COMMISSIONER OF INCOME TAX Vs. B P DALMIA

JUDGEMENT

(1.) By this reference under Section 256(1) at the instance of the Commissioner of Income-tax, West Bengal (VI), Calcutta, the Tribunal has sought for our opinion on the following question :

(2.) The matter arises out of the income-tax assessments of the assessee for the assessment years 1978-79, 1980-81 and 1981-82, respectively. The assessee has shown the director's remuneration under the head "Salaries" and claimed standard deduction under Section 16(1) of the Income-tax Act, 1961. The Income-tax Officer was of the opinion that the assessee, as managing director, enjoyed wide power and control on the affairs of the company and accordingly his position did not stand on par with that of other employees of the company and that the existence of any contractual relationship between the assessee and his employer could not also be established or proved. Therefore, the remuneration was assessed under the head "Other sources" and no standard deduction under Section 16(1) was allowed.

(3.) On appeal, the Appellate Assistant Commissioner, after referring to Clauses 68(a) and 49 of the articles of association of the company, observed that the assessee being the first managing director of the company had to act and discharge all the duties and powers vested in the board of directors and that, on a total reading of the memorandum and articles of association, it cannot be said that the employer-employee relationship existed between the assessee and the company of which he was the managing director. In that view, he upheld the action of the Income-tax Officer.