Compounding under section 297

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

31 October 2013 Is there any exemption for holding subsidiary companies with respect to Section 297? Please quote relevant provision.

Thanks in advance!!

Ajay Mishra

Ajay Mishra (Expert)
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31 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]

Ajay Mishra

Ajay Mishra (Expert)
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31 October 2013 In your case, if both company are public limited companies or covered under the above case then section 297 will not apply otherwise it will be applicable.

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Querist : Anonymous

Querist : Anonymous (Querist)

01 November 2013 There are 2 private companies and one of them is the wholly owned subsidiary of the other. The holding company charges technical fee from the subsidiary company. In both the companies one of the shareholder is common and out of 4 directors in subsidiary company 3 are also directors in holding company. The paid up capital of both subsidiary and holding is Rs 1 crore and more. Is there any provision which can avoid CG approval.

Ajay Mishra

Ajay Mishra (Expert)
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01 November 2013 If you are charging technical fee which is at fair market value then such section will not apply, otherwise yes section 297 becomes applicable on your both company.

Querist : Anonymous

Querist : Anonymous (Querist)

29 November 2013 Hello Sir thank you for the reply, can you quote relevant provision as to why technical fee would not come under the purview of section 297?

Ajay Mishra

Ajay Mishra (Expert)
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29 November 2013 read section 297.

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Querist : Anonymous

Querist : Anonymous (Querist)

29 November 2013 i have read it a lo many times but not able to make out as to which exact provision would effect it..

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Querist : Anonymous

Querist : Anonymous (Querist)

03 December 2013 Hello Sir thank you for the reply, can you quote relevant provision as to why technical fee would not come under the purview of section 297?