Section 80JJAA

Section 80JJAA — the law in short

What the courts have decided on section 80JJAA, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Hexaware Technologies Ltd v ACIT High CourtHelps taxpayerPartly overruled — read this first
  Your s.148 notice came from your own local officer, not from the faceless unit. Does that matter?
  In Bombay, yes. After the CBDT scheme notified under s.151A on 29 March 2022, only a Faceless Assessing Officer acting through automated allocation can issue a reassessment notice. There is no concurrent jurisdiction, and a notice from the jurisdictional officer was quashed.
• 360 One Distribution Services Ltd v DCIT — s.80A(5) kills a s.80JJAA claim first made before the Commissioner (Appeals) ITATHelps departmentNo later treatment found
  We missed the s.80JJAA claim in the return and raised it for the first time in appeal, with the Form 10DA report in hand. Can the Commissioner (Appeals) or the Tribunal still allow it?
  No. The Mumbai Tribunal held that s.80A(5) disentitles an assessee from claiming a deduction under s.80JJAA where the claim was not made in the return of income, and that this disposes of the matter without going into any other aspect. It was no answer that the chartered accountant's Form 10DA had been issued, because the Tribunal found nothing on record that prevented the assessee from raising the claim and filing Form 10DA before the Assessing Officer during the scrutiny proceedings, which ran on until the assessment order was passed. The appeal was dismissed.
• ManpowerGroup Services India v ACIT — staffing company's deputed employees qualify for s.80JJAA, and a one-day Form 10DA delay was condoned ITATHelps taxpayer
  My client is a staffing company. The Assessing Officer says the people it hires and deputes to clients are not its employees, and separately that Form 10DA was a day late. Both grounds together have killed the whole s.80JJAA claim.
  The Delhi Tribunal held for the assessee on both grounds for AY 2020-21. On the substantive point it held that the assessee is the employer of the personnel it employs and deputes, and that the employer-employee relationship is not to be intertwined with the service arrangement that gives the customer a mechanical and temporary right to supervise the work; it therefore held the assessee satisfies all the eligibility criteria under the amended s.80JJAA and directed the Assessing Officer to allow the deduction. On the procedural point it condoned a one-day delay in filing Form 10DA, which was due on 15 January 2021 against the extended return due date of 15 February 2021 and was filed on 16 January 2021. The claim spanning the first, second and third years was remitted to the Assessing Officer to verify the second and third year components.
• Statutory position — s.80CCD(1B) and s.80CCD(2): the fifty-thousand NPS deduction that does NOT survive s.115BAC(1A), the employer contribution that does, and the fourteen per cent proviso inserted by Act No. 15 of 2024 CBDT Circulars & InstructionsCuts both ways
  My client is in the default regime under s.115BAC. Can he still claim the extra fifty thousand for NPS, and what is the ceiling on his employer's NPS contribution now?
  No on the first, better news on the second. Section 115BAC(2)(i) computes the total income of a person taxed under s.115BAC(1A) without any deduction under Chapter VI-A other than sub-section (2) of section 80CCD, sub-section (2) of section 80CCH and section 80JJAA — so the additional Rs. 50,000 deduction under s.80CCD(1B) is not available in the default regime, while the employer's contribution deduction under s.80CCD(2) is. On the ceiling: s.80CCD(2) allows fourteen per cent of salary where the contribution is made by the Central Government or a State Government and ten per cent where it is made by any other employer, but a proviso inserted by Act No. 15 of 2024 with effect from 1 April 2025 provides that where the total income is chargeable to tax under s.115BAC(1A), sub-section (2) has effect as if for the words "ten per cent" in clause (b) the words "fourteen per cent" had been substituted.
• Statutory position — s.115BAE: the 15 per cent regime for new manufacturing co-operative societies, and the absence of case law CBDT Circulars & InstructionsCuts both waysNo later treatment found
  A new manufacturing co-operative society wants the 15 per cent rate. What does s.115BAE require, and is there any decided case on it?
  Section 115BAE, inserted by the Finance Act 2023 with effect from 1 April 2024, taxes a resident co-operative society at 15 per cent from AY 2024-25 if it was set up and registered on or after 1 April 2023 and commenced manufacturing or production of an article or thing on or before 31 March 2024, and if the other conditions in sub-section (2) are met. No judicial decision on the section is recorded — no High Court, Tribunal or Supreme Court authority on s.115BAE — and this entry states the statute, not case law.
• Statutory position — s.80JJAA: thirty per cent of additional employee cost for three years, and every condition that defeats it CBDT Circulars & InstructionsCuts both ways
  My client wants to claim s.80JJAA for new hires. What exactly is the deduction, and which conditions actually cause claims to fail?
  Section 80JJAA gives an assessee to whom s.44AB applies, whose gross total income includes profits and gains derived from business, a deduction of thirty per cent of the additional employee cost incurred in the course of that business in the previous year, for three assessment years including the assessment year relevant to the previous year in which the employment is provided. The conditions that defeat claims in practice are in the Explanation, not in the operative sub-section: an employee earning more than twenty-five thousand rupees a month is not an "additional employee", nor is one employed for less than two hundred and forty days in the previous year (one hundred and fifty days for a manufacturer of apparel, footwear or leather products), nor one who does not participate in a recognised provident fund, nor one whose entire Employees' Pension Scheme contribution is paid by the Government. And the additional employee cost is nil for an existing business if there is no increase in the total number of employees over the last day of the preceding year, or if the emoluments are paid otherwise than by account payee cheque, account payee bank draft, electronic clearing system through a bank account, or such other prescribed electronic mode.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.