9911796707
TMI Blog1952 (8) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act road with Clause (2) (a) of the same rule? There was a Hindu undivided family firm known as R.B. Multanimul and Sons which till March 1940 worked as Managing Agents of the Modi Sugar Works Ltd. There was a disruption in the family and the Hindu undivided family firm was succeeded by another firm of the same name which carried on business up to September 1940. In September 1940, a private limited company was formed which took over as a going concern the business of R.B. Multanimul and Sons and thus became the Managing Agents of the Modi Sugar Works Ltd. From the Articles of Association of the Company it appears that the Board of Directors could not exceed 7 including the Governing Director and could not be less than 2. The na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Seth G. M. Modi was performing two separate functions, one of a director and the other of a manager, and as manager, by reason of the fact that he was not the beneficial owner of 20 per cent, of ordinary share capital of the company, he could not be called a director. 3. On behalf of the Department it was urged that it was not their case that Seth G. M. Modi was manager of the company and as he held beneficial ownership in not less than 20 per cent, ordinary share capital of the company he was deemed to be a director, but that the whole amount paid to him was paid to him as a director and that the case came under Schedule 1, Rule 7 (2), Excess Profits Tax Act. 4. 'Profits' are defined in Section 2, Sub-section (19) as mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paid to him as director for performing any managerial work entrusted to the director. The whole basis of the argument is that under Article 61 of the Articles of association Seth G. M. Modi had to carry on the work assigned to him subject to the control and supervision of the Board of Directors and it is urged that Seth G. M. Modi, therefore, became a manager of the company. Reliance is placed on the definition of the word 'manager', in the Indian Companies Act. The word 'manager' has been defined in Section 2(9) of that Act as a person who, subject to the control and direction of the directors, has the management of the whole affairs of a company . The argument is that, if he was to carry on the work assigned to him as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of the fact whether she continued to hold two offices, her duties as secretary being separate from her duties as Director and Chairman of the Board, and that whether if she ceased to be a Director, the post of Secretary would remain and her salary as Secretary would remain payable to her. The learned Judge further pointed out that Directors are of two kinds: Directors who merely attend Directors' meetings and get Directors' fees; and working Directors who give all their time to carrying on the business of the company, such as a Managing Director, and in the latter case the amount paid to the Managing Director would be remuneration paid to a Director. 6. In the case before us it cannot be seriously urged, that Seth G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remuneration paid to him must be held to be managing agent's remuneration. Similarly, if a director has the management of the affairs of a company entrusted to him in his capacity as a director, the remuneration paid to him will be director's remuneration even though the work entrusted to him might be the same as is usually done by a manager. It will cease to be director's remuneration only if he happens to be doing the work not in his capacity as a director to whom some additional work has been entrusted but as a manager in the capacity of a servant under a contract of service so that he is really holding two distinct and separate offices. In Hutton v. West Cork Railway Co., (1883) 23 Ch. D. 654, it was pointed out by Bowen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies Act and yet he would be entitled to the remuneration fixed for him under Article 61 of the Articles of Association. It cannot be seriously contended that Seth G. M. Modi could have continued to exercise the functions entrusted to him under Article 62 as Governing Director, if he had ceased to be director of the company. It is clear that the remuneration payable to him under Article 61 was payable in his capacity as a Governing Director irrespective of the fact whether he also discharged the functions of the manager under the Indian Companies Act or entrusted such functions to any other person appointed by him. 7. We are, consequently, satisfied that, on the facts and circumstances of this case, the remuneration granted to R.B. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
