Director's waived remuneration deemed taxable income despite waiver, court rules in favor of Revenue.

The court held that the director's remuneration, waived after accrual, was taxable income as per established legal principles. The waiver did not negate the tax liability of the accrued income, following the precedent set by the Supreme Court. The court ruled in favor of the Revenue, allowing them to recover costs.

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Issues:
1. Taxability of director's remuneration waived after accrual.

Analysis:
The case involved a director of a company who had waived his monthly remuneration after it had accrued. The company suffered losses, and the directors, including the assessee, waived their remuneration due to the financial situation. The Income Tax Officer (ITO) assessed the waived amount as income for the director. The assessee appealed, and the Appellate Assistant Commissioner (AAC) deleted the amount from the assessment, citing retrospective acceptance of the waiver by the company. The Revenue appealed to the Tribunal, which upheld the AAC's decision based on the Supreme Court precedent in CIT vs. Shoorji Vallabhdas & Co. The case raised the question of whether the waived remuneration was liable to be assessed for tax.

The Revenue argued that the income had accrued to the director month by month, regardless of the waiver, and pointed out a previous decision supporting this view. The assessee contended that the waived amount should not be taxed as it did not accrue to him. The court referred to a similar case, Kothandaraman vs. CIT, where the managing director's remuneration was waived retrospectively. The court held that if income had already accrued, a subsequent waiver would not affect its taxability, following the principle established by the Supreme Court in CIT vs. Shoorji Vallabhdas & Co. The court emphasized that the waiver only applied the income and did not negate its tax liability.

In light of the legal principles established by previous judgments, the court concluded that the director's remuneration, though waived after accrual, was rightly brought to tax by the ITO. The court answered the question in the negative, in favor of the Department, allowing them to recover costs.

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