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company Law Query

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CA. Anshul Bajaj

Taxation Head

173 Points Posted on 15 January 2010

A Director of a private limited company took 100000 rs as loan from Mumbai HO of a company and later on He incurred some expenses like salary, R&M in delhi Branch of the company...

So Now the ques is can the director adjust his loan with the same expenses and what are the compliances involved!!

Replies (1)

Amir

Learner

4016 Points Posted on 15 January 2010

Dear Anshul,

If the expenses in Delhi are incurred for the Company then it can be adjusted against the loan...

As far as Compliances are required, since it is a Private company nothing much just the Borad has to approve this adjustment in the Board Meeting..Further the information should be disclosed as a foot note to Balance Sheet in terms of AS-18, RELATED PARTY DISCLOSURES..

AUDITOR SHALL MENTION THE FACT IN THE TAX AUDIT REPORT NOW THIS WAS MY QUERY WHICH I HAD POSTED ON TAX FORUM WHETHER SEC 269T GETS ATTRACTED IN THIS CASE(i:e Repayment of Loan otherwise than by A/c payee Cheque/Draft) - I M NOT SURE ON THIS.........

But if the Director is also the shareholder in the company(with 10% or more shares) then Sec 2(22)(e) comes in picture & It will be treated as Dividend to the extent of the reserves of the company.