Query Regarding Appointment Letter

Dear Seniors,
Have a query, we have an employee who is appointed at Manager level but is not on rolls. His payment is being done as professional fees.
We have hired an employee who reports to him.
We want to issue appointment letter to the employee can we use the Managers name ( whom we are paying professional fees) as his reporting head. His signature would also be required on the appointment letter.
Is it legally correct to do the above. Are there any negative implications if we useh is name.

Dear Amby,
You can use the name of the Manager who is working for your organisation but is not on your payroll but you cannot put his signature unless and until he is not been recognized as a authorized signatory by the board of directors of your organization or he has been given any intimation in writing from the management of company to sign letters.

What I understand is that you do not want to treat the manager as your employee,yet you want a permannet employee of yours to report to him. Irrespective whether or not you mention his name in the appointment letter of the employee reporting to him, you concede that the said manager in fact is your employee.
B.Saikumar
Mumbai

Your idea to treat a consultant as an employee by making his reporting officer and asking him to sign papers as if he is Manager could creat problem under Income tax law. The treatment of consultancy fee and salary is different, the first one is business income and he can deduct various expenses and pay tax on balance but this is not possible for salary. What is paid to a regular employee is salary. Now if you pay him consultancy fee but make him responsible as Manager and make other employee to report to him, that would mean evasion of tax on salaries. Better consjlt your IT consultant or CA, before such steps.