Section 295 with 372A

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Ganisht (Querist)
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30 December 2010 Dear Expert,

Please guide me the provision of sec 295 & 372A in the below mention case:

M/s XYZ & Co. takes a home on rent from Mr. A( Director of XYZ & Co.), to provide that home to Mr. A for his residence.

Company also give some security to Mr. A for providing home.

Wheather this security is treated as loan/advance u/s 295?

Wheather provision of section 372A applicable?

pls explain in detail with section reference also.

Jayashree S Iyer

Jayashree S Iyer (Expert)
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31 December 2010 Section 372A deals with inter-corporate loans and investments. So it will not apply to this case.

It also does not amount to giving loan or guarantee or security under Section 295.

You say "company also given some security to Mr.A". I suppose you are talking of advance amount.

I think this transaction is a related party transaction attracting provisions of Section 299, 300 and 301 inviting disclosure of interest by director, absenting from board proccedings and entry in the register of contracts.

Experts, your opinion please.

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