Section 180(1)(c)- Borrowings by company
This query is : Resolved
05 July 2022
While calculating the threshold limit of borrowings by a company, the temporary loans are excluded. My query is whether Trade credit, Stand by letter of credit, Overdraft and bank guarantees forms part of the term Temporary loans?
25 July 2022
In explanation to s.180(1)(c), "Temporary Loans" are defined to loans repayable on demand or within six months from the date of the loan such as short-term, cash credit arrangements, the discounting of bills and the issue of other short-term loans of a seasonal character.
The explanation gives only the illustrations with the defining feature of Temporary Loan being a loan repayable on demand or within six months from the date of the loan such as short term. So, if trade credit satisfies this condition, it can fall within the ambit of Temporary Loan and not within the meaning of money already borrowed. Position with regard to Stand By Letter of Credit and Bank Guarantees may be debatable as they are Non-Fund based limits. I do not see them as loans within the meaning of s.180(1)(c) (Although they may be loans for other purposes); rather they are simply in the nature of guarantees and liability of a company will arise upon demand by the bank once bank pays under the bank guarantee.
The explanation gives only the illustrations with the defining feature of Temporary Loan being a loan repayable on demand or within six months from the date of the loan such as short term. So, if trade credit satisfies this condition, it can fall within the ambit of Temporary Loan and not within the meaning of money already borrowed. Position with regard to Stand By Letter of Credit and Bank Guarantees may be debatable as they are Non-Fund based limits. I do not see them as loans within the meaning of s.180(1)(c) (Although they may be loans for other purposes); rather they are simply in the nature of guarantees and liability of a company will arise upon demand by the bank once bank pays under the bank guarantee.
25 July 2022
Thanks for the clarification
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Applicability
- Where to show the RCM on Rent paid to unregistered landlord
- Is Aadhar PAN linking required for opening bank account?
- CPC Processing IT Return for AY 2023-24 without recognizing the Taxation Option under New Regime
- TDS NUMBER SURRENDER
- Gst Sales of FY 2023-24
- Offsetting interest income against derivative trading losses
- Application of 115BAC
- Legal heir raised refund , but refund issued to the closed account of deceased.
- RCM - commercial rent paid to URP under GST
- Whether still royalty
- 20% OF DEMAND PAYMENT IN APPEAL
- Issue of gst e invoice
- Interchangeable words in accounts
- Adjusted profit/Loss in the case of LLP and Pvt. Ltd.company
- How to adjusted advances given or receipt
- Foreign vendor without PAN unable to to register due to non receipt of OTP on foreign number ?
- 133(6) DIN INVALID format error - ->WHERE TO REPLY 133(6) notice?
- Query for dubts
- Regarding Resignation by Auditor from Pvt. Ltd.
Trending Online Classes
-
Excel Mastery Program
CA Rishabh Pugalia
CAclubindia
