salary by directors as % of profit

This query is : Resolved

Virendra Sahdev (Querist)
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04 June 2011 Dear Sir,

There are two directors in a private limited company, both of whom have invested equal amounts in the company. They have entered into an agreement that each of them will draw 50% of Profit every month as their remuneration.

Is this agreement OK and will the assessing Officer accept it as the company will have no profit left.

Thanks,

Virendra Sahdev

CS Bijoy

CS Bijoy (Expert)
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04 June 2011 According to me the Director's remuneration should not be more than 5% of the last three financial year profit but they received more than, so i think it is not possible.