22 July 2009
I have one query, one of my friend has started a company. He is a director in the company but he is also doing job somewhere. They want to start a coaching centre where he along with other director will provide coaching. Can company pay professional fees to them. If yes, do we need to treat it as Managrial Remuneration.Moreover they are not paying salary to any of the director. thanks in advance
22 July 2009
If your company is a public company then section 309 is applicable.
I would like to draw your kind attention towards proviso to Section 309(1) which reads as follows:
“Provided that any remuneration for services rendered by any such director in any other capacity shall not be so included if – (a) the services rendered are of a professional nature, and (b) in the opinion of the Central Government, the director possesses the requisite qualifications for the practice of, the profession]. “
Thus on the basis of above provision and in your case such payment as professional fees shall not be treated as remuneration to director if and only if such the 2 conditions mentioned above fulfill simultaneously.
In proviso to Section 309(1) above you have to file application to CG in order to obtain CG approval.
22 July 2009
Please tell me is there any problem in paying the fees, intead of salary for taking the classes and showing it as managerial remuneration (extra disclosure just for sake of safety).
22 July 2009
Applicability of 314 is separate from section 309. However in your case section 314 is not applicable because your friend is taking remuneration simply as director of the company.
If he draw anything over and above the remuneration which he is drawing as director of the company then he will be in office or place or profit and then only section 314 became applicable.
22 July 2009
It means We can pay professional fees to director for services rendered by him (after deduction of TDS) and show it as a managerial remuneartion at the time of finalizing the accounts. Do we need to enter any agreement for the same/
22 July 2009
It is advisable to enter into agreement.
But remember such professional fees to director for services rendered by him shall not be counted in managerial remuneration if your friend possesses the requisite qualifications for the practice of, the profession and CG's approval obtained.
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