HI FRIENDS.........

I AM SHARING SOME IMPORTANT THINGS WITH YOU REGARDING THE NEW NOTIFICATION ISSUED REGARDING THE SERVICE TAX LAID DOWN ON DIRECTOR'S REMUNERATION ON REVERSE CHARGE METHOD............

I AM TRYING TO CORRELATING THE COMPANY LAW , INCOME TAX ACT AND SERVICE TAX TO HAVE GOOD UNDERSTANDING OF THE EFFECT OF THE PROVISION .................

1) COMPANY LAW.........

DEFINITION OF OFFICER U/S 2(30) : OFFICER INCLUDES ANY DIRECTOR . MANAGER OR SECRATARY OR ANY PERSON IN ACCORDANCE WITH WHOSE DIRECTION OR INSTRUCTIONS THE BOARD OF ​DIRECTORS OR ANY ONE OR MORE DIRECTORS IS OR ARE ACCUSTOMED TO ACT

• DEFINITION OF DIRECTOR U/S 2(13) : DIRECTOR INCLUDED ANY PERSON OCCUPYING THE POSITION OF THE DIRECTOR , BY WHATEVER NAMED CALLED.........

• THE COMPANIES ACT,1956 ITSELF SILENT ABOUT THE RELATIONSHIP BETWEEN THE DIRECTORS AND COMPANY....NOT THE SINGLE PROVISION OF THE COMPANIES ACT,1956 CLARIFY THE RELATATIONSHIP OF BETWEEN THE DIRECTORS AND COMPANY......WHETHER THAT RELATIONSHIP BE CONSIDERED AS EMPLOYEE-EMPLOYER RELATIONSHIP.......OR THEY ARE THE REAL OWNER OF THE COMPANY.........OR THEY ARE THE AGENT OF THE COMPANY.......

• IF WE GO THROUGH THE PROVISIONS LAID DOWN U/S 198 AND 309 REGARDING REMUNAERATION PAYABLE TO DIRECTIORS IS NICE ONE............NOWHERE IN THE PROVISIONS IT'S MENTIONED THAT PAYAMENT OF REMUNERATION TO THE DIRECTORS ARE MANDATORY .............NOW NOT A SINGLE PROVISION NOT MAKING THE MANDATORY TO PAY THE REMUNERATION TO THE DIRECTOR THEN WHY THE COMPANIES ARE PAYING THE "REMUNERATION" TO DIRECTORS INSTEAD OF "SALARY"....

• IF WE PAY THE "SALARY" INSTEAD OF " REMUNARATION" TO DIRECTORS THEN IT'S NOT THE VILOATION OF ANY PROVISION OF COMPANIES ACT,1956 BECAUSE THE ACT HAS NOT DEFINED "SALARY" AND "REMUNERATION"....IF WE PAY THE "SALARY" THEN WE ARE NOT REQUIRED TO SATIFY THE CONDITIONS LAID DOWN UNDER COMPANIES ACT REGARDING DIRECTOR'S REMUNERATION........

2. INCOME TAX ACT,1961

• PROBLEM WAS THERE WITH REGARD TO TAX DEDUCTED AT SOURCE WITH INCOME TAX ACT,1961 BEFORE THE RECENT AMENDMENT U/S 194J THAT UNDER WHICH SECTION THE TAX SHOULD BE DEDUCTED........
• IF WE DEDUCT THE TAX AT SOURCE U/S 192 THEN IT BE CONSIDERED AS SALARY AND FALL UNDER THE HEAD "INCOME FOR SALARY"
• IF WE DEDUCT THE TAX AT SOURCE U/S 194J THEN IT BE CONSIDERE AS PROFESSIONAL INCOME AND FALL UNDER EITHER "PROFITS OR GAINS FORM BUSINESS OR PROFESSION " OR "INCOME FROM OTHER SOURSE"
• NOW THE RECENT AMENDMENT U/S 194J IT'S CLARIFIED THAT TAX TO BE DEDUCTED U/S 194J FOR  REMEUNERATION, SITTING FEES OR COMMISSION IF THEY ARE NOT TAXABLE AS SALARY........
• STILL THE PROBLEM WITH INCOME TAX ACT IS THERE. UNDER WHICH HEAD THE DIRECTOR'S REMUNARATION TO BE TAXABLE......THAT'S SURE ENOUGH THAT IT' WILL NOT BE TAXABLE UNDER THE HEAD "SALARY" BUT THEN UNDER WHICH HEAD?? IF WE CONSIDERED AS PROFESSIONAL INCOME THE "PROFIT OR GAIN FROM BUSINESS OR PROFESSION " THEN THE PROBLEM OF SECTION 44AA 44 AB WILL BE THERE ............LOGICALLY WE CAN NOT CONSIDERED IT AS THE INCOME AS "INCOME FROM OTHER SOURCE"
• SO INSTEAD OF PAYING THE REMUNERATION TO THE DIRECTOR ONE ONE SHOULD PAY THE SALARY TO THE DIRECTOR SO THAT THE PROBLEM REGARDING THE HEAD UNDER WHICH THE DIRECTOR'S REMUNERATION TO BE TAXABLE IS NOT BE THERE BECAUSE IT'S WOULD BE SIMPLE THAT AS WE HAVE PAID THE SALARY TO THE DIRECTOR THAT WOULD BE TAXABLE UNDER  THE HEAD SALARY ONLY AND TAX SOULD BE DEDUCTED UNDER SECTION 192...........

3) SERVICE TAX..........

• NOTIFICATION ISSUED BY THE GOVERNMENT LAID DOWN THE PROVISION THAT THE SERVICE TAX WOULD BE LEVIABLE ON THE DIRECTOR'S REMUNERATION AS PER THE REVERSE CHARGE METHOD FOR ANY SERVICES PROVIDED OR TO BE PROVIDED BY THE DIRECTOR TO THE COMPANY.......
• THIS NOTIFIACATTION HAS NOT EXPLAINED THAT WHAT TO BE TAXED.......THAT TO SAY SALARY OR REMUNERATION OR SITTING FEES OR COMMISION.........NOW LOGICALLY SALARY CAN NOT BE TAXED UNDER SERVICE TAX ............

CONCLUSION :

ANY PAYMENT MADE TO THE DIRECTOR SHOULD BE TERMED AS  " SALARY " INSTEAD OF "DIRECTOR'S REMUNERATION " TO ESCAPE FROM THE INCOMPLETE ILLOGICAL AND MOST PROBLEMATIC PROVSIONS OF THE INCOME TAX AND SERVICE TAX.............