Dear Anshul,
If the expenses in Delhi are incurred for the Company then it can be adjusted against the loan...
As far as Compliances are required, since it is a Private company nothing much just the Borad has to approve this adjustment in the Board Meeting..Further the information should be disclosed as a foot note to Balance Sheet in terms of AS-18, RELATED PARTY DISCLOSURES..
AUDITOR SHALL MENTION THE FACT IN THE TAX AUDIT REPORT NOW THIS WAS MY QUERY WHICH I HAD POSTED ON TAX FORUM WHETHER SEC 269T GETS ATTRACTED IN THIS CASE(i:e Repayment of Loan otherwise than by A/c payee Cheque/Draft) - I M NOT SURE ON THIS.........
But if the Director is also the shareholder in the company(with 10% or more shares) then Sec 2(22)(e) comes in picture & It will be treated as Dividend to the extent of the reserves of the company.