TMI Blog1990 (9) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to standard deduction under section 16(i) on the ground that the remuneration paid to the joint managing director was not salary ? 2. Whether, on the facts and in the circumstances of the case, the learned Tribunal was legally correct in holding that the deduction under section 80U of the Act allowed by the Income-tax Officer was rightly withdrawn by the Appellate Assistant Commissioner of Income-tax ?" The assessee, an individual by status, is a shareholder and also a director of a company, Hurana Motor and General Finance Private Limited (hereinafter referred to as "the company"). The company, by its resolution dated December 15, 1973, appointed the assessee as its joint managing director on a monthly remuneration of Rs. 700 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has held that "since the assessee is actively engaged in the conduct of the business of the company and is enjoying regular remuneration, it cannot be said that he is having a permanent physical disability." On this ground, deduction granted by the Income-tax Officer under section 80U of the Act was declared to be unjustified. The assessee, thereafter, filed second appeal before the Income-tax Appellate Tribunal, Delhi, who has affirmed the order of the learned Appellate Assistant Commissioner. The Appellate Tribunal has, however, as mentioned above, referred the aforesaid two questions to this court for its opinion at the instance of the assessee. An assessee is entitled to deduction under section 16(i) of the Act on the salary receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on concerned, and where, after considering the articles and the agreement, if any relationship of an employer and employee is established, a person can be said to be a servant of the company and the remuneration received by him is liable to be treated as salary. It was further observed that a managing director may have a dual capacity and he may both be a director and an employee depending on the nature of the employment which is to be determined on the construction of the articles of the company and the agreement, if any. The Appellate Assistant Commissioner, after considering the articles and the resolutions of the company whereby the assessee was appointed as joint managing director, came to the conclusion that the assessee was not actin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company and is having regular remuneration on account of which, it cannot be said that he is suffering from some physical disability which had impaired his capacity to engage in any employment. The Appellate Tribunal adopted the same line of reasoning and decided against the assessee on the ground that the asses see as a director is running the business having been appointed as a joint managing director on a monthly remuneration in 1973, and was earning the income. The Appellate Tribunal further held that the assessee has not produced the medical certificate from a registered medical practitioner before the lower authorities and, as such, cannot be allowed any deduction. The finding of the Appellate Tribunal to the effect that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al disability which has tile effect of reducing substantially his capacity to engage in a gainful employment or occupation. The Income-tax Officer allowed the deduction under section 80U of the Act but the Appellate Assistant Commissioner and the Appellate Tribunal have disallowed the deduction on the ground that he is engaged in the business of the company and earning money. The approach, both of the Appellate Assistant Commissioner and the Appellate Tribunal, is erroneous. While considering the question of allowing deduction under section 80U of the Act, what is to be looked into by the authorities is as to whether the assessee suffers from a permanent physical disability which has the effect of reducing substantially his capacity to enga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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