Explanation 2 to sec 64(1)

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Neethu Abraham (Querist)
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30 May 2012 If an individual entitled to 20% of the profits of a company and having LESS THAN 20% voting power, will he treated as an individual having substantial interest according to explanation 2 to sec 64(1)?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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30 May 2012 Where the concern is a COMPANY, the individual must hold 20% of the shares of the company.

The fact that he is entitled to 20% of profits does not amount to substantial interest for the purpose of Section 64(1).