07 July 2011
A new Company is formed to provide investment or inter corporate loans their subsidiary companies or group companies.
My question is...
1) Should we Comply with section 372A of the companies Act. 2) Also is there any limit for such lending 3) Whether the lending will be covered under any of the provisions of the Income Tax Act?
We need our company to be an NBFC who can invest in the Subsidiary Companies.
08 July 2011
In case loan is given to a wholly owned subsidiary then provisions of sec 372A are not applicable.This sec is also not applicable for private limited companies/companies whose principal business is the acquisition of shares, stock, debentures or other securities (Like NBFC's) . If it is not the case then you need to follow sec 372A of companies Act. Their is a limit to lending under sec 372A and in case that limit is crossed you have to comply with the other conditions as laid down in sec 372A. Again their is a separate reporting in CARO for audit purpose. Under Income Tax their is no such condition laid down. But it is better to pay interest to the lender company after deduction of TDS for overcoming from undue questions asked in case of scrutiny.
The co. incorporated is a private co and registered as an NBFC but the companies to which it advances loans is not its wholly owned subsidiary or even subsidiary. The companies are sister concerns in the meaning that both the companies are subsidiaries of the same company.
Now with the above details what shall be the requirements under Companies Act, RBI directions and Income Tax Act?
CAclubindia
