Double taxation exemption for director's remuneration turns on actual deduction treatment, not on whether a claim was first made.

A tax exemption framed to prevent double taxation applies where director's remuneration was included in the company's business profits and was not allowed as a deduction, even if the company never claimed that deduction. The notification's plain language required only that the sum had not been allowed as a deduction; it did not add a further condition that a deduction claim must first have been made and rejected. The practical effect was that the same income could not be taxed again in the directors' hands merely because the company had not sought deduction treatment.

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Issues: (i) Whether director's remuneration paid out of profits and not allowed as a deduction in the company's assessment was exempt from tax under the notification issued under the income-tax law. (ii) Whether the assessee could claim the exemption only if the company had made and had disallowed a deduction claim for the same amount.

Issue (i): Whether director's remuneration paid out of profits and not allowed as a deduction in the company's assessment was exempt from tax under the notification issued under the income-tax law.

Analysis: The notification was framed to prevent double taxation of the same receipt in the hands of both the company and the recipient director. Its language required only that the sum should not have been allowed as a deduction and should have been included in the business profits assessed to tax. The wording did not require that the company must first have claimed the deduction and that such claim must have been expressly refused.

Conclusion: The remuneration was exempt and the answer was in favour of the assessee.

Issue (ii): Whether the assessee could claim the exemption only if the company had made and had disallowed a deduction claim for the same amount.

Analysis: The condition suggested by the revenue had no support in the language of the notification. The expression used was "have not been allowed as a deduction", not "have been claimed and not allowed as a deduction". Therefore, the benefit could not be denied merely because the company had not made a deduction claim.

Conclusion: A prior deduction claim by the company was not a necessary condition, and this issue was also decided in favour of the assessee.

Final Conclusion: The exemption applied on the basis of the actual tax treatment of the amount in the company's assessment, and the appeals succeeded because the same income could not be taxed again in the directors' hands.

Ratio Decidendi: Where a taxing exemption is framed to prevent double taxation, the court must give effect to its plain language; if the provision requires only that an amount has not been allowed as a deduction, the benefit cannot be denied on the additional ground that the deduction was never claimed.

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