Law: Income Tax Ordinance, 1979

Section: 24,16(2)(e)

Income Tax Ordinance (XXXI of 1979)---Ss. 24(fff) & 16(2)(e)---Salary paid to Directors ---Deductions--¬Admissibility---Salary paid in cash to the Directors of the company was disallowed by the Assessing Officer being not paid through a crossed cheque or transferred to the employee's Bank account as provided in S.24(fff) of the Ordinance, 1979---Assessee contended that Director was not an employee of the company for the purpose of S.24(fff) of the Income Tax Ordinance, 1979 rather he was a shareholder and owner of the company---Validity---Word "employee" as defined in S.16(2)(e) of the Income Tax Ordinance, 1979 includes a Managing Director or any other individual who, irrespective of his designation, performs any duties or functions in connection with the management of affairs of the company---Directors of the assessee-company were, no doubt, performing duties or functions in connection with the management of the affairs of the company and were being paid salaries and remunerations for their services---Revenue was justified to treat the Directors of the company as "employees" and to disallow the salaries paid to these Directors under S.24(fff) of the Income Tax Ordinance, 1979 because the conditions of payment of salaries through crossed cheques or through transfer to their Bank accounts as required by law, had not been fulfilled. (1977) 36 Tax 223 and 2000 PTD (Trib.) 2883 distinguished. ORDER MUHAMMAD SHARIF CHAUDHRY (ACCOUNTANT MEMBER).----Cross-appeals have been filed for the assessment year 1999-2000 by Revenue as well as by the assessee, to challenge appellate order, dated 30-8-2000 passed by Commissioner of Income Tax, (Appeals Zone-I), Lahore under section 132 of the Income Tax Ordinance on estimation of sales and add backs from profit and loss account expenses. The assessee contends that even the sales as reduced by the Commissioner are on the higher side, and confirmation by the Commissioner of profit and loss account add backs is also unjustified. On the other hand, the Revenue feels dissatisfied with the order of the Commissioner on the reduction of sales in both the trading accounts. Both the appeals are taken-up and decided in this…

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