Director's Personal Expenses
This query is : Resolved
Nishant Soni
(Querist)
02 September 2008
I am in audit of Private Limited Company. Is there any provision or say in companies Act regarding the personal expenses of Director. In Income tax Act, the same expenses has been disallowed. The nature of Director Expenses is the education fees for their children. IF there is any provision in companies act, pls reply me the section number.
Thanks.
Thanks.
CA E.A.Ravikumar
(Expert)
02 September 2008
If the school fee is paid as per the terms of the employment of the director then the perk/fbt/tax provisions takes over & allowable accordingly in income tax.
The logic is same for companies act also.
If there is no contractual obligation, the expense should not go into the PL & has to be recovered from the director.
This is the reason we come across auditors reporting like "According to the information and explanations given to us, no personal expenses of employees/ directors have been charged to the revenue account other than those payable as stipulated or agreed to under contractual obligations"
The logic is same for companies act also.
If there is no contractual obligation, the expense should not go into the PL & has to be recovered from the director.
This is the reason we come across auditors reporting like "According to the information and explanations given to us, no personal expenses of employees/ directors have been charged to the revenue account other than those payable as stipulated or agreed to under contractual obligations"
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