TMI Blog2019 (4) TMI 1595X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 - 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 those directors are employees of the assessee company. In the present case, the appellant has duly deducted tax under section 192 of the Income Tax which is the applicable provisions for TDS on payments to employees. This factual and legal position also fortifies the submission made by the appellant that the whole time directors who ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormity with the provisions of the Companies Act. The Department has raised demand of service tax under reverse charge mechanism on the said remuneration paid to the whole time directors, in terms of Notification no. 30/2012-ST, dated 20.06.2012, as amended. It is the case of the department that the said remuneration paid to the directors would constitute service liable to service tax in the hands of assessee under reverse charge mechanism. 3. Sri B. N. Chattopadhyay, Ld. Consultant, appeared on behalf of the appellant assessee. He submitted that the present dispute is only in respect of the remuneration amount paid to the four directors who are the whole time directors in the Board of the Company. The whole time directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said towards rendition of taxable service for levy of service tax. He also relied on the decision of the Tribunal in the case of PCM Cement Concrete Pvt Ltd. vs. CCE, Siliguri 2018 (9) GSTL 391 (Tri-Kol) wherein the Tribunal observed that consideration paid to whole time directors would be treated as payment of salaries inasmuch as there would be employer employee relationships and in such cases, there cannot be any levy of service tax. He further relied on the CBEC Circular no. 115/9/2009-ST dated 31.07.2009, wherein it has been clarified that no service tax is leviable on commission paid to managing directors/ whole time directors, even if the remuneration is termed as commission , inasmuch as the said managing directors/ whole time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 94), 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 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 acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in Rent Works India (Supra) has clearly set the legal position that when the Income Tax Department considers payment in the nomenclature consultancy fee as salaries, on which TDS is also made, the said payments cannot be said towards rendition of taxable service for levy of service tax. The decision in case of PCM Cement Concrete Pvt Ltd. (Supra) has set the legal proposition that consideration paid to whole time directors would be treated as payment of salaries inasmuch as there would be employer employee relationships and in such case the levy of service tax cannot be sustained. 8. In view of the above discussions and the settled legal judicial precedence and provisions contained in statutes referred above, demand of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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