Independent delegated management does not make a body corporate a statutory manager under the Companies Act.

For section 384 of the Companies Act, 1956, a body corporate is a manager only if it controls the whole or substantially the whole of the company's affairs while remaining subject to the board's superintendence, control and direction. Where the arrangement shows independent delegated management rather than subordinate managerial control, the statutory definition is not satisfied, even if the agreement labels the party as a manager. On that construction, the remuneration paid under such an arrangement was not liable to disallowance as inadmissible business expenditure, and the assessee's later dispute over recovery did not affect deductibility.

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Issues: Whether Kamala Mills Ltd. was a manager of the assessee within the meaning of section 384 read with section 2(24) of the Companies Act, 1956, and whether the remuneration paid to it for the relevant years was liable to be disallowed as an inadmissible business expenditure.

Analysis: The agreement between the parties showed that the company's powers were structured so that Kamala Mills Ltd. exercised the delegated functions independently and was not subject to the superintendence, control and direction of the assessee's board of directors. The definition of manager under the Companies Act, 1956 required such subordination, whereas the agreement was closer to the concept of a managing agent or financier arrangement. The description of Kamala Mills Ltd. as manager in the agreement was not decisive. On that construction, section 384 was not attracted. The objection based on the assessee's later dispute regarding recovery of the remuneration did not affect the deductibility question.

Conclusion: Kamala Mills Ltd. was not the manager of the assessee within the meaning of section 384 read with section 2(24) of the Companies Act, 1956, and the disallowance of the expenditure could not be sustained. The question was answered in the negative, in favour of the assessee and against the revenue.

Ratio Decidendi: For the purpose of section 384 of the Companies Act, 1956, a body corporate is a manager only if it has the management of the whole or substantially the whole of the company's affairs while remaining subject to the board's superintendence, control and direction; an independent delegated management arrangement does not satisfy that definition.

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