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Section 293A of Companies Act 1956 (Corporate Law)

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This query is : Resolved


( Author )
26 September 2010

I want to know whether there is STILL violation of Section 293A of Co.'s Act,1956 where, ABC co. Pvt.Ltd(which is not completed 3 financial years since incorporation & is a non-Govt.Co.) has paid to a political party on behalf of XYZ Co.Pvt.Ltd (which has completed more than 4 financial years),in such case whether ABC Co.Pvt.Ltd has voliated the said provision of the act?

IN the books of ABC CO.PVT.LTd,accounting entry

XYZ Co.Pvt.Ltd A/c Dr. Rs. 50,00,000.00
To Bank A/c Rs.50,00,000.00
Being chq. drawn in favour of political party,as the said amt.is paid on behalf of XYZ Co.PVtLTD.

In the books of XYZ co.Pvt.LTd,accounting entry
Donation A/c Dr. Rs. 50,00,000.00
To ABC Co.Pvt.LTd 50,00,000
Being paid donation to political party ,the said amt is paid by ABC co,pvt,ltd on behalf of the company




Jagruti (CS)

( Expert )
27 September 2010

Yes, ABC can make as it political contribution as it is making payment on behalf of another Comapny. Also make a note of same in Board Meeting.

For XYZ company political contibution need to be approved in Board Meeting and it should not exceed 5 % of average net profit as calculated as per Sec 349 & 350 of co's Act. of preceeding 3 year.


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