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Applicability of caro to pvt ltd co.

Sachin S (manager) (25 Points)

21 August 2011

Can somebody help me out for a clarification on following?

as per S. 227 (4A) , Pvt ltd co. is excluded from CARO applicability subject to following conditions

1. paidup capital and reserves does not exceeds 50 lakh AND

2. Turnover exceeds Rs. 5 crore AND

3. Loans form banks/FI exceeds 25 lakh.

My query is whther all the conditions needs to be satisfied together. And what happens in following conditions

If loans exceeds Rs. 25 lakh during Apr 2010 and letter on reduced below 25 lakh due to repayment. and later on other conditions satisfied during say sep 2010.

whether 227 (4A) applicable to this co....

Please help to answer alongwith reference..

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7 Replies

Sumit Grover (Chartered Accountant ) (3652 Points)
Replied 21 August 2011

1) yes, all the conditions have to be simultaneously satisfied...

2) These limits hav 2 be chckd at any point of tym during the financial year

So, in case, the LOAN amount exceeds Rs 25 lakh(though later reduced),

bt still CARO will be applicable to such pvt ltd company

plz correct me if m wrng

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Sachin S (manager) (25 Points)
Replied 21 August 2011

Thanks Sumit but just one doubt...

Since all the conditions needs to be satisfied simultaneously, then if loan reduced later on then how can it will be applicable. Because when loan was exceeding Rs. 25 lakh that time other conditions were not satisfied e.g. turnover was below limit. when turnover exceeded the limit before that loan has been repaid.

kindly guide on issued of satisfation of conditions at one time.

Sumit Grover (Chartered Accountant ) (3652 Points)
Replied 21 August 2011

In nutshell, it can be said that if at any point of tym during FY, any of the conditions is violated, then CARO becoms applicable to Pvt Ltd company......

2 Like

vaibhav (CA & CS) (577 Points)
Replied 21 August 2011

yes sumit you are right.

If any of the condition is violated at any movement of time within the FY the CARO wil become applicable. it is immaterial whether the loan which was exceeding the limit was reduced within the limit by repayment.

In that case also CARO will be made applicable.

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