02 September 2012
IN CASE OF A DIRECTOR OF A COMPANY, EMPLOYER-EMPLOYEE RELATIONSHIP CANNOT BE PRESUMED BUT SHOULD BE ASCERTAINED BASED ON THE SERVICE AGREEMENT, IF ANY, EXECUTED OR IF THERE IS ANY PROVISION IN THE ARTICLES OF ASSOCIATION. IF ANY AGREEMENT IS THERE, IT SHOULD BE CHARGE U/H SALARIES
02 September 2012
Examine the board resolution concerned, and if principal and agent relationship exists between the company and the said director, then offer the remuneration under the head'income from other sources'.
03 September 2012
Dear friend - your query has already been answered by the experts - however I am clarifying once again - if employer - employee relationship can be established (you may issue an appointment letter signed on behalf of the Board) and such appointment letter is approved by the Board (this is always the best), then deduct TDS u/s 192, else deduct TDS u/s 194J. Also please note that as per Notification No. 45/2012 dated 7th August 2012, the Company has to deposit Service tax under reverse charge concept, if the remuneration is to be considered as Other Income or Professional income.
03 September 2012
Yes that is what I clarified - Service tax will become applicable only if the remuneration is considered as Other Income or Professional Income and NOT as Salary income.
03 September 2012
No, Only Deducting TDS u/s 192 is Not Enuf to Prevent From Service Tax Liability.
Suppose a Director Holding Major Stake, and Then You are Giving as Salary, Then Service Tax is Applicable. Since You Cant Say That he is Executve Director.
03 September 2012
You have raised an interesting point but nowhere does the Company Law state that an Executive Director can be appointed only if his or her shareholding is restricted to 50%. Moreover the Assessing Officer can disallow payments that he may feel "excessive" vide provisions of section 40A, even where the holding of the individual is only 20%. With due regards, I do not think that what you are saying is legally tenable.
06 September 2012
I agree with this view that % holding is not a factor to consider the applicability of service tax on payment to directors. If is made to the Director as an Employee of the Company, no service tax would be applicable