Can a Private Limited Company provide temporary loan to it's sister concern companies..? Is there any violation in provisions of either Companies Act or Income Tax Act in doing so?
Restriction imposed U/s 372A (1) on giving loans or guarantees to other companies or on making investment in the shares of other companies do not apply U/S 372A (8)to a private company unless it is a subsidiary of a public company
Restriction imposed U/S 295 (1) on loans to directors & relatives, etc. does not apply U/S 295 (2) to a private co. unless it is a subsidiary of a public co.
Sec. 77 does not prohibit on a private company, which is not a subsidiary of a public co., to provide financial assistance to anyone for purchasing or subscribing for its own shares or of its holding co.
Therefore, a private ltd. co., not being a subsidiary of a public co., can provide temporary loan to its sister concern. There is no restriction on it.
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