Director's remuneration accrues where services are performed, so exemption failed when duties were rendered in British India.

Director's remuneration accrues where the services giving rise to it are actually rendered, not where the company is registered, keeps its books, or earns its profits. On the finding that the assessee substantially performed his directoral duties from Kanpur in British India, the income arose in British India and not in Bhopal. The remuneration therefore did not qualify for exemption under section 14(2)(c) of the Indian Income-tax Act, 1922, and the exemption was unavailable.

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Issues: Whether the assessee's remuneration as a director of a company registered in Bhopal accrued or arose within the Indian State of Bhopal so as to attract exemption under section 14(2)(c) of the Indian Income-tax Act, 1922.

Analysis: The remuneration was held to be payable for services rendered by the directors in the management and supervision of the company, and the place of accrual depended on the place where those services were performed. The finding of fact was that the assessee performed his directoral duties substantially from Kanpur in British India, notwithstanding that the company was registered in Bhopal and the remuneration was credited in the company's books there. The articles of association fixing remuneration by reference to profits did not alter the source or situs of accrual. The principle applicable was that income by way of remuneration accrues where the services giving rise to it are actually rendered, not where the company earns its profits or maintains its books.

Conclusion: The remuneration accrued or arose in British India and not in Bhopal, so section 14(2)(c) of the Indian Income-tax Act, 1922 was not attracted. The answer was against the assessee.

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