11 December 2010
As per the one news letter, posting the same Q.A company, has withdrawn cash Rs.45 Lacs from the company current a/c in single transaction to pay a ransom of same amount to the kidnappers who threatening for kidnapping one of the director of the company.The amount has been paid. Director is key managerial person of the company.
The Director has lodged an FIR with police. FIR also mentioning the same amount of payment mentioning the name of director Now my question is. 1.what will be the treatment of the same in the books of accounts of the company 2.Can we treat this sum as advance to director? will it attract Sec 269SS? 3.Can the company book this amount as an expenditure? will sec 40A(3) attract?
11 December 2010
1. Although this is not a valid transaction, but if the company has released this payment after the approval by competant authority, and also a resolution has been passed by the board, It should be treated as security expenses as non-receurring expenditure.
2. this is a Advance or not depend on the company.
3. It is very difficult to say whether sec 40A(3) will be applicable or not. This all depends on police verification report and other documents and the circumstances , place where the amount was paid.
11 December 2010
As far i think it will be treated as advance to director coz under no acts it is legal to pay ransom to kidnappers ,it is also crime and no matter either resolution has been passed for the same or not . And Mr .Shailesh can you plz tell me who is the competent authority to give permission to pay ransom , i think there is no competent authority to do so. Further it is again no matter that FIR been lodged or not . And how it can be treated as security expanses ? security expanses is allowed for security and not for paying ransom to kidnappers . Thanks
CAclubindia
