TaxTMI 
TaxTMI 
2024 (1) TMI 935
X X X X Extracts X X X X
X X X X Extracts X X X X
....Tax Act, 1961 as "Salaries". 3. The department has erred in interpreting the word „remuneration‟ which is paid by the appellant to its Directors in a literally meaning. The amount being paid by the appellant to its Directors is nothing but a salary for all practical purposes. It has also been contended that it is pertinent to note that TDS on such salaries received by various employees including its Directors has duly been deducted and the same is being regularly deposited with the Income Tax department. The learned Advocate has mentioned that the matter has been decided in catena of judgments where it has been held that the remuneration paid to the Directors is nothing but a salary. The Directors which are appointed as per the statutory requirements are employees of the Company. The learned Advocate has relied upon the decision of this Tribunal in the case of Allied Blenders and Distillers Pvt. Limited vs. CCE & ST, Aurangabad reported in - 2019 (24) GSTL 207 (Tri. Mumbai.) and Rent Works India Pvt. Limited vs. CCE, Mumbai reported in 2016 (43) STR 634 (Tri. Mumbai). 4. Learned Advocate has also drawn our attention to this bench‟s decision vide Final Order ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ves Pvt. Limited vs. UOI wherein the following directions have been given by the Hon‟ble High Court:- "In the instant case also, we notice that the approach of the Tribunal is to abdicate its duty of deciding the matter on the merits or to retain the matter till the outcome of the pending matter before the apex court. This approach of tribunal is not proper. We deem it appropriate to direct the tribunal to decide the matter on merits. We further reserve liberty to the parties to raise all contentions as raised by both the sides before this Court. Let the same be decided without further loss of time." 6. The matter has been heard in detail. We find that the short issue involved in the present appeals is that whether the remuneration paid to the Directors by the appellant is chargeable to service tax under reverse charge basis or not. We find that the matter is no longer res-integra as the same has already been decided by this Tribunal. The Kolkata Bench of this Tribunal, in the case of Bengal Beverages Pvt. Limited vs. CGST & Excise, Howrah reported in 2020 (11) TMI 622- CESTAT Kolkata has passed the following order:- "8. In the instant case, the only disp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....larly in the case of Allied Blenders and Distillers Pvt. Limited vs. CCE&ST, Aurangabad reported at 2019 (24) GSTL 207 (Tri. Mumbai), the Mumbai Bench of this Tribunal passed the following order:- "5. The short issue involved in the present appeal for determination is whether remuneration paid to the Directors by the appellant is chargeable to Service Tax and the appellants are required to discharge Service Tax under reverse charge mechanism in accordance with Notifications No. 45/2012-S.T., dated 7-8-2012 and 46/2012-S.T., dated 7-8-2012. Revenue's allegation is that the Directors namely, Shri K.R. Chhabria, Shri U.K. Ganguli, Shri Deepak Roy and Shri Jitendra Hemdev, who were paid remuneration during the period July, 2012 to March, 2015 amounting to Rs. 1,01,02,55,057/- by the appellant, Service Tax of Rs. 12,48,67,525/- was required to be discharged by the appellant. Opposing the said contention of the Revenue, the appellant has argued that the amount paid to the said Directors are in the nature of the salary paid to them, since the said Directors are whole time directors and employees of the company, accordingly, it is not a 'service' within the definition of 'service'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irector" means a director who, 2(54) by virtue of the articles of a company or an agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of the managing director, by whatever name called. "whole-time Director" includes a Director 2(94) in the whole time employment of the company;" "Executive Director" means a whole time director as defined in clause (94) of Section 2 of the Act. In the present case, the Board of Directors (BOD) are empowered to appoint under clause 93 of the Articles of Association, Managing Director and Whole-time Director with such conditions as may deem fit. It reads as follows : - 93. Managing Director/Whole-time Director/Manager. - Subject to provisions of the Act, the Rules framed thereunder and the approval of the Promoter(s), the Board may from time to time, appoint Managing Director/Whole-time Director/Manager for one or more of the divisions of the business carried on by the Company and to enter into agreement with him in such terms and condition....