Director's remuneration remains such despite managerial functions unless statutory whole-time conditions are satisfied.

Remuneration paid to a governing director under the articles, by reason of his office, was treated as director's remuneration and not as payment under a separate managerial contract. The governing director did not hold distinct offices of director and manager, and the arrangement did not amount to managerial employment under a contract of service. Functions resembling those of a manager did not change the character of the payment. The Rule 7(2)(a) exception applied only where the statutory conditions were met, including substantially whole-time service in a managerial or technical capacity. The remuneration was therefore not deductible in computing excess profits tax.

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Issues: Whether the remuneration paid to the governing director was director's remuneration within Schedule I, Rule 7(1) read with Rule 7(2)(a) of the Excess Profits Tax Act, or remuneration paid in the capacity of a manager.

Analysis: The remuneration was payable to the governing director under the articles by reason of his office as governing director. The governing director did not hold two separate offices of director and manager, and the arrangement did not create a managerial employment under a contract of service. A person entrusted with managerial functions because of the office of director may still receive director's remuneration, and the payment does not cease to be such merely because the functions resemble those ordinarily performed by a manager. The exception in Rule 7(2)(a) applies only where the director is required to devote substantially the whole of his time in a managerial or technical capacity and the statutory conditions are satisfied.

Conclusion: The remuneration was director's remuneration and was not deductible in computing profits for excess profits tax purposes; the reference was answered against the assessee.

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