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TMI Blog1993 (11) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... tor of the assessee company and he holds office until his death or resignation or until he otherwise ceases to hold the office as director. Under article 125(1), each director shall be paid out of the funds of the company by way of remuneration for his services, a sum not exceeding Rs. 250 for each meeting of the board or committee of the board, attended by him as a director. Clause 125(2) provides that in addition to the remuneration payable as above, the directors may allow and pay to any director who is not a bona fide resident of the place where a meeting of the board of the company is held, certain fair compensation for travelling and other expenses as set out thereon. Article 126 provides that if any director be called upon to go or r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the year 2003 for which the assessee-company undertook to purchase a single premium policy from the Life Insurance Corporation of India Ltd. Accordingly, in the assessment year 1974-75, the assessee-company purchased the requisite single premium policy from the Life Insurance Corporation of India on payment of Rs. 7,77,604. The assessee-company also entered into another agreement dated June 1, 1971, with Dev Anand under which the assessee-company appointed Dev Anand as the leading male artiste for its film "Shareef Badmash". Under clause 5 of the said agreement in consideration of Dev Anand rendering services as the leading man in the said film, the assessee-company agreed to pay him Rs. 25,720 by annuity instalments beginning from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the deletion of the addition of Rs. 13,38,885 so made. On an appeal from this judgment and order filed by the Department before the Income-tax Appellate Tribunal, the Tribunal set aside the order of the Appellate Assistant Commissioner. The Tribunal by its order dated November 22, 1978, inter alia, held that the restrictions placed with regard to the admissibility of expenditure under section 40(c)(i) apply to the payments made for the purchase of the annuity in question. In respect of the above order of the Tribunal, the following question has been referred to us under section 256(1) of the Income-tax Act, 1961: "Whether, on the facts and in the circumstances of the case, the provisions of section 40(c)(i) are applicable in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or amenity to him as a director of the said company. The agreements, in terms, clearly set out the purpose for which these payments are being made. It is a remuneration given to him for his acting as the leading male actor in the two films in question, as also for doing work as a writer and director in the case of one of the two feature films. The amounts are clearly by way of remuneration for these services which Dev Anand is expected to render to the said assessee-company. Acting as a leading male actor or writing the script of a film or directing it cannot, by any stretch of imagination, be considered as the duty of a director of the assessee-company. The two contracts in question relate to other work which Dev Anand was required to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the directors of the company as directors. Such a payment would not fall within the four corners of section 40(c). (See the observations at page 1070). In view of the above observations of the Supreme Court, which would directly apply to the case before us, the payments which have been made by the assessee-company for the purchase of annuities in favour of Dev Anand, who also happens to be one of the directors of the assessee-company, are not covered by section 40(c). Hence, the restrictions placed under clause (A) of that sub-clause would not apply. It was submitted before us by the Revenue that under article 126 of the articles of association of the assessee-company, there is a provision for payment of special remuneration to a di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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