Leonard Stone, Kt. , C. J. - (1.)THIS is a reference under Section 66 (1) of the Indian Income-tax Act and the question referred to us is : Whether in the circumstances of this case the remuneration of Rs. 40,000 received by the assessee from Messrs. Tata Sons Ltd. in the year of account is salary chargeable under Section 7 of the Indian Income-tax Act ?
(2.)THE assessment year was the year 1942-43, in respect of the accounting year, which is the calendar year 1941, in which year the sum of Us. 40,000 was received by the assessee in respect of her remuneration as a director of Tata Sons, Limited. This sum is made up of remuneration at the rate of Rs. 100 per month, and in addition, Rs. 38,800, being the assessee's share in the remuneration voted to the directors on May 5, 1941, at an annual general meeting of the company, pursuant to the power in that behalf contained in Article 97 of the company's articles. THE articles so far as material are as follows :
Article 92 provides, that the number of directors of the company should not be less than three nor more than ten and that the first directors of the company should he six persons whose names are therein set out, three of them being appointed for life, so long as they remained the registered holders of not less than 200 ordinary shares of the company, they are called "permanent directors" and the other three are what is described in the article as "ordinary directors. " Article 92a makes special provision with regard to Mr. Saklatvala who was one of the three ordinary directors. Article 93 is concerned with the appointment of other directors besides the six named in Article 92, and provides that the three permanent directors or their executors or administrators should have the power in the circumstances therein mentioned to appoint a permanent director. It was under this article that the assessee, who is the widow of Sir Ratan Tata (one of the three original permanent directors), was appointed in the year 1925 by Sir Ratan Tata's executors. Article 97 which is headed "directors' remuneration" is as follows: The remuneration of the Directors (other than the managing director, if any) shall he at the rate of Rs. 100 per mensem, and such further sum (if any) as shall he voted to them by the company in general meeting, and such remuneration shall be divided among the directors (other than as aforesaid) as they shall determine, or, failing agreement, equally. The directors shall also be entitled to be repaid all travelling and hotel expenses incurred by them respectively in or about the performance of their duties as directors, including their expenses of travelling to or from board meetings.

The only other article to which it is necessary to refer is Article 101 which provides that the business of the company shall be managed by the directors, who, in addition to the powers and authorities by the articles or otherwise expressly conferred upon them, might exercise all such powers of the company as therein mentioned.

(3.)THIS article must be read in conjunction with Regulation 71 of Table A of the Indian Companies Act, which is a compulsory regulation and applies to all companies by virtue of Section 17 of that Act. Regulation 71 is in these terms : The business of the company shall be managed by the directors, who may pay all expenses incurred in getting up and registering the company, and may exercise all such powers of the company as are not by the Indian Companies Act, 1913, or any statutory modification thereof for the time being in force, or by these articles, required to be exercised by the company in general meeting, subject nevertheless to any regulation of these articles, to the provisions of the said Act, and to such regulations being not inconsistent with the aforesaid regulations or provisions, as may be prescribed by the company in general meeting; but no regulation made by the company in general meeting shall invalidate any prior act of the directors which would have been valid if that regulation had not been made.
From the agreed statement of facts contained in the reference it appears that; All the directors, except the assessee-lady, are full-time directors of the company and attend office every day. Singly or together they look after the management of the concerns taken over by the company for management. The assessee-lady, however, does not attend office every day nor is she allotted any day to day work. She is however a resident of Bombay and attends the board's meetings and is also consulted in all important matters by the directors. As a permanent director she possesses residual powers, including the power of veto described in the articles of association. None of the directors is paid any fees or remuneration for attending the board's meetings.

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