Section 297

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Mamta Batra (Querist)

13 October 2009
suppose a service agreement has been executed between the holding and subsidiary comapny, the subsidiary company will use the office space, house keeping, furniture and fixtures of the holding company, both the companies have common directors. The paid up capital of the holding company is more than Rs. 1 cr, both are private limited company.

Whether section 297 will be attracted or not?

pls reply its urgent

Ankur Garg

Ankur Garg (Expert)

13 October 2009 YES.

As per my understanding Section 297 is applicable along with CG's approval.

Regards

Mamta Batra

Mamta Batra (Querist)

13 October 2009 thx sir.

can u pls clarify the meaning of "regularly trades or does business" as stated in section 297(2)(b)

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

13 October 2009 The crucial word in the section is 'goods'. But goods is not defined in the act. So reference may be made to the definition given under the Sale of Goods Act,1930 wherein goods means every kind of movable property. Here the service contract is mainly for Immovable property and ,therefore, application of section 297 may be carefully looked into in view of the clarification letter No 0/41/90-CL-X dated 27/03/1990 issued bu DCA.

Ankur Garg

Ankur Garg (Expert)

13 October 2009 But sir as the nature of agreement is "service agreement" as mentioned by Ms. Mamta which is very much cover in 297.
Can we conclude section 297 is applicable?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

13 October 2009 Sir, In Sona steering Systems ltd's case, the agreement was to take on lease office premises,DCA clarified that 297 is not applicable being a transaction in immovable properties.

Message likes : 2 times

Ankur Garg

Ankur Garg (Expert)

13 October 2009 Okay. Thank you Sir.

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