We are machine manufacturer , wholly owned Private Limited Company of the Japanese listed Company .
We wish to advance Rs. 10 lcs to one of our vendor , who supplies some parts to us , for purchasing the machine which will be exclusively used for production of the parts which are supplied to us. This advance will be recovered from him in 12 equal monthly installment. We will not charge any interest on such refundable adavance.
I understand subsection 7 of section 186 prohibits interest free loans to any person.
Now, I would like to know , whether above reffred arrangement will be treated as interest free loan and will contravene the provision of section 186.
whether criteria of , exceeding 60% of paid up share capital , free reserves and securities premium account will apply to subsection 7 also.
Is there any other method wherein we can give interest free refundable advance to the vendor.
please reply , its urgent .
Reards,
Gargi
CAclubindia
