Case Law Details
Mukesh Gupta Vs DCIT (ITAT Bangalore)
Any remuneration paid to director apart from sitting fees is taxable under the head salary. As per section 2(78) of the Companies Act, 2013, “remuneration” is defined as any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under Income-tax Act. There are limits prescribed as per section 197 of the Companies Act for payment of managerial remuneration to a director of the company. However, exception is when remuneration is paid for professional services rendered by a director. In the instant case, the Articles of Association or the terms of the agreement, whereby the assessee receives remuneration from the company is not on record. When an assessee insists that he is rendering professional / technical services to a company, the burden is on him to prove the same. As mentioned earlier, the assessee has not furnished any evidence to prove that the services rendered by him to the company are of professional in nature. The treatment in the company’s books of account that the remuneration paid to the assessee are professional charges and deduction of tax at source is made u/s 194J of the Act is not the determinative factor to decide in the hands of the assessee whether the remuneration is salary income or income from business or profession. Therefore, we have no hesitation to hold that the receipt from company is nothing but salary income. Moreover, the interest expenditure cannot be deducted from the amount received from the company because there is no nexus between them. Only such expenditure which has been incurred wholly and exclusively to earn a particular income is allowable as a deduction from such income. In the instant case, there is no relation whatsoever between the interest expenditure from a mortgaged loan and the payment received for rendering certain services. Advancing interest free loans to the employer company cannot be a ground for claiming deduction of interest expenditure from the salary income received from it.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These appeals at the instance of the assessee are directed against three orders of the CIT(A) (for ITA No.2739/ Bang/2017, CIT(A)’s order dated 06.10.2017, for ITA Nos.208 and 209/Bang/2019, CIT(A)’s orders are dated 20.11.2018). The relevant assessment years are 2013-2014 to 2015-2016. Common issue is raised in these appeals, hence, they were heard together and are being disposed of by this consolidated order.
2. The common issue raised for all the three assessment years is that whether the Income Tax Authorities is justified in treating income received by the assessee from company as salary income instead of professional income claimed by the assessee, thereby disallowing the interest paid to M/s.Sundaram BNP Paribas Home Finance Limited. For assessment year 2015-2016, apart from the above issue, the assessee has raised grounds regarding disallowance u/s 14A of the I.T.Act.
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