Compliance certificate

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 October 2013 Dear All,

I have a doubt relating to compliance certificate.

We have unsecured loan taken from the related party of the company .

Now whether this will come under both Sec 297 and 293(1)(d) ???

SAMADHAN SHRIRAM

SAMADHAN SHRIRAM (Expert)
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09 October 2013 Unsecured loans from relative party- 297 or 293 (1) (d)
Following sections affected
Sec 292 power of boards
372A if related party is company
295 if related party is director- loan to director
Deemed dividend under income tax act.
S.293(1)d – if borrowing exceeds capital – Shareholders approval

Rate of interest - ?
According to 372A interest rate shall not be lower than the prevailing bank rate. While 40A(2)(b) holds that the A.O is at the discretion of disallowance of any excessive or unreasonable expenditure made by the assesses to the parties as given in the section. So he might or might not disallow based on his discretion. Hence best is to take the prevailing bank rates prescribed by RBI Act.
Section 297 applies to all companies, public as well as private. BOARD’S CONSENT AND CENTRAL GOVERNMENT’S APPROVAL FOR CERTAIN CONTRACTS IN WHICH PARTICULAR DIRECTORS ARE INTERESTED [Sec. 297]
Accounting standard AS- 18 related party also apply.

Querist : Anonymous

Querist : Anonymous (Querist)

09 October 2013 Sorry but i dint get your point .

Can you please elaborate more without taking interest into consideration

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Ajay Mishra

Ajay Mishra (Expert)
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09 October 2013
Section 297 does not apply to:

1. Giving or taking loans.
2.Contract in respect of immovable property (as it is not 'good' ).{Letter No. 9/4190-CL-X dated 27.03.1990}.
3.Contract between two public Companies.
4.Contract of employment of director or managing or whole time director.[ Circuler No.8/11/75-CL-V dated 27.03.1975]
5.Contract for employment of relative of director.
6.Contract entered into by the company with the dealer on principle to principle basis. [Circuler No. FM 8/297/56-PR dated 02-08-1956]
7. Professional services of the nature given by firms of solicitors and advocates, etc.[circuler No. 8/11/75-CL-V dated 05.06.1975]
8.hiring of office premises on rent as the transaction is in immovable property. [Department Clarification dated 10-09-1990]

SAMADHAN SHRIRAM

SAMADHAN SHRIRAM (Expert)
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10 October 2013 297 is applicable if company is NBFC