Law: Income Tax Rules, 1922

Section: R-39,39(2)

Income-tax Rules, 1922----R. 39(2)-Director working whole time for one Company-Included in definition of employee-View that Director working in 'more than one Company could not be said to be working whole time for one Company, held, erroneous and a person could work whole time for more than one Company. ORDER M. KARIM (MEMBER).-These are direct appeals against the order of the Income-tax Officer. The main objection of the appellant was against addition of Rs. 23,200 under rule 39(2) of the Income-tax Act Rules which was allegedly without any justification. For 1970-71 the amount added back was Rs. 23,800. The facts of the case are that the assessee received remuneration from Gravure Ltd. United Containers Ltd., Bandnawaz Ltd. and Rahimtoola Ltd. The assessee's claim was that he was an employee of Chambon Ltd. (Now Gravure Packages Ltd.) from 1-7-1962 and was appointed a Director of Gravure Packages Ltd. in August 1567. The Income-tax Officer treated the appellant as employee simpliciter up to the assessment year 1967-68, but from 1968-69 onwards he thought that the assessee was a mere Director and not an employee within the meaning of rule 39(2) of the Income-tax Rule. For each of the years under consideration the Income-tax Officer allowed earned income relief at Rs. 6,000 which could only be allowed to a person receiving salary. Therefore by allowing the maximum earned income relief the Income-tax Officer accepted that the income was to be assessed under the head salary which in turn meant that the assessee was an employee of the companies, or at least of one Company. Under rule 39(2) a Director working wholetime for one company was included in the definition of employee. This only showed that if a Director was working wholetime for at least one…

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