Ganeshbabu K (Audit and Tax Advisory) (48564 Points)
19 December 2012please clarify my question,
it was a limited company,
payment was made towards directors personnel purposes,,and till now it amounts to 80 lakhs,and this amount was accounted as advance made to director is it permissible to do so,
please clarify me as per act
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 19 December 2012
Personal expenses paid to directors are considered legal as per the Companies Act, provided that they are authorized by the AOA and a resolution to that effect is being passed at the Board Meeting. Any personal expenses other than the above would be against the law. the amount wuold not matter as long as it is authorized by the company. In such case the auditor would have to report.
Ganeshbabu K
(Audit and Tax Advisory)
(48564 Points)
Replied 19 December 2012
LET ME KNOW AS PER WHAT SECTION WE CAN DO SO,,
AS I NEED TO GIVE OPINION TO COMPANY I NEED TO KNOW AS PER WHAT SECTON
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 19 December 2012
there's no section as such for the opinion whihc you would give. It's all about complying the legal formalities, such as passing the Board Resolution, adhering to the Articles etc... becasaue if the tax authorities question about the this then the company would be able to provide teh requried evidence.
Yes but from reporting point of view as per section 227(1A) the auditor has to make specific inquiries about the six clauses, of whihc one is relating to eprsonal expenses. Also as per section 227(4A) the auditor hs to report as per CARO if any personal expenses are being debited to P&L.
Ganeshbabu K
(Audit and Tax Advisory)
(48564 Points)
Replied 19 December 2012
but here the case is, this expenditure was not debiting to profit and loss account,
but it was accounted as advance payment to director over the years as of now it is accumulated to 82lakhs.
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 19 December 2012
what is the reason for accumulating the expenditure & ot debiting to P&L.
Ganeshbabu K
(Audit and Tax Advisory)
(48564 Points)
Replied 20 December 2012
actually it is accounted as advance made and same was repaid by director later
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 20 December 2012
then in that case it would be considered as deemed dividend u/s 2(22)(e)in the hands of director.
Ganeshbabu K
(Audit and Tax Advisory)
(48564 Points)
Replied 20 December 2012
so what are the implications on company,
say dividend distribution tax came into force
Landmark Judgments: Important Provisions of the EPF & ESI Act interpreted by the Honorable Supreme Court of India
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