Always best , good and much more. Can not be better than this............keep it up
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Shah D J
On Friday, 19 June 2015 10:02 AM, "'KRISHNAN.M.K' emkaykay2002@yahoo.com [ICAI_CIRC_MEERUT_CA]" <ICAI_CIRC_MEERUT_CA@yahoogroups.com> wrote:
Dear Madhukar Bhat,In the instance cited you have mentioned that "the holding company is appearing as a creditor in the books of the subsidiary". By "creditor", I presume that you are referring to the fact that the Holding Company has advanced loan to its Subsidiary. The Companies Amendment Act 2015 has amended Section 185 to specifically provide that "Section 185 shall not apply to any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company." Even prior to the amendment, Rule 10 of the Companies (Meetings of Board and its Powers) Rules, 2014 dated 31-03-2014 provided the same exemption which was later incorporated as an amendment to Section 185 by the Amendment Act, 2015. It should be noted that this exemption will apply only to loan advanced by the Holding Company to its Wholly Owned Subsidiary and not to loans advanced to Subsidiaries which are not wholly owned.As far as the applicability Section 186 of the Companies Act, 2013 is concerned, Rule 11 of the Companies (Meetings of Board and its Powers) Rules 2014 dated 31-03-2014, provides that section 186(3) will not apply to a loan or guarantee given or where a security has been provided to its Wholly Owned Subsidiary by a Holding Company. The company however has to disclose the details of such loans or guarantee or security in the financial statements as provided under section 186(4) of the Act. Here again it should be noted that this exemption will apply only to a loan advanