Loan by pvt. ltd co to another pvt. ltd com u/s 297

Dear Professionals,

Kindly provide me your valuable suggestion on the following issue-

 

If a pvt. ltd co gives a loan to anothe pvt. ltd co on interest, in both companies one of the directors is common and hence it is a related party transaction u/s 297 of the Companies Act, 1956.

Section 297 includes services in its ambit. In my view, this loan comes under servies because co will charge interest thereon. This transaction not only occures once or twice rather it is recurring in nature in the comany.

Kindly throw light on the above.

Look forward to your kind reply.

Regards,

Harvinder

 

Replies (1)

Till recent past this type of transaction was outside the purview of section 297.

The term service has not been defined expressly or impliedly under section 2 of CA 1956.

Whether the definition will be borrowed from service tax law , specially when services are now being taxed under Negative list from 1st July 2012 is an interesting subject.

I would urge other Member Company Secretaries of this accalimed Forum to discuss this please.

Regards,

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