Loan given by a pvt. ltd. co to sister concern

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CA SAJANA (Querist)
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14 June 2013 Dear Sir,

Can a Private Limited Company provide temporary loan to it's sister concern companies..? Is there any violation in provisions of either Companies Act or Income Tax Act in doing so?

Thanks and best regards...
Sajana

CA Alexandar Gazi

CA Alexandar Gazi (Expert)
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15 June 2013 Dear Professional colleague,

Restriction imposed U/s 372A (1) on giving loans or guarantees to other companies or on making investment in the shares of other companies do not apply U/S 372A (8)to a private company unless it is a subsidiary of a public company

Restriction imposed U/S 295 (1) on loans to directors & relatives, etc. does not apply U/S 295 (2) to a private co. unless it is a subsidiary of a public co.

Sec. 77 does not prohibit on a private company, which is not a subsidiary of a public co., to provide financial assistance to anyone for purchasing or subscribing for its own shares or of its holding co.

Therefore, a private ltd. co., not being a subsidiary of a public co., can provide temporary loan to its sister concern. There is no restriction on it.

Thanks

Alexandar Gazi

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CA SAJANA

CA SAJANA (Querist)
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15 June 2013 Thank you sir,

Thanks for your valuable advice...

Regards,

Sajana

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Guest (Expert)

18 June 2013 Thanks expert for such a perfect reply to query.

Message likes : 1 times