Civil Procedure Code (CPC)

Manpower recruitment agency - business or profession - audit



Hello All, 

My name is Komal Thakkar - I am a Propreitor of a Recruitment Firm based in Mumbai. 


I started providing recruitments services to various recruitment firms in the year 2009 and that year 2009-10 my company's turnover was 25,00,000/- . That year i got a refund of 2,93,000 .


Next year i.e. 2010-11 my turnover was 35,00,000/- and in this year i have filed for refund to the tune of 3,53,000.

Next year i.e. 2011-12 my turnover was 49,00,000/- and in this year i am yet to file my returns.

Now in the first week of August i have received a notice from the Income Tax department under section 271B. for not auditing my books of accounts in the year 2010-11. 

I met the ITO and he is of the opinion that I should have audited my books since all my TDS has been deducted under 194J and thus i should have audited my books as a Professional.

My argument with the ITO has been as follows:-

1. I am hiring 12th pass or just graduates in my organisation as employees.

2. Our work is to line up candidates for clients where the final decision on the candidate is taken by the client. 

3. The 194J TDS deduction is because there is no other section under which the TDS is to be deducted. 

4. The list of professionals as highlighted by INCOME TAX DEPARTMENT does not include Manpower Recruitment Agents. 

5. "Issues of Tax Audit " ICAI Publication - 2003 edition clearly states that the Manpower Recruitment Agents are BUSINESS.

However the ITO is of the opinion that i should give him much more data to make my point. The submission should be very strong so that he can put it in front of the Joint Commissioner/ Commissioner.

My assistance Required:-

Can anyone please help me with some additional data which can help me strengthen my case. Would you be aware of any case law or case studies or books or reference material which can substiantiate the face that Manpower Recruitment Agents are BUSINESSES? Or can you share some detailed (5/6pages) of "WHAT IS BUSINESS" so that i can draw lines of the similiarities of "DEFINITION OF BUSINESS " and my organisation. 

Any assistance in this regard will be of lots of help to me. 

Thanks and Warm Regards, 


Komal Thakkar



1.   The receipt does not become one from 'profession' merely becausethe TDS was under S. 194J.

As held (see below) by the Delhi HC, the deduction has to be under S 194J if the service rendered is 'technical', as well.

S.194J: Deduction at sourceTechnical services Payments made by school to contractors for

training students in horse riding Liable to deduct at source.(S. 194J)

The assessee entered into a contract with Mustang Riding School to provide five horses for Rs.

10,000/‐ per horse per month along with qualified and experienced instructor to teach the children

horse riding. The school deducted the tax at source as per section 194C of the Income‐tax Act. The

Assessing Officer held that it was fee for professional or technical services to the assessee and

therefore, invoked section 194J. The order was up held by the Commissioner (Appeals) and

Tribunal. (A.Y. 2008‐09)    Lotus Valley Educational Society v. ACIT (2012) 13 ITR 61 (Delhi)(Trib.);

2. In your case there is no exercise of any professional knowledge.

Whether a particular activity can be classified as `business' or `profession' will depend on the facts and circumstances of each case. The expression "profession" involves the idea of an occupation requiring purely intellectual skill or manual skill controlled by the intellectual skill of the operator, as distinguished from an operation which is substantially the production or sale or arrangement for the production or sale, of commodities. - CIT Vs. Manmohan Das (Deceased) [1966] 59 ITR 699 (SC). 


The following have been listed out as professions in section 44AA and notified thereunder (Notifications No. SO-17(E) dated 12.1.77 and No.SO 2675 dated 25.9.1992):

  1. Accountancy
  2.  Architectural
  3. Authorised Representative
  4.  Company Secretary
  5.  Engineering
  6.  Film Artists/Actors, Cameraman, Director, Singer, Story-writer,etc.
  7.  Interior Decoration
  8.  Legal
  9.  Medical
  10.  Technical Consultancy

Therefore you have a strong case to argue that yours is a business and not profession.


Hi Rajagopalan Sir,

I have a little query/confusion, and I will be very much thankful to you for solving it.

Kindly let me know the recruitment consultant services/fees comes under the professional services/charges or brokerage/commission.

Also help me out to calculate the TDS for the amount Rs.9438, in the month of feb'2014.


Thanks and regards,








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