Liability of a company met by director personally

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CA SAJANA (Querist)
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14 January 2014 Dear Sir,

During the year 2012-13, Company "A" received fund from company "B" where the director of "A" company is a director.All amounts were received through Bank transfer. The amount has not been repaid by Company "A". However while going through the audited accounts of Company "B", it has been understood that the due has been repaid by the common director and settled the accounts accordingly.

What will be the recourse to settle the issue in the books of "A".?

Can we show it as Share application money received from director by passing journal entries in the year 2013-14 and issuing shares in the name of director?

It is not possible for us to correct the accounts in the books of Company "B" which is in no way accessible to us.

Please advice,

Regards,

CA Sajana E V.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 January 2014 well in accounts and ROC it could work..

but the question is how it has been shown in the books for AY 2013-14? As share application money??? If yes, then AO can ask for the KYC of the applicant. Now here the linkages of money transfer could come into play.

On the other hand if the said only reflects as a sundry creditor/unsecured loan in AY 2013-14, you can play around for AY 2014-15...

Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 January 2014 the best way is to create a note in the financial statements explaining the transaction and thereafter either issuing shares or refunding the amounts to the director.

CA SAJANA

CA SAJANA (Querist)
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14 January 2014 In the audited financials of "A" for the year 2012-13, it is shown as unsecured loan from Company "B", which has been actually refunded the director personally.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 January 2014 then it should not be a problem...pass book entries to close the Company B's account by crediting the director..and thereafter issue the shares..better close the whole thing before March 2014.

CA SAJANA

CA SAJANA (Querist)
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14 January 2014 Sir,

In the Audited financials of Company "A" for the year 2012-13, it is shown as unsecured loan from Company "B"..

opening balance for the year 2013-14 is provided accordingly.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 January 2014 yes it will be..that is why i said close all the entries before 31 March 2014...

debit the unsecured loan, credit the director and thereafter issue shares to him or refund the money to him...the best way is to refund to him..

CA SAJANA

CA SAJANA (Querist)
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14 January 2014 Sir,

is there any violation either any of the provisions of Companies Act or Income Tax Act in doing so...

We have to inform these matter to the management with all supporting provisions

CA SAJANA

CA SAJANA (Querist)
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14 January 2014 Sir,

Is there violation in any of the provisions of Companies Act or Income Tax Act in doing so..

Please advice

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