372A

This query is : Resolved

Guest

Guest (Querist)

28 May 2010 A holding co. is meeting out the expenses of the Subsidiary and debiting to Loans and advances.

It is not a wholly owned subsidiary.

whether it is a loan for the purpose of Section 372A?

Please clarify

Aditya Maheshwari

Aditya Maheshwari (Expert)
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28 May 2010 Only loans given to wholly owned susidiary is exempt not otherwise. Hence it is a loan given for the purpose of Section 372A if the holding company is not a private company

Guest

Guest (Querist)

02 June 2010 The said comapany is Public Ltd.

And Sec 372A is applicable.

In the said case they are maintaining two separate a/c by the following names:

1.Subsdiary-Expenses recoverable
2.Subsidiary-Loan a/c

only for the second one they are charging interest.

So is there a violation of Sec 372A in the first one i.e expenses a/c

Aditya Maheshwari

Aditya Maheshwari (Expert)
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02 June 2010 I think it would be a current account transaction i. e. business transaction and no a loan transaction and hence it should not be violative of Section 372A.

If the limit as specified in the section is being crossed then you can pass a resolution in the general meeting for granting loans in excess of the limits specified so that u do not face any problem in future if u cross the limit.

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