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TMI Blog2024 (9) TMI 1549X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 65B(44) (b) of the Finance Act, 1994. The appellant have also booked the payment made to the Directors as salary in their books of accounts and the same has been accepted by the Income Tax department. The TDS was also deducted under the head salary under Section 192 of the Income Tax Act. All these facts go on to prove that the considerations paid to the Directors are in course of employment of the Directors. Therefore, the same is not taxable being not a service as per definition of service under Section 65B(44) of the Finance Act, 1994. From CBEC vide Circular No. 115/9/2009-ST dated 31.07.2009 it is clear that any commission paid to the Directors of the Company is not a commission i.e. within the scope of Business Auxiliary Service hence service tax would not be leviable on such amount. This Circular is binding on the departmental authorities therefore, the lower authorities ought not to have confirmed the demand taking a view against the view taken by Board vide Circular dated 31.07.2009. Thus, it is settled beyond any doubt that the commission paid to the Directors by the Company does not fall under the service as Business Auxiliary Service accordingly, not liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We find that as per claim of the appellant, the service provided by Director as an employee to the employer i.e. Company is not liable to pay service tax as per Section 65B (44). For the ease of reference, we reproduce the same as under:- "(44) "Service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include-- (a) …….. (i) to (iii) ……… ………… ………… (b) A provision of service by an employee to the employer in the course of or in relation to his employment; As per the above sub clause (b) of sub-Section (44) of Section 65 of Finance Act, 1994, it is clear that provision of any service by an employee to the employer in case of his employment does not fall under the definition of service. As per the facts in the present case, the Directors to whom the commission was paid by the appellant are employees of the Company as per the Board's resolution. The Directors in the capacity of employees provided service to the employer i.e. present appellant Company. Therefore, the service whatsoever provided by the Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case such directors provide any advice or consultancy to the company, for which they are being compensated separately, such service would become chargeable to service tax. 3. In view of the above, it is clarified that remunerations paid to Managing Director / Directors of companies whether whole-time or independent when being compensated for their performance as Managing Director/Directors would not be liable to service tax. Pending issues may be resolved in line with the above." From above Circular it is clear that any commission paid to the Directors of the Company is not a commission i.e. within the scope of Business Auxiliary Service hence service tax would not be leviable on such amount. This Circular is binding on the departmental authorities therefore, the lower authorities ought not to have confirmed the demand taking a view against the view taken by Board vide Circular dated 31.07.2009. 5. This issue was also considered in various judgments which are as under:- (a) In the case of Bengal Beverages Pvt. Ltd. vs. CGST & Excise, Howrah, the Tribunal passed the following order:- "8. In the instant case, the only dispute herein is for payment of remuneration in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch-2024 (2) TMI 910 - CESTAT Ahmedabad, this Tribunal taken the following view:- "4. After considering the submissions made by both the sides, we find that matter is no longer res-Integra as this Tribunal in the case of M/s Bangal Beverages Pvt. Ltd. Vs. CGST & Excise, Howrah reported under 2020 (11) TMI 622-CESTAT Kolkata has held as follows:- "8. In the instant case, the only dispute herein is for payment of remuneration in the nature and form of commission based on percentage of profit to whole time directors, which is a fact on record. Section 2(94) of Companies Act, 2013, duly defines 'whole- time director' to include a director in the whole-time employment of the company. A whole-time Director refers to a Director who has been in employment of the company on a full-time basis and is also entitled to receive remuneration. The certificate issued by the company secretory states that the remuneration is given in various form as allowed under the Companies act, 2013. We further find that the position of a whole-time director is a position of significance under the Companies Act. Moreover, a whole-time director is considered and recognized as a 'key managerial pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Income tax returns submitted under Form - 16, we are of the considered view that the Directors have been appointed as employees of the Appellant's Company. We find that the matter is no longer res- integra as the same has already been deliberated upon and decided by this Tribunal. The issue has been squarely covered by this Tribunal under similar facts and circumstances. For the said purposes relevant portion of the judgements have been extracted below:- In the case of Bengal Beverages Pvt. Ltd. v CGST & Excise, Howrah 2020 (11) TMI 633 "8. In the instant case, the only dispute herein is for payment of remuneration in the nature and form of commission based on percentage of profit to whole time directors, which is a fact on record. Section 2(94) of Companies Act, 2013, duly defines 'whole-time director' to include a director in the whole-time employment of the company. A whole-time Director refers to a Director who has been in employment of the company on a full-time basis and is also entitled to receive remuneration. The certificate issued by the company secretory states that the remuneration is given in various form as allowed under the Companies act, 2013. We furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bria, Shri U.K. Ganguli, Shri Deepak Roy and Shri Jitendra Hemdev, who were paid remuneration during the period July, 2012 to March, 2015 amounting to Rs. 1,01,02,55,057/- by the appellant, Service Tax of Rs. 12,48,67,525/- was required to be discharged by the appellant. Opposing the said contention of the Revenue, the appellant has argued that the amount paid to the said Directors are in the nature of the salary paid to them, since the said Directors are whole time directors and employees of the company, accordingly, it is not a 'service' within the definition of 'service' prescribed under Section 65B(44) of the Finance Act, 1994. ….16. Also, from the documents produced by the appellant it is crystal clear that the Directors who are concerned with the management of the company, were declared to all statutory authorities as employees of the company and complied with the provisions of the respective Acts, Rules and Regulations indicating the Director as an employee of the company. No contrary evidence has been brought on record by the Revenue to show that the Directors, who were employee of the appellant received amount which cannot be said as ' salary' but fees paid for be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho has been in employment of the company on a fulltime basis and is also entitled to receive remuneration. We further find that the position of a whole-time director is a position of significance under the Companies Act. Moreover, a whole-time director is considered and recognized as a 'key managerial personnel' under Section 2(51) of the Companies Act. Further, he is an officer in default [as defined in clause (60) of section 2] for any violation or non-compliance of the provisions of Companies Act. Thus, in our view, the whole time director is essentially an employee of the Company and accordingly, whatever remuneration is being paid in conformity with the provisions of the Companies Act, is pursuant to employer - employee relationship and the mere fact that the whole time director is compensated by way of variable pay will not in any manner alter or dilute the position of employer - employee status between the company assessee and the whole time director. We are thoroughly convinced that when the very provisions of the Companies Act makes whole time director (as also in capacity of key managerial personnel) responsible for any default / offences, it leads to the conclusion that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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