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Query on caro applicability

Anuj Shah (Article/CA Final Student) (55 Points)

29 October 2012

CARO is applicable if ANY of the above is satisfied:

1) a private limited company with a paid-up capital and reserves not more than rupees fifty lakh;

2)does not have outstanding loan exceeding rupees twenty five lakhs from any bank or financial institution;

3) does not have a turnover exceeding rupees five crores at any point of time during the financial year.

MY QUERY is that suppose a company not satisfying condition no. 2 and 3 and in case of first condition if PAID UP CAPITAL + Reserves are less than 50 lacs say around 40 Lacs BUT if there is SHARE APPLICATION MONEY PENDING ALLOTMENT MORE THAN 10 LACS SAY 11 LACS , WILL CARO BE APPLICABLE ???

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2 Replies

Radhe (Student) (192 Points)
Replied 30 October 2012

No CARO ll not be applicable, Reason: Bcoz for the first point satisfaction of paid capital is very imp and app pending for allotment are not even authorised by directors of company hence when allotment has not yet made and not yet confirmed the question of paid capital doesnt arises.

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(Guest)

first of all CARO not applicable to Private limited company if all the following conditions are satisfied:

Paid up share capital and reserves is → not more than Rs. 50 Lacs (it excludes share application money and includes all revenue reserves including capital reserve and revaluation reserve).

Further debit balance in P&L A/c. should be deducted only from the revenue reserves and miscellaneous expenditure appearing in the Balance Sheet (to the extent not written off) should not be deducted either from the paid up capital or reserves.

It has not accepted any Public deposits (within the meaning of section 58A).

Turnover or Services rendered were → not more than Rs. 5 crore. Trade Discount and sales return should be deducted. Also, Sales Tax and Excise Duty can be deducted if it has been booked separately to Sales Tax A/c or Excise Duty A/c (with payments to authorities being debited to respective accounts).

Commission paid to third party for promoting sale cannot be deducted.