Director remuneration not treated as salary where no employer-employee relationship existed, defeating deduction claim under income-tax law.

A director's remuneration was examined to see whether it amounted to salary creating an employer-employee relationship and supporting deduction under section 16(i) of the Income-tax Act, 1961. The Orissa HC applied its earlier ruling on identical articles of association and found that the director was not in an employment relationship with the company. As no employer-employee relationship existed, the claim for deduction under section 16(i) failed, and the reference was answered in favour of the Revenue.

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Issues: Whether the remuneration received by a director of a company constituted salary so as to establish an employer-employee relationship and entitle her to deduction under section 16(i) of the Income-tax Act, 1961.

Analysis: The question referred stood covered by an earlier decision of the same court on identical clauses of the articles of association. On that reasoning, the relationship of employee and employer was held to be absent and the claim to deduction under section 16(i) could not be sustained.

Conclusion: The assessee was not entitled to deduction under section 16(i) of the Income-tax Act, 1961, and the answer to the reference was in favour of the Revenue.

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