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'ble Supreme Court was whether the 10% gross profit payable to the assessee under the terms of the agreement appointing him as the managing director is liable to be assessed as 'salary' or under the head 'income from business'. The contention of the assessee in that case was that in order to assess the income as salary it must be held that there was a relation of master and servant between the company and the assessee. It was pleaded that for such a relationship to exist, it must be shown that the employee must be subject to the supervision and control of the employer in respect of the work the employee has to do. Where, however, there is no such supervision or control it will be a relationship of principal and agent or an independent contractor. Their Lordships analyzing the characteristics of master-servant relationship observed as : "6. There is no doubt that for ascertaining whether a person is a servant or an agent, a rough and ready test is, whether, under the terms of his employment, the employer exercises a supervisory control in respect of the work entrusted to him. A servant acts under the direct control and supervision of his master. An agent, on the other hand,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ork which he can do as an agent or manager of the company can be done on terms and conditions and on such remuneration as can be agreed upon between him and the Directors of the Company and under the latter he had to execute the decisions that may be arrived at by the Board from time to time. The very fact that apart from his being a Managing Director he is given the liberty to work for the company as an agent is indicative of his employment as a Managing Director not 'being that of an agent. Several of the clauses of Article 140 as pointed out by the High Court specifically empower the Board of Directors to exercise control over the Managing Director, such, for instance to accept the title of the property to be sold by the company, providing for the welfare of the employees, the power to appoint attorneys as the Directors think fit, etc. As pointed out earlier under the terms of the agreement he can be removed within the period of 20 years for not discharging the work diligently or if he is found not to be acting in the interest of the company as Managing Director. These terms are inconsistent with the plea that he is an agent of the company and not a servant. The control which th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....929, submitted that merely on deduction of Income Tax at source cannot be considered that the Director and the Company has employer and employee relationship. It is the agreement between the employer i.e. company and the Director would reveal the exact relationship between them. In the present case, no such agreement exists between the employer and the Directors, hence there exists no employer-employee relationship. 15. We do not find merit in the argument of the Revenue inasmuch as during the course of investigation, the statement of Shri Atit Dalai, Vice President (Finance & Accounts) of the appellant company was recorded by the investigating officers on 4-6-2015. Answering the question No. 3. Mr. Dalal informed that there were four directors in the company and they were appointed in accordance with the provisions of Companies Act and Regulation of Article of Association of Company for managing day-to-day affairs of the company. Further answering to question No. 4, he has stated that the company are paying them remuneration which is nothing but salary. All the necessaiy deductions on account of Provident Fund, Professional Tax and TDS under Section 192 of the Income Tax ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent(s) Mr. K. Radhakrishnan, Sr. Adv. Ms. Nisha Bagchi, Adv. Ms. Sunita Rani Singh, Adv. Hr. B. Krishna Prasad, AOR UPON hearing the counsel the court made the following ORDER.. List the matters for final disposal on a non- miscellaneous day in the month of January-2019. (POOJA ARORA) COURT MASTER (ASHA SONI) ASSISTANT REGISTRAR Document 2 ABD Allied Blenders & Distillers CERTIFIED TRUE COPY OF THE RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS OF THE COMPANY HELD ON 15TH JULY, 2009 AT MUMBAI. REVISION IN REMUNERATION PAYABLE TO MR. K.R. CHHABRIA - CHAIRMAN OF THE COMPANY. The Secretary placed before the Board the statement of salary details giving the present salary and the proposed salary payable to Mt K. R. Chhabria with effect from 1.4.2009. The present salary is Rs. 4,36,71,200/- per annum and the proposed salary is Rs. 4,67,28,248/- per annum thereby there is a net increase of 7% on the present CTC. The board discussed the same and thereafter the following resolution was unanimously passed :- "RESOLVED THAT the increase in remuneration payable to Mr. K. R. Chhabria from Rs. 4,36,71,200/- per an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed before the Board the statement of salary details giving the present salary and the proposed salary payable to Mit K. R. Chhabria with effect from 1.4.2009. The present salary is Rs. 4,36,71,200/- per annum and the proposed salary is Rs. 4,67,28,248/- per annum thereby there is a net increase of 7% on the present CTC. The board discussed the same and thereafter the following resolution was unanimously passed :- "RESOLVED THAT the increase in remuneration payable to Mr. K. R. Chhabria from Rs. 4,36,71,200/- per annum to Rs. 4,67,28,248/- per annum i.e. 7% on the present CTC be and is hereby approved as per details given below:- Particulars Present Present Salary Per Proposed Salary Per Annum. Proposed Salary Per Annum Month Salary Per Month TOTAL EARNINGS Basic 2000000 24000000 2089200 25070400 HRA 235000 2820000 286000 3432000 Special Pay 146000 1752000 238700 2864400 LTA 250000 3000000 261150 3133800 Total (A) 2631000 31572000 2875050 34500600 OTHER BENEFITS Gas & Electricity 25000 300000 25000 300000 Residential Telephone & Mobile 60000....