Law:

Section:

Section 15 of the Income-tax Act, 1961 [Corresponding to section 7 of the Indian Income-tax Act, 1922] - Salaries - Chargeable as - Assessment year 1960-61 - Assessee was appointed as a managing director in a company at a monthly remuneration of Rs. 1250 plus commission at rate of five per cent on net profits of company - For accounting year ending 31-12-1959 company credited to assessee said remuneration every month - Subsequently, board of directors of company passed a resolution on 9-5-1960 to stop payment of remuneration to assessee for year 1959 for reason of company not making any profit - Pursuant to said resolution, company on 31-12-1959 debited assessee with salary of whole year - Assessee's contended that he was not entitled for any remuneration for year 1959 was rejected, and sum credited to assessee's account for nine month was brought to tax - Whether it was company that was carrying on business and assessee was employed by company in managing its affairs including carrying on its business, therefore, monthly remuneration credited to assessee for nine months in question represented his salary Held, yes - Whether resolution passed by board of directors of company did not purport to withdraw salary already accrued to assessee but it only meant withholding of payment of remuneration - Held, yes - Whether even if resolution, was to be read as having effect of denying salary during period of nine months to assessee or if it was to be taken that assessee had waived accrued remuneration, such denial, withdrawal or waiver occurred subsequent to assessment year, and it would, therefore, be totally ineffective in computation of income for assessment year which would be liable to tax under section 7 of 1922 Act - Held, yes - Whether, therefore, remuneration for period of nine months could be brought to tax - Held, yes FACTS The assessee was the managing of public limited company. He was to be paid a monthly remuneration of Rs. 1,250 plus commission at the rate of five per cent, on the net profits made by the company. The commission was to become due and be paid to him yearly and he would be entitled to draw the same immediately after the annual accounts of…

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