1. [The order was passed by M. Karim, Accountant Member].- These are direct appeals against the order of the Income Tax Officer. The main objection of the appellant was against addition of Rs. 23,200 under rule 39(2) of the Income Tax Rules which was allegedly without any justification. For 1970-71 the amount added-back was Rs. 23,800. The facts of the case are that the assessee received remuneration from G. Ltd., U. Containers Ltd. B. Ltd. And R.
2. Management Ltd. The assessee's claim was that he was an employee of C. Ltd. (Now G. Packages Ltd.) from 1-7-1952 and was appointed a Director of G, Packages Ltd. In August. 1967. The Income Tax Officer treated the appellant as employee simpliciter up to the assessment year 1967-68, but from 1968-69 onwards he thought that the assessee was a mere Director and not an employee within the meaning of Rule 39(2) of the Income Tax Rules. For each of the years under consideration the Income Tax Officer allowed earned income relief at Rs. 6,000 which could only be allowed to a person receiving salary. Therefore by allowing the maximum earned income relief the Income Tax Officer accepted that the income was to be assessed under the head salary which in turn meant that the assessee was an employee of the companies, or at least of one company.
3. Under rule 39(2) a Director working whole time for one company was included in the definition of employee. This only showed that if a Director was working whole time for at least one company he was to be treated as an employee. The department's view was that if a Director was working in more than one company he was not working whole time for one company. This view is erroneous for more than one reason. A person can be working whole time for more than one company because he has only to be on the top to be a whole time employee and not necessarily be working for one company for all the 24 hours of the day. Again if a person is working whole-time for one company and part time in any other company he cannot be denied the status of "employee".
4. Therefore we are unable to accept the departmental view on the matter and direct that additions may be made as perquisites under sub-rule (1) of Rule 39 of the Income Tax Act and not under sub-rule 2 of the said Rule.
5. In 1969-70 the Income Tax Officer added back as company's contribution a sum of Rs. 6,000 although the company had contributed only Rs. 3000 to the Provident Fund. We therefore reduce it to Rs. 3,000. The assessee's contribution to the Provident Fund could of course not be added-back.
6. For 1970-71 the assessee's dividend income was wrongly taken at Rs. 7,001 in place of Rs. 4,007. The dividend income should now taken at Rs. 4,007 only. The Income Tax Officer wrongly or inadvertently ignored assessee's claim for investment under Section 15(c). We direct the Income Tax Officer to allow the investment under Section 15(c) according to law.
7. The appeals are disposed of as above.