Money lending and Loan

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TH (Querist)
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12 May 2009 Dear Sir,

A company is into money lending business. however it lends money to its subsidiary company without charging any interest. My query is that is it possible for the company to lend money/ advance loan to its subsidiary without charging any interest? What will be the legal implications for this?

chetan soni

chetan soni (Expert)
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13 May 2009 Following will be the implications

01. ROC of company may call this money back from subsidiary company. As the nature of business of is to income generation from lending the money. As lending money for the company of against the interest of the shareholders.

02. In income tax, AO can make the addition of interest to the income of the company. Explanation will be lending money & income generation is the business of company. They may ask for show cause why this income should not be added?

03. There should be observation in audit report by the company auditor on this transaction.

04. Also in CS compliance this may be highlighted.

Experts please add any other implications in case i forgot to mention.

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