40a(2)(b)

This query is : Resolved

chillakuru chaitanya (Querist)

31 August 2013 If x ,a director of annu ltd holds 25% of voting rights in hari ltd.If hari ltd makes payment to y a director of annnu ltd.

Whether y comes under relative of hari ltd.
please clarify

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

31 August 2013 If a director or member of a company has SUBSTANTIAL INTEREST in the business of the ASSESSEE, then the company will be specified person in relation to the assessee for the purpose of Section 40A(2).

Accordingly, facts of the given case are as under:

X is a DIRECTOR of Annu Ltd.
X holds 25% shares in Hari Ltd.
Hari Ltd makes payment to Y (a director of Annu Ltd.)

Y is NOT specified person in relation to Hari Ltd.

Here Annu Ltd is specified person in relation to Hari Ltd.

If Hari Ltd enters into transaction with Annu Ltd then Section 40A(2) will be attracted.

If Hari Ltd enters into transaction with Mr. X then Section 40A(2) will be attracted.

Accordingly Section 40A(2) is NOT attracted when Hari Ltd makes payment to Mr. Y.

chillakuru chaitanya

chillakuru chaitanya (Querist)

31 August 2013 As per 40A(2)(b) (v)a company, firm, association of persons or Hindu undivided family of which a director, partner or member,
as the case may be, has a substantial interest in the business or profession of the assessee; or any director,
partner or member of such company, firm, association or family or any relative of such director, partner or
member;
as per this all directors of annu ltd is also covered

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

31 August 2013 Yes covered in the second part. "director of such company'.

Sorry for the mistake.

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