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2024 (5) TMI 566 - CESTAT NEW DELHINon-payment of service tax - amount paid to Directors as ‘Directors Remuneration’ against services given by the Directors - employees or not - N/N. 30/2012-Service Tax dated 20.06.2012, as amended, vide N/N. 45/2012- Service Tax dated 7th August, 2012 - Reverse Charge Mechanism. Whether or not the amount in question was given to the whole time directors of the appellant for them being the employees of the appellant? - HELD THAT:- The amount in question is an amount paid to whole time Directors and that the amount of remuneration which has been paid to non-whole time directors, the service tax liability stands already discharged. On perusal of the definition of Director given under Section 2(94) of Companies Act, 2013. It is observed to be an inclusive definition according to which the Director who is an employee of the company is the whole time director. In the Companies Act, Section 149(6) simultaneously define independent directors as those who should not have been the employee or proprietor or the partners of the company. The definition of service given in the Section 66B (44) clarifies that a provision of service by an employee to the employer in the course of or in relation to his employment is excluded from the definition of service. It becomes abundantly clear that the amount in question since is an amount paid by the appellant to its whole time directors who are none but the appellant’s employee, the relationship between the two cannot be categorized as an activity of service being rendered by the said directors. The question of any tax liability on the said amount does not at all arises. The adjudicating authority below has in fact accepted the said contention however still has confirmed the demand based on the difference of figures in the balance sheet versus the returns - Whatever remuneration paid to them even if i.e. over and above the amount of salary i.e. the remuneration arising out of the relationship of employer and employee. The statute itself excludes that relationship from the scope of service. The taxability has wrongly been fastened upon the appellants. The adjudicating authority has relied merely upon the difference between the values of balance sheet and Form 16. Both the documents are submitted for the different purposes. The figures recorded in the balance sheet are for accounting purpose, whereas the figures in Form 16 are for tax deduction purpose. In balance sheet and profit and loss account, the expenses are recorded on accrual basis regardless of the fact whether they have been paid for or not, whereas Form 16 is issued on the basis of remuneration actually disbursed to the executive directors after deduction of their TDS. Hence there can be no possibility of the figures in both the documents to match. The findings arrived upon after comparison of the two documents are nothing but are held to be the outcome of presumption. Hence are not sustainable. There is also no denial that the ST-3 returns containing all requisite details were being duly filed by the appellant. The alleged demand has already been held non-sustainable. In these circumstances, there are no cogent evidence produced by the department which could demonstrate suppression. Hence the extended period has wrongly been relied upon. The impugned order set aside - appeal allowed.
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