S. 314 applicability in case of pvt. ltd. co.

Pls note:

1. HUF is relative under section 6 of Companies Act.

2.  Pls appreciate section 314 is applicable when some office or place of profit is held, i.e. person is appointed as employee, advisor, consultant etc. Since you have paid commission on sales of company, there is no appointment of relative on any designation carrying remuneration.

To my mind, section 314 is not applicable looking at the nature of transaction of Company and HUF.

Contrary views are appreciated. Thanks.

Dear Neha Mam thanks for discussing query. please note following and discuss further :-

1.Section 6 covers members of HUF and not for HUF itself. so members are relative and not HUF itself.

2. Section 314 Specifically includes Commission in the definition of Remuneration. therefor section 314 will be applicable in case of payment of commission also.

Once again thanks for your precious participation.

Other Experts are also welcome in the discussion.

Dear Sachin,

1. Karta is also member of HUF, Agreed. So Karta being a member is relative.

2. You are right that commission is included in remuneration under section 314. But then there is no designation on which person is appointed for certain terms.

To my mind section 314 not applicable.

Thanks for prompt reply.

But I still put my view that KARTA & HUF both are two defferent legal entity, So transactions entered with HUF, can not be said to be entered with KARTA. ... I think with this contention Commission paid to HUF will not be treated as to be paid to KARTA. So HUF is not relative but KARTA is Obviously relative as per minute reading of section 6. I think my query is now clear to you.

Further, Section 314 dose not require any designation, it requires only something paid against services rendered.

I  would like to further ask one thing that what is the significance of the word "monthly" used in section 314.

Awaiting for your Answer.

Originally posted by : Sachin j Vatsal
	But I still put my view that KARTA & HUF both are two defferent legal entity, So transactions entered with HUF, can not be said to be entered with KARTA. ... I think with this contention Commission paid to HUF will not be treated as to be paid to KARTA. So HUF is not relative but KARTA is Obviously relative as per minute reading of section 6. I think my query is now clear to you.

Mr. Sachin,

Pls appreciate that here transaction entered with karta of huf (rather than transaction entered with huf) is covered. If transaction would have been entered with any other member of huf then it would be covered under RELATIVE. Like wise transaction entered with karta is also covered under relative framework since KARTA IS AT PAR WITH OTHER MEMBERS OF HUF. I will suggest you to treat KARTA on same footing with ANY OTHER MEMBER of huf. 

I guess monthle suggests some kind of payment which is paid on monthly basis under some agreement, contract or arrangement.

Thanks.

Dear Neha Mam,

Please reply only one more Query whether HUF and KARTA are two seperate legal entity in Companies Act, 1956 also like Income Tax Act, 1961.

If Answer to above question is affirmative then HUF doesn't fall under perview of Relative under Section 6.

Thanks for Reply.

Sachin jain.

Hi Sachin,

The above facts suggest that Section 314 is not applicable in your case. In Company law Karta is not regarded as a separate artificial person. Hence the director and Karta are to be construed as same in such a case. Prima facie section 297 seems to be applicable.

Amit Mishra

B. Samrish & Co.

New Delhi

Hi all,

With due respect to learned experts pls acknowledge the following which is purely my understanding:

According to me, In Company law, HUF can also become member/shareholder in a company and in case director and karta are the same person then how could director and karta be treated as different shareholder in a company. Lets say example:

'Mr ABC' is shareholder of XYZ Limited and 'ABC HUF through karta' is also shareholder of XYZ Limited. Then if we presuppose that in Company law Karta is not regarded as a separate artificial person, i.e. 'Mr. ABC' and 'KARTA OF ABC HUF' are to be construed as same then they should be treated as SINGLE SHAREHOLDER AND THEIR SHAREHOLDING SHOULD BE CLUBBED.

Pls clarify if i m mistaken.

ON THE CONTRARY even if we assume that :

Karta is not regarded as a separate artificial person. Then it means if company has made payment to 'Karta of HUF (Who is director)' then it has made payment to director itself. Then the case is very well covered under section 314. Because payment of commission will be treated as if commission is paid to director himself under section 314 (1).

Would like to have strong and healthy discussion on this matter for clarification of doubt and better understanding of statute.

Warm Regards,

Neha Jain

Hi Neha,

In the following case no office of profit can be established as the payment is for a single transaction (may be covered under Section 297 as stated above) and no particular office has been assumed in this regard. Moreover the payment is also made in a single instalment attributable to a single transaction by the Company and not in periodic instalments to constitute office of profit.

In the above case HUF is included within the definition of relative.

Thanks & Regards

Amit Mishra

Originally posted by : AMIT MISHRA
	In the following case no office of profit can be established as the payment is for a single transaction. Moreover the payment is also made in a single instalment attributable to a single transaction by the Company and not in periodic instalments to constitute office of profit.

Hi Amit,

Acc to Section 314 Commission is included in the definition of Remuneration. therefor section 314 will be applicable in case of payment of commission also. 

Also I could not find out any section/rule/regulation/case law/clarification/ circular etc. which provides that  for applcability of section 314, payment should not be for a single transaction rather it should be for periodic instalments to constitute office of profit.

Await your reply.

Kind Regards,

Neha

Originally posted by : Sachin j Vatsal
	I  would like to further ask one thing that what is the significance of the word "monthly" used in section 314.

Dear Sachin,

As far as my understanding is concerned, Term 'monthly' is used in section 314 because of the reason that if persons covered under section 314 are appointed for say 4 months @ Rs. 3.00 Lacs then maximum permissible ceiling (i.e. 50000/- and 250000/- per month) should be calculated for the tenure of appt.

Thanks / Neha

Hi Neha,

Sorry for a late reply.Kindly refer to the following link https://www.taxmann.com/fileopener.aspx?stype=3&searchid=5063 or the document attached for further details on Office of Profit u/s 314.

Merely the presence of word "commission" in a case do not constitute office of profit. Hope the article helps you in understanding  "Office or Place of Profit " better.

Await your reply