80JJAA of Income-tax Act, 1961 which incentivises new employment generation, subject to fulfilment of certain conditions such as emoluments paid to the employee (which should be less than Rs. 25,000 per month) and number of days of employment etc.

During the course of the survey operation, evidences of tax evasion have been gathered regarding wrongful claims of deduction u/s 80JJAA of Income-tax Act, 1961. The investigations further revealed, that, even though the emoluments of new employees added were more than Rs. 25,000 per month, the assessee has been wrongfully claiming deduction u/s 80JJAA by excluding certain components of emoluments of such employees to fit into the eligible emoluments limit of Rs. 25,000 per month.

Further, it has been found that deduction u/s 80JJAA has been claimed in subsequent years, even though certain eligible employees were no longer on the payroll of the assessee.

Overall, the survey has resulted in detection of concealment of income to the tune of Rs. 880 crore spread over various assessment years.

Further investigations are in progress.

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