iNTEREST FREE LOANS

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

05 July 2010 Dear Sir
What are the consequences , if a private limited company pays interest free advances of Rs 30 lacs to the relative of the director.

Pl. guide me

Thanks

DR GAURAV GUPTA FCA, FCS, LL.B

DR GAURAV GUPTA FCA, FCS, LL.B (Expert)
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05 July 2010 payment to director's relative can be disallowed if it is covered u/s 40A(2) how ever if director is also holding substantial shareholding and company is having accumulated profits then it can be covered u/s 2(22)(e)of income tax act

Querist : Anonymous

Querist : Anonymous (Querist)

05 July 2010 Dear Gaurav Ji
I am asking about the loan given but not the interest paid ( it is rather just opposite to the interest paid).

Can you highlight about the limit of advance paid and chargeability of notional interest or whether Section 299 of the Companies act applicability etc etc.

Further Section 2(22)(e) says about benificial owner of shares of atleast 10% himself not about relative of the benificial owner

Pl.guide me with suitable supporting

With Regards

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