JUDGMENT
R.K. Abichandani, J.
1. The assessee, a public limited company, in its returns for the assessment years 1972-73 and 1973-74, claimed deduction of remuneration paid to the directors, besides directors’ fees and committee board’s meetings fees. The Income-tax Officer held that the ceiling of Rs. 72,000 prescribed under the provisions of section 40(c)(i)(A) of the Income-tax Act, 1961 (hereinafter referred to as “the said Act”), applied with reference to the remuneration as well as fees of the directors’ and committee meetings paid by the company to the directors. He, therefore, disallowed a sum of Rs. 31,500 in all for the assessment year 1972-73 and a sum of Rs. 31,500 in all for the assessment year 1972-73 and a sum or Rs. 28,000 for the assessment year 1973-74. In the appeals filed before the Appellate Assistant Commissioner, he took the view that the directors fees and committee meeting fees were not covered by the expression “remuneration or a benefit or an amenity” within the meaning of section 40(c)(i)(A) of the said Act. He, therefore, restricted the disallowance to Rs. 16,00 for the assessment year 1972-73 and to Rs. 16,000 for the assessment year 1973-74 being the excess amount of remuneration paid to each of the directors over the prescribed ceiling of Rs. 72,000.
2. The Revenue challenged the orders of the Appellate Assistant Commissioner before the Tribunal and the Tribunal found that the Income-tax Officer was justified in coming to the conclusion that the ceiling prescribed under the said provision was to be applied by working out the total payment made by the company to the directors by way of remuneration as well as fees paid for attending company and board’s meetings. The Tribunal, therefore, reversed the decision of the Appellate Assistant Commissioner and partly allowed both the appeals.
3. In the above background, the Tribunal has referred for the opinion of this court under section 256(1) of the said Act the following question in the two reference applications, namely, Reference Applications Nos. 70 and 72/ (Ahd.) of 1979 :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the ceiling of Rs. 72,000 prescribed under section 40(c)(i)(A) of the Income-tax Act applied to directors’ meeting fees and directors’ fees for considering the disallowable excess ?”
4. Section 40(c)(i)(A), as it was operative during the relevant period, read as under :
“Section 40. – Notwithstanding anything to the contrary in sections 30 to 39, the following amounts shall not be deducted in computing the income chargeable under the head ‘Profits and gains of business or profession’, – . . . .
(c) in the case of any company –
(i) any expenditure which results directly or indirectly in the provision of any remuneration or benefit or amenity to a director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be,. . . .
if, in the opinion of the Income-tax Officer, any such expenditure or allowance as is mentioned in sub-clauses (i) and (ii) is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom, so, however, that the deduction in respect of the aggregate of such expenditure and allowance in respect of any one person referred to in sub-clause (i) shall, in no case, exceed –
(A) where such expenditure or allowance relates to a period exceeding eleven months comprised in the previous year, the amount of seventy-two thousand rupees :”
5. There is no dispute about the fact that the amount which was paid as board of directors meetings’ fees or board meetings fees to the directors of the assessee-company was for the services which were rendered by them as such directors. It will be noticed from the provisions of section 309(2) of the Companies Act, 1956, dealing with the topic of remuneration of directors, that a director may receive remuneration by way of a fee for each meeting of the board, or a committee thereof, attended by him. Thus, the fee which a director receives for attending any committee meeting is described by the statute itself as his remuneration. It was tried to be contended that, under sub-section (2) of section 198 of the Companies Act, the overall maximum remuneration indicated in the said provision was exclusive of any fees payable to directors under sub-section (2) of section 309 of the Companies Act, and, therefore, the same effect should be given while construing the provisions of section 40(c)(i)(A) of the said Act. It is difficult to accept this contention for the simple reason that the provisions of sub-section (2) of section 198 under which such fees are to be excluded while computing the maximum managerial remuneration to be given to its directors cannot control the provisions of the Income-tax Act which operate in an independent and separate field. Even though the remuneration payable by way of fee to the directors for attending meetings may not be included while calculating the overall maximum managerial remuneration payable to the directors under section 309 of the Companies Act, it cannot be said that such remuneration would not be taxable under the said Act. To remunerate would mean to make some return for service, etc., or to reward a person or to pay for services rendered or work done. (See the Oxford English Dictionary, Volume VIII). In this context, we may refer to the observations of Justice Blackburn in The Queen v. Postmaster-General [1876] 1 QBD 658, at 663, while considering the meaning of the word “remuneration”, “but I think the word ‘remuneration’ is a wider terms and means a quid pro quo. If a man gives his services, whatever consideration he gets for giving his services seems to me a remuneration for them.” “Remuneration”, in our opinion, would include all that is quantifiable in money and paid to a person for his services or work. There is no dispute about the fact that the fees which were paid as directors’ fees or board meetings’ fees were in respect of the services rendered by the directors in their capacity as directors. It is, therefore, clear to us that such fees would fall within the meaning of the word “remuneration” under section 40(c)(i) of the said Act and the Tribunal was, therefore, right in holding that the directors’ fees and the board meetings’ fees paid to the directors by the assessee-company were to be included as was done by the Income-tax Officer.
6. Reliance was placed on behalf of the assessee on the decision of the Punjab and Haryana High Court in CIT v. Avon Cycles (P.) Ltd. [1980] 126 ITR 448, in which it was held that commission paid to the firm in which the directors of the company were partners, in lieu of the services rendered by the firm in its business activity cannot be said to be “remuneration” or “benefit” under section 40(c) of the Act. In the instant case, the fees for attending the meetings of board of directors and the meetings of the committees are clearly remuneration paid to the directors and, therefore, it is not necessary for us to express any opinion on the decision in Avon Cycles’ case [1980] 126 ITR 448 (P&H), in so far as it holds that payment by the company to a firm in which directors are partners does not fall within the ambit of the provisions of section 40(c) of the said Act. In CIT v. Chotanagpur Engineering Works Ltd. [1987] 163 ITR 705 (Patna), on which reliance was placed on behalf of the assessee, the issue involved was entirely different and it was in the context of deposits which were made in the names of relations of directors and for which interest was disallowed by the Income-tax Officer under section 40(c) that the Tribunal held that the case did not fall under section 40(c) as the words “remuneration or benefit or amenity” were not applicable to the expenditure on such interest payments. The said decision, therefore, cannot help the assessee. In CIT v. Sudarsan Chits (India) Ltd. [1990] 182 ITR 94 (Ker), where the question which arose for consideration was whether the payment made by the company to its holding company under an agreement for the use of services of the managing director was an allowable deduction, it was held that the payment was made on contractual basis and was incurred on account of business expediency and section 40(c) was not applicable in such a case. This decision also cannot help the assessee because, in the present case, the payment made to the directors was clearly remuneration and squarely fell within the provisions of section 40(c). In India Jute Co. Ltd. v. CIT [1989] 178 ITR 649 (Cal), where guarantee commission was paid to the father of the director, it was held that the remuneration was paid in respect of the liability which was undertaken as a guarantor and could not be described as a benefit within the meaning of section 40(c) of the said Act. The said decision also, therefore, stands on a different footing and cannot help the assessee.
7. Since there were two reference applications mentioned above in which a common question has referred to this court, we direct that the reference be split into two and Income-tax Reference No. 162 of 1979 be treated as a reference in respect of the matter arising from Reference 70 of 1979 for the assessment year 1972-73 and the reference in respect of assessment year 1973-74 which arises from Reference Application No. 72 of 1979 be numbered as Income-tax Reference No. 162A of 1979.
8. For the reasons indicated herein before, we answer the question referred to us in the affirmative and against the assessee. Both these references stand disposed of accordingly.