Salary accrues monthly under a contract of service; a later board resolution cannot defeat taxability after accrual.

Monthly remuneration credited to a managing director under a contract of service is salary assessable under section 7 because the director remained subject to the board's superintendence, direction and control. The salary accrued from month to month when the books recorded the monthly credits, and a later board resolution passed after the accounting period could not extinguish the contractual right to that accrued remuneration. The doctrine of real income and commercial expediency, which may be relevant to business income, was treated as inapplicable to salary taxable on accrual. A post-accrual waiver or denial therefore did not affect the taxability of income already earned.

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Issues: Whether the monthly remuneration credited to the managing director for the relevant nine months was salary assessable under section 7, and whether the subsequent board resolution prevented accrual of that salary for income-tax purposes.

Analysis: The managing director's powers under the agreement remained subject to the superintendence, direction and control of the board of directors, showing a contract of service and therefore an employer-employee relationship. The remuneration payable monthly under the agreement was salary, and the monthly credit entries in the company's books represented accrual from month to month. The board resolution passed after the accounting period did not alter the contractual right to remuneration for the period already elapsed. The doctrine of real income and the principle of commercial expediency, relied on in cases concerning business income, were held inapplicable to salary taxable under section 7. A post-accrual waiver or denial could not affect the taxability of income already accrued.

Conclusion: The remuneration was salary assessable under section 7, and the amount remained taxable notwithstanding the later resolution.

Ratio Decidendi: Salary accruing under a contract of service is taxable when it accrues, and a subsequent resolution or waiver after the accounting period cannot defeat that accrual for the purpose of section 7.

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