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TMI Blog1984 (11) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, it would appear that there was no delay on the part of the assessee who appears to have handed over the necessary papers in this regard to the counsel in time and the delay that ensued thereafter, was due to a mistaken impression on the part of the counsel. We, therefore, condone the delay and admit the appeal. The facts in this regard are briefly as under : 3. The assessee was the managing director of Commercial Explosives (India) Ltd. By a resolution dated 23-7-1979, the Board of Directors requisitioned his services in a professional capacity for designing and making improvements in the machinery for manufacture of safety fuses and gun powder blending and packing. For these technical services, he was to be paid a fee of Rs. 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies Act, 1956, no director of a company shall hold any office or place of profit except with the consent of the company accorded by a special resolution. In the present case, though there was a resolution of the Board of Directors, dated 23-7-1979, the same was ratified, approving the payment of professional fees amounting to Rs. 12,500 to Shri Sanyal only at the annual general meeting held on 17-5-1980, after the death of Shri Sanyal on 15-10-1979. Since a director could not hold an office or place of profit except under a special resolution of the company and the special resolution in this behalf was ratified only on 17-5-1980 by the annual general meeting, after the death of Shri Sanyal, it was contended, that the amount payable ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year ended December 1979 itself. He also held that as far as the assessee was concerned, the stipulated amount was payable to him for services already rendered by him during his lifetime and, therefore, the accrual of the income in respect thereof could not be held in abeyance beyond the period of the performance of the services under the resolution. He, accordingly, upheld the inclusion of the professional fees in the assessment for the year 1980-81, on the ground that it had accrued during the previous year. 6. Aggrieved with the same, the assessee is in appeal before us. The submissions made in this behalf by the learned representative for the assessee may be summarised as under : Under section 314(1)(a), a director cannot hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccrued prior to that date. Since the income held accrued after the death of Shri Sanyal, it was includible only in the subsequent proceedings. 7. The submission made by the learned departmental representative may be summarised hereunder. The services, for which the remuneration was payable by virtue of the Board's resolution dated 23-7-1979, were rendered by Shri Sanyal to the company before his death. The remuneration, even though ratified by the general meeting held on 17-5-1980, was for the services rendered by Shri Sanyal during his lifetime. Section 314 does not apply to managing directors as the managing director or manager has been excluded from its operation. Section 314(1)(a) has application only to director. Since the word ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for the services rendered by Shri Sanyal accrued to him immediately after the completion of the services that is, during the year ended 15-10-1979, being the previous year for the assessment year under consideration. As argued on behalf of the revenue, section 314 has no application to a managing director. The commentary at page 687 extracted from Ramaiya's book makes it clear, that the prohibition under this section does not hit the managing director. There is no authority for the proposition that the professional services rendered by Shri Sanyal were rendered by him in his capacity other than that of the managing director. The Board's resolution, dated 23-7-1979, authorised Shri Sanyal to render the services in respect of which a fee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (3) of section 314, any office or place of profit will obviously include only selling and buying agents, receiving commission and/or salary. In the present case, the services, for which the payment was sanctioned, were rendered by Shri Sanyal during his life time, namely, during the previous year. The accrual of the income will be simultaneous with the completion of the services. It cannot be made dependant on the ratification of the special resolution at a much later date. Even otherwise, the ratification will only relate back to the date of the resolution by the board of directors on 23-7-1979, by virtue of which the services were rendered. We, accordingly, uphold the decision of the AAC that the income has been rightly included in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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