NBFC
This query is : Resolved
CS Vandana Kacholia
(Querist)
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
kindly clarify this with relevant section/circular/decision...if any
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
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
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
(Querist)
14 April 2010
thanks a lot to both of you for your kind suggestion
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