Allowability or disallowablity as per i.t act

This query is : Resolved

CA Sanjay Baheti (Querist)
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05 January 2013 One of my client being a private limited co.has issued shares to Directors HUF. For Example suppose there are 3 Directors i.e.Mother & their 2 Sons & each has formed their own HUF. First of all whether the same is valid as per Companies Act or not so far shareholder as HUF is concerned

Secondly if after becoming as Shareholder in the Status of HUF whether the Co.can take unsecured Loans from such HUF's as shareholder & can pay interest thereon.

If yes then the same is admissible as business expenses or not from Income Tax Point of view or any restrictions as per I.T Act as well as Companies Act point of view.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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06 January 2013 Please check whether the HUF's are properly created or not ?
.
Shares can be issued to HUF and there is no restriction for a Pvt Ltd Co. like it can not issue shares to the members of HUF or
to the HUF.
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A pvt Ltd Company can take loans from its shareholders and pay interest on such loans.
.
The interest is allowable provided it is
a revenue expenditure and the amount has been utilised mainly for the purpose of the assessee company's business.
.

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