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Sec185 of com act 13
Sec 185 of com act 13 say that advance any loan including any loan represented by a book debt to a specified person treated as loan to director .......
Qes - A com offer flat to MD who pay 50% amount immediately & contract to pay balance amount in installmemt .Does this amount to loan to director as per sec 185 of com act 13?
Replies (3)
No. It does nt amount to 'loan to director'. It amounts to credit sale resulting in a debt. The same facts were decided in the case of Dr.Fredie Ardeshir Mehta Vs UOI. So, sec 185 does nt apply to the above transactions.
credit sale treated as a book debt ( debtor)
Whether a particular transaction is in the nature of loan or not will depend upon facts and circumstances of each case. Bombay High Court in the case quoted above had held that sale on credit is not a loan. We have to consider here whether final sale deed has been executed in favour of the MD without getting full amount or only an agreement to sale has been executed. If only agreement has been executed, there should be no problem. However, if final sale deed has been executed, the question will arise whether it is a common practice to sell immovable property on credit? If not, why the transaction should not be treated as a loan?
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