31 August 2013
If a director or member of a company has SUBSTANTIAL INTEREST in the business of the ASSESSEE, then the company will be specified person in relation to the assessee for the purpose of Section 40A(2).
Accordingly, facts of the given case are as under:
X is a DIRECTOR of Annu Ltd. X holds 25% shares in Hari Ltd. Hari Ltd makes payment to Y (a director of Annu Ltd.)
Y is NOT specified person in relation to Hari Ltd.
Here Annu Ltd is specified person in relation to Hari Ltd.
If Hari Ltd enters into transaction with Annu Ltd then Section 40A(2) will be attracted.
If Hari Ltd enters into transaction with Mr. X then Section 40A(2) will be attracted.
Accordingly Section 40A(2) is NOT attracted when Hari Ltd makes payment to Mr. Y.
31 August 2013
As per 40A(2)(b) (v)a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the assessee; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member; as per this all directors of annu ltd is also covered
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