03 December 2009
if a loan of Rs.20,00,000 is given by the MD to The company and is given in cash. what are its consequences which will affect the company? & What are the statutory obligations of an auditor in relation to the above situation?
13 December 2009
There is no restriction as such in the Companies Act regarding accepting of loans in cash. However, Section 269SS of Income Tax Act restricts accepting of loans and deposits in cash in excess of Rs.20000 during one financial year (with some exceptions w.r.t to loans from banks, FI's, Govt., etc.). In case anyone accepts loans or deposits violating the provisions of Section 269SS, an amount equal to the amount of loan or deposit accepted shall be charged as penalty.
In the present case, as the company has accepted a loan of Rs. 20,00,000 in cash from the MD, the consequences are that it is violating the provisions of Sec.269SS of the Income Tax Act and is liable for penalty of an amount equal to the loan i.e. Rs.20,00,000
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