CHINNAPPA REDDY J. - The assessee is a director of M/s. Seth Oil Mills Private Ltd. During the accounting year April 1, 1967, to March 31, 1968, he did not draw any remuneration from the company though he was entitled to remuneration at the rate of Rs. 2,000 per month. On June 20, 1968, the company passed the following resolution :
'Resolved that the monthly remuneration of the directors may be reduced to Rs. 3,000 p.m. and further we confirm the voluntary reduction already made during the year. Further, Shri Shiv Prakash Seth of Bombay agreed not to draw any remuneration and has not drawn except entertainment expenses allowance from time to time.'
This resolution of the company was effective from January 1, 1968, in regard to two other directors of the company, Shri Janak Raj Seth and Shri Ramesh Seth. The Income-tax Officer took the view that in the case of Shri Shiv Prakash Seth did also, it became effective from January 1, 1968. The Income-tax Officer was of the view that the remuneration payable to Shri Shiv Prakash Seth did accrue to him and, therefore, whether he had drawn the remuneration or not, such remuneration had to be included in his income. A further argument that he had given up the remuneration was overruled by the Income-tax Officer on the ground that such giving up was not at any time during the relevant accounting year. The order of assessment made by the Income-tax Officer was confirmed by the Appellate Assistant commissioner and the Income-tax Appellate Tribunal. The following question has been referred to us for our opinion :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the remuneration from July 1, 1967, to December 31, 1967, accrued to the assessee and that the same was not given up under the resolution dated June 20, 1968, passed by M/s. Seth Oil Mills (P.) Ltd ?'
We must mention here that the assessee admitted before the Tribunal that the remuneration for the period from April 1, 1967, to June, 30, 1967, had to be included in his total income since that had been credited to his account in the books of the company. That is why the question referred to us by the Tribunal mentions the remuneration from July 1, 1967, to December 31, 1967 only. The learned counsel for the assessee argued that there was no warrant for the conclusion of the Tribunal that the resolution of the company did not take effect from July 1, 1967, on which date commenced the accounting year of the company. The resolution itself was passed on June 20, 1968, and in the case of the other two directors, it was admittedly effective from January 1, 1968 only. The revenue was, therefore, justified in holding that the resolution became effective from January 1, 1968, in the case of the assessee also. The learned counsel for the assessee argued that in any case the assessee had given up the remuneration and, therefore, it could not be included in his income. The assessee did not given up his remuneration at any time during the relevant period of account. He cannot, therefore, claim that the amount should not be included in his income. We are not concerned with the consequences that may follow in the next year as result of the later giving up of the remuneration, if any.
The learned counsel for the assessee then urged that the remuneration payable to a direct is not salary and, therefore, it could not be taxed on an accrual basis. The question referred to us is not whether the revenue was not right in treating the remuneration as salary. In fact, throughout it was assumed before all the subordinate tribunals that the remuneration due to the assessee was salary and was taxable as such. The question whether remuneration paid to a director is or is not salary is not an abstract question of law which could be answered. It depends on various circumstances such as the nature of the duties performed by the director of the company, the nature of the agreement, if any, between the individual director and the company, etc. We are of the view that the question whether the remuneration payable to the assessee is not salary does not arise out of the question referred to us. The question referred to us is answered in the affirmative.