Directors' remuneration denied as "salaries" for tax deduction.

The High Court of Orissa considered the case of directors of a company claiming remuneration as "salaries" and seeking standard deduction under section 16(i) of the Income-tax Act, 1961. The Court found that the assessees did not prove the necessary relationship of employee and employer, concluding they were not entitled to the deduction under section 16(i) of the Act. Justice D. P. Mohapatra concurred with the decision.

---

---

Issues involved: Determination of whether the relationship between the assessees, who are directors of a company, and the company can be considered that of an employee and employer for the purpose of claiming deduction under section 16(i) of the Income-tax Act, 1961.

Summary:
The High Court of Orissa considered the case of directors of a company claiming remuneration as "salaries" and seeking standard deduction under section 16(i) of the Income-tax Act, 1961. The Income-tax Officer initially rejected the claim, but the Tribunal allowed it, leading to references by the Department. The Revenue argued that the assessees failed to establish the master and servant relationship required for the deduction. On the other hand, the assessees' counsel emphasized the company's memorandum of association and resolutions indicating remuneration for extra services by directors. The Court analyzed the articles and resolutions, citing the need to establish the employee-employer relationship as a fact. It referenced a Supreme Court case emphasizing the consideration of duties and agreements to determine employment status. The Court found that the assessees did not prove the necessary relationship, concluding they were not entitled to the deduction under section 16(i) of the Act.

In a separate opinion, Justice D. P. Mohapatra concurred with the decision.

---