Service tax on director remuneration

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CA. SANDEEP SHARMA (Querist)
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02 April 2016 Dear experts
please spare your valuable time in giving advice to my query

1) A pvt ltd company is paying remuneration of Rs 5 lakh to its director who is also shareholder. does this remuneration comes under purview of reverse charges ( refere notification no 45/2012) . no sitting fees or commission is paid. the payment is purely on account of employee employer relationship.

2) The same director is also having rental income in his individual name amounting to Rs 8 lakh per annum . How to calculate basic exemption limit amount of 10 lakh in this case. Does the value of remuneration under reverse charge will be added to Rs 8 lakh rental income for the purpose of calculation of basic exemption limint.

Thanks in advance.
CA Sandeep Sharma

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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02 April 2016 1 No service tax applicable to whole time director and the payment is purely on account of employee employer relationship.
2 In view of the above no service tax payable on 8 lacs.

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CA. SANDEEP SHARMA

CA. SANDEEP SHARMA (Querist)
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02 April 2016 Thanks for the prompt action.
meanwhile i checked it and found worth sharing it.

Section 65B: Interpretation
(44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include—
(a) an activity which constitutes merely,––
(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or
(ii) a transaction in money or actionable claim;
(b) a provision of service by an employee to the employer in the course of or in relation to his employment;
(c) fees taken in any Court or tribunal established under any law for the time being in force.
Explanation 1. — For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to,––
(A) the functions performed by the Members of Parliament, Members of State Legislative, Members of Panchayats, Members of Municipalities and
Members of other local authorities who receive any consideration in performing the functions of that office as such member; or
(B) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or
(C) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or State
Governments or local authority and who is not deemed as an employee before the commencement of this section.
Explanation 2.–– For the purposes of this Chapter,—
(a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons;
(b) an establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of
distinct persons.
Explanation 3.— A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an
establishment in that territory;

clause 44(b) a provision of service by an employee to the employer in the course of or in relation to his employment;

i think from that it is cleared no service tax either directly or under reverse charge.

thanks in advance

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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02 April 2016 Thanks for sharing...............

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