Loans given by a pvt ltd company to its sister firm

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CH.A.Krishnna Chaitanya (Querist)
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12 February 2017 Please let me know the latest position applicable for the FY2016-17 and onward regarding the restriction on loans given by a pvt limited company to its sister concern (which is a Pvt.ltd company or partnership firm or prop.ship firm.).?

CAchaitanya

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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13 February 2017 A partial exemption has now been granted to private companies giving a loan, providing a guarantee or offering a security in connection with a loan taken by a sister concern. There are 3 cumulative conditions for availing the exemption:

(a) There is no body corporate shareholder in the lending/guaranteeing company;
(b) The lending company’s aggregate borrowings from other bodies corporate or banks or financial institutions is limited to lower of
(i) 2X net worth of company; or
(ii) Rs 50 crores
(c) There is no pending default in repayment of such borrowings by the lending company

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