Sunil (Company Secretary) (28 Points)
03 June 2010Dear All,
what "service" implies u/s 297 ? Does it include car hiring or rent charges ?
Does it matter if Co. is not paying any serivce tax on hiring charges on car the same?
Thanking U in anticipation
Regards,
CS Sunil
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 03 June 2010
Contract for services vis-a-vis contract of personal services: Section 297 applies to contracts for services but not to contract of personal services.
(i) Contract for services
Contract of services includes contract for supply of services. Further, contract for supply of services may also include supply of one's own services or supplying the services of some other person.
However, contract of service is quite different from contract for services. The latter attracts the provisions of section 297 whereas the former has been exempted vide Department Circular No. 13/75, dated 5-6-1975, which is dealt separately, hereunder. And in a case where such a person is appointed at a place of profit, it will not only require the compliance of the provisions of section 314 but also the requirements of the proviso to sub-section (1) of section 297 have to be complied with in every such matter because no exemption is provided in this section unlike section 314 in which monthly remuneration of Rs. 10,000 has been prescribed under section 314 (l)(b).
(ii) Contract of personal services
The Department's views in this connection are contained in Circular No. 13/75, dated 5-6-1975 that "section 297(1) provides that consent of the Board of directors of a company shall be necessary for a contract for the sale, purchase or supply of any goods, materials or services entered into by the company with a director of the company or his relative or a firm in which such a director or relative is a partner, etc. The proviso to this sub-section requires that in the case of a company having paid-up share capital of not less than rupees one crore, no such contract shall be entered into except with the previous approval of the Central Government."
Contracts on principal to principal basis: The Department has expressed its views vide Circular No. F.M. 8/Z97/56-PR, dated 2-8-1956 that the provisions of section 297 would not become applicable to contracts entered into by the company with a dealer on a principal to principal basis, unless the contract is in respect of goods which the dealer sells or supplies on an agency basis.
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