NBFC

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CS Vandana Kacholia (Querist)
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13 April 2010 Can a nbfc lend money to its subsidiary or group companies which are under the same management??

kindly clarify this with relevant section/circular/decision...if any

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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13 April 2010 VANDANA JI,

THE PRIMARY BUSINESS OF NBFC IS LENDING MONEY . THERE IS NO RESTRICTION ON NBFC WITH REGARDS TO LENDING MONEY TO GROUP COMPANIES PROVIDED IT CHARGES THE SAME INTEREST RATE TO GROUP COMPANIES WHICH IT CHARGES TO ANY OTHER OUTSIDE PARTY.

ANOTHER POINT SHOULD BE TAKEN CARE OF IS THE PERCENTAGE OF SHAREHOLDING OF THE GROUP COMPANY IN THAT NBFC. IF SHAREHOLDING PERCENTAGE IS >=10% IT WOULD BE ADVISED TO NOT TO GIVE LOAN TO THAT GROUP COMPANY AS THE SAME CAN BE TREATED AS DEEMED DIVIDEND IN THE HAND OF GROUP COMPANY.

REGARDS

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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13 April 2010 Section 2(22)(e) of the Income tax Act,1961 has to be taken care of as rightly pointed out by Mr. Gupta.

CS Vandana Kacholia

CS Vandana Kacholia (Querist)
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14 April 2010 thanks a lot to both of you for your kind suggestion

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