Acceptance of Deposit Rules.

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Inactive amounts in customer accounts arising from credit notes due to rate differences or shortages are generally not considered 'deemed deposits' under the Companies (Acceptance of Deposits) Rules, 2014. These are viewed as trade-related adjustments and fall under specific exclusions for credit balances from commercial transactions. Companies should maintain clear documentation linking credit notes to sales to defend against regulatory scrutiny.

CA Praveen Chopra

CA Praveen Chopra (Querist)
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06 December 2025 If any amount is lying inactive in a customer account w.r.t. any credit note posted in his account due to rate difference, shortage etc i.e. other than amount received, will it be treated as deemed deposit under the Acceptance of Deposit Rules ?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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06 December 2025 No, an amount lying inactive in a customer account due to credit notes (rate difference, shortage, etc.) is not treated as a deemed deposit under the Companies (Acceptance of Deposits) Rules, 2014. Such balances are considered trade-related adjustments and fall under the exclusions specified in Rule 2(1)(c).

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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06 December 2025 Definition of Deposit (Sec. 2(31), Companies Act, 2013):
A "deposit" includes any receipt of money by way of deposit, loan, or in any other form by a company, but excludes certain categories as prescribed.
• Rule 2(1)(c), Companies (Acceptance of Deposits) Rules, 2014:
Specifically excludes amounts received in the course of business, such as:
• Advance against supply of goods/services.
• Security deposits for performance of contracts.
• Credit balances arising from commercial transactions (e.g., rate differences, shortages, rebates, or adjustments).
Thus, credit notes posted in customer accounts due to commercial reasons are not deposits, since they are not receipts of money but accounting adjustments linked to trade transactions.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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06 December 2025 Inactive Credit Notes:
These represent adjustments to invoices (e.g., overbilling, shortages, discounts). They are not "money received" from customers, but rather reductions in receivables.
• Audit/Regulatory Defense:
• Maintain clear documentation showing linkage of credit notes to underlying sales transactions.
• Prepare reconciliation statements to demonstrate that such balances are trade-related, not deposits.
• Highlight Rule 2(1)(c) exclusions in replies to regulators.

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