Sitting Fees Paid to Non-Employed Director Not Amounts to Salary, Liable to Service Tax: CESTAT [Read Order]

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has stated that the payment made to a non-employed director as director's sitting fees is not amounts to salary and are liable to the levy of Service Tax.

The assessee, Jsl Industries Ltd submitted that regarding the payment made to the whole-time Director, who is employed with the company, the said remuneration was paid as salary and treated as such for the purposes of income tax, with TDS deducted. This is also evident from the Director's income tax return.

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The assessee submitted that they do not dispute the tax liability for non employed Directors. Accordingly, the assessee has discharged the Service Tax on the remuneration paid to the non-employed Directors. However, the lower authorities did not consider this, citing a lack of proper correlation. The assessee has submitted Annexure-C along with their synopsis, which clearly shows that Service Tax has been paid on the remuneration paid to the non-employed Directors.

It was observed that any remuneration paid to a whole-time director in the form of salary is not liable to service tax. However, payment made to a non-employed director as sitting fees is not considered salary; therefore, such fees are subject to service tax.

The two member Bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) observed that the payment made to non-employed director as a director sitting fees since the same is not in the nature of salary, the director fees is liable to levy of Service Tax. The assessee has not disputed the Service Tax liability in respect of the remuneration paid to such directors.

The Tribunal reviewed the reconciliation chart produced by the assessee to establish a proper correlation regarding the payment of service tax and observed that, according to the chart, the assessee has discharged the service tax. However, this needs to be verified by the adjudicating authority.

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The Bench remanded the matter to the adjudicating authority to verify the correctness of the reconciliation related to the service tax demand on the remuneration paid to non-employed directors and l allowed the appeal.

To Read the full text of the Order CLICK HERE

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