Interest free loan to group concern

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Querist : Anonymous

Querist : Anonymous (Querist)

26 December 2012 Respected Experts

Please clarify: A Private Limited Company having paid up share capital of RS. 20 Crore made Interest free loan of Rs. 1 Crore to its Group Concern.

Please clarify whether Interest free loan allowed as reference to Companies Act, 1956 and Income Tax Act, 1961

Amol S Joglekar

Amol S Joglekar (Expert)
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26 December 2012 Need to check 2(22)(e) of income tax as well. Views please.

S Sivasalapathy

S Sivasalapathy (Expert)
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26 December 2012 372A of Companies Act, no loan to any body corporate shall be made at a rate of interest lower than the prevailing bank rate, being the
standard rate made public under section 49 of the Reserve Bank of India Act, 1934.

Querist : Anonymous

Querist : Anonymous (Querist)

26 December 2012 Mr. S Sivasalapathy Sec 372A will not applicable to Private Limited Company.
So question for Interest at prevailing rate will not arise.

Please provide alternate solution.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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26 December 2012 1) Section 2(22)(e) of the Income tax Act applies only if the lending company is a 'domestic company' and it possesses 'accumulated profit'.

2) Section 372A of the Companies Act,1956 doesn't apply to a private limited company unless it is a subsidiary of a public company.

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