LAKSHMIPAT SINGHANIA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question raised in this reference relates to the situs of accrual of income being remuneration paid to a director of a company limited by shares.

(2.) THE assessee was one of the six directors of M/s. Straw Products Ltd. (hereafter referred to as the company). THE company was registered in Bhopal where the manufacturing operations were carried on. At all material times, Bhopal was an Indian State to which the Indian Income-tax Act, 1922, as it then stood (hereafter referred to as the Act), did not apply.

(3.) IN the assessments for the accounting years 1942-43 to 1948-49 the assessee claimed thit the director's remuneration received by the assessee during the relevant periods had accrued in Bhopal which was an INdian State, and, therefore, it was exempt under Section 14(2)(c) of the Act. The INcome-tax Officer, however, did not accept the claim. He noted that in the relevant years the affairs of the company were managed and controlled by the directors entirely from Cawnpore, and he held that, as the assessee was a resident in British INdia, the remuneration paid to him for his services were assessable to INdian INcome-tax.