Refund of excess managerial remuneration was not taxable as salary income when returned to comply with company law limits.

Excess managerial remuneration refunded to align with limits under the Companies Act, 1956 was treated as a statutory compliance adjustment rather than voluntary salary income. The appellate findings noted that the company had suffered losses and that the amount paid above the permissible ceiling was returned because the payment exceeded the legal limits for managerial remuneration. On that basis, the refunded amount was not treated as salary income under Section 15 of the Income-tax Act, 1961 and was not taxable in the recipient's hands.

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Issues: Whether the refund of excess managerial remuneration of Rs. 10,17,112 was taxable as salary income under the Income-tax Act, 1961.

Analysis: The refund was made because the company had suffered losses and the remuneration already paid exceeded the limits prescribed under the Companies Act, 1956. The factual findings recorded by the appellate authorities showed that the refund was not voluntary and was made to comply with the statutory restrictions governing managerial remuneration under the Companies Act, 1956. On that basis, the amount originally received beyond the permissible limits was not treated as salary income liable to tax under Section 15 of the Income-tax Act, 1961.

Conclusion: The refund was not assessable as salary income and was not taxable in the hands of the assessee.

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