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who r d persons u/s 40 A (2)(b) in case f PVT ltd co

Rahul Mittal (student) (39 Points)

23 July 2010

who r d persons u/s 40 A (2)(b) in case f PVT ltd co..?

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DT Fundas - Tarun rustagi ( Author) (1150 Points)
Replied 23 July 2010

dear friend

they are directors or relative of directors in case of a company whether pvt or public.

regards

tarun rustagi

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Harpreet (* * * * * *) (1670 Points)
Replied 23 July 2010

FInd the summary u/s 40a(2)

Amounts not deductible in respect of payment to Relatives [Sec. 40A(2)]

As per the provisions of this section any payment made by an assessee to any of his ‘Relatives’ in respect of any expenditure is disallowable to the extent it is considered excessive, or unreasonable, having regard to the market value of Goods or Services or Facilities etc.

Here the following definitions need to be considered for better understanding:

‘Relative’ is defined to include Husband, Wife, Brother, Sister or any other Lineal Ascendant or Descendant; and

‘Substantial Interest’ is defined as a situation wherein a person is the beneficial owner of at least 20% or more Equity Voting Power (in case of Company) or is entitled to 20% or more of the profits. (in any other case).

The extent of disallowablity is to be decided by the assessee himself and proportionate expenditure be disallowed at the time of filing of his Self Assessment Tax u/s 139 of the Income Tax Act.

Thus, I don't think that the transaction falls under the category of payments to relatives u/s.40A(2)(b).

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DT Fundas - Tarun rustagi ( Author) (1150 Points)
Replied 23 July 2010

dear harpreet

don't u think he is just asking about the defiantion of relative.i gave my answer according to this view that if the company is a assesse then who are relatives of company.

A.O. will decide that the payment is unreasonable or not.it not depends on assessee.make me correct if i am wrong.

Vijay Parmar (student) (261 Points)
Replied 23 July 2010

hi...

directors or relative of directors are covered under 40(a)2b.

regard...

Abhimanyu Bind (CA Final Student & Audit Assitant) (2051 Points)
Replied 23 July 2010

Rahul

Sec. 40 A(2) provides that where the assessee incurs any expenditure in respect of which a payment has been or is to be made to a relative or to an associate concern so much of the expenditure as is consider to be unreasonable or excessive shall be disallowed by A. O.

And now the word "relative" has been defined in the sec.2(41) of the Act, In relation to a company (whether pvt or public), Relationship will have to be reckoned for the purpose, with reference to the directors or persons having substantial interest in the company.

Substantial interest in case of business carried on by a company, such person is, at any time during the previous year, the beneficial owner of equity shares carrying not less than 20% of voting power.

For further clarification and for knowing about other cases you may ask me. Thx....

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(Guest)

Director of the company or any relative of the director
A person in whose business or profession the company or any of its director or relative of such director has substantial interest.

(Guest)

Originally posted by : Deep @ k Gupt/\
	Director of the company or any relative of the director A person in whose business or profession the company or any of its director or relative of such director has substantial interest.

Vishal Khanvilkar (Student) (202 Points)
Replied 24 July 2010

Can someone please tell me recurring deposit matured is exempt under which section??

DT Fundas - Tarun rustagi ( Author) (1150 Points)
Replied 24 July 2010

dear vishal can u plz specify what kind of recurring deposit

Kalpesh Chauhan, (Tax Assistant (Accounting Technician CA FINAL CS PROF. PROG. B.Com)) (8311 Points)
Replied 26 July 2010

Originally posted by : Abhimanyu Bind
	Rahul Sec. 40 A(2) provides that where the assessee incurs any expenditure in respect of which a payment has been or is to be made to a relative or to an associate concern so much of the expenditure as is consider to be unreasonable or excessive shall be disallowed by A. O. And now the word "relative" has been defined in the sec.2(41) of the Act, In relation to a company (whether pvt or public), Relationship will have to be reckoned for the purpose, with reference to the directors or persons having substantial interest in the company. Substantial interest in case of business carried on by a company, such person is, at any time during the previous year, the beneficial owner of equity shares carrying not less than 20% of voting power. For further clarification and for knowing about other cases you may ask me. Thx....