Page 30 - GSTL_30th April 2020_Vol 35_Part 5

J82 GST LAW TIMES [ Vol. 35
but the same cannot be made applicable universally for the reasons
mentioned explained below. Further, the instant advance ruling
may not be applicable universally as Hon’ble Delhi Tribunal [Laxmi
Electricals & Decorators v. Commissioner of C. Ex., Jaipur-I - 2016 (41)
S.T.R. 132 (Tri. - Del.)] has been held that any Advance Ruling is-
sued by the Advance Ruling Authorities shall only be binding on
the company who has applied for Advance Ruling since the Ad-
vance Rulings do not constitute any binding precedent.
(b) In our opinion, the term “employee” means any such person who is
a servant to the company. In terms of establishing whether a partic-
ular person is a servant to the company or not, one has to under-
stand his/her locus standi in the company.
(c) Under the companies act, managing director means, a director who,
by virtue of an agreement with the company or of a resolution
passed by the company in general meeting or by its Board of Direc-
tors or by virtue of its memorandum or articles of association, is en-
trusted with substantial powers of management which would not
otherwise be exercisable by him, and includes a director occupying
the position of a managing director, by whatever name called. Thus,
a director who has also taken employment in the company would
be functioning in dual capacities, namely, one as a director of the
company and the other on the basis of the contractual relationship
of master and servant with the company, i.e., under a contract of
service entered into with the company.
(d) Merely from the fact that a managing director gets a remuneration
as envisaged under the Companies Act, 2013 it cannot be inferred
that he is a servant of the company. The test to determine [Ambica
Mills Ltd. v. Commissioner of Income-Tax - 1999 235 ITR 264 Guj.]
whether a managing or an ordinary director is also an employee, is whether
he/she is under a contract of service. Where there is contract of service
and the relationship of employer-employee between the company
and the director is established, there would be control over his work
as an employee of the company and that capacity would be differ-
ent from his other role as a director of the company. Therefore, a di-
rector including a managing director who is not an employee under
any contract of service with the company, would not be an employ-
ee of the company merely by virtue of his having been paid remu-
neration or benefits or amenities in his capacity as such director of
the company.
(e) Further, it is a settled [Ram Pershad v. Commissioner of Income Tax,
New Delhi - (1972) 2 SCC 696] position in the Income Tax Act, 1961
that a managing director/whole-time director may have a dual ca-
pacity. He may be both, a director as well as an employee and ac-
cordingly TDS under the head “Income from Salaries” is being de-
ducted for any amounts paid/payable to them. Accordingly, it is for
this reason we are of the opinion that all executive directors are em-
ployees of the company.
[Continued on page J86]
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