Page 34 - GSTL_11th June 2020_Vol 37_Part 2

J42 GST LAW TIMES [ Vol. 37
Another question is whether such Directors for whom Remuneration
paid can be both an employee as well as employer. This calls for an understand-
ing of the scope of ‘director’ and ‘remuneration’ and it would be pertinent to pe-
ruse the relevant provisions of the Companies Act, 2013.
As per Section 2(34) “Director” of the Companies Act defines a director
appointed to the Board of a company.
As per Section 2(54) of Companies Act, “Managing Director” defines a
director who, by virtue of the articles of a company or an agreement with the
company or a resolution passed in its general meeting, or by its Board of Direc-
tors, is entrusted with substantial powers of management of the affairs of the
company and includes a director occupying the position of the managing direc-
tor, by whatever name called.
As per Section 2(94) of the Companies Act “whole-time director” in-
cludes a Director in the whole-time employment of the company;”
As per Rule 2(1)(k) of the Companies (Specification of Definitions De-
tails) Rules, 2014, “Executive Director” means a whole-time director as defined in
clause (94) of Section 2 of the Act.
Thus, it become imperative for the existence of the relationship of em-
ployer and employee to get covered under clause (1) of the Schedule III of the
CGST Act, 2017.
There are also Directors in the Board of Directors of the Company for
whom sitting fee is paid. Such of those Directors for whom sitting fee is paid,
cannot, by any stretch of imagination, be construed as employee and therefore,
and such payment would most definitely attract GST payment under RCM.
In the case of Ram Prashad v. Commissioner of Income-Tax, 1972 (8) TMI 61
- Supreme Court, the Hon’ble SC has observed that there is no doubt that for as-
certaining whether a person is a servant or an agent, a rough and ready test is,
whether, under the terms of his employment, the employer exercises a supervi-
sory control in respect of the work entrusted to him. Further, the nature of em-
ployment of managing director may be determined by the articles of association
of a company and/or the agreement, if any, under which a contractual relation-
ship between the director and the company has been brought about, whereunder
the director is constituted an employee of the company, if such be the case, his
remuneration will be assessable as salary under Section 7. The similar view was
taken in Regional Director, E.S.I. v. Sarathi Lines (P) Ltd. on 29 January, 1997 (1998)
ILLJ 28 Ker the Hon’ble High Court of Karnataka.
The issue also came up in the Service Tax regime before Tribunals and in
the case of M/s. Allied Blenders and Distillers Pvt. Ltd. v. Commissioner of CST, Au-
rangabad, 2019 (1) TMI 433-CESTAT Mumbai it was held that it is the agreement
between the employer i.e. company and the Director would reveal the exact rela-
tionship between them.
In the case of M/s. Rent Works India Pvt. Ltd. v. CCE, Mumbai-V - 2016 (5)
TMI 786-CESTAT Mumbai, the Hon’ble Tribunal opined that the same depart-
ment of Government of India cannot take a different stand on the amount paid to
the very same person and treat it differently.
Hence, in the above judgments and following catena of other judgments,

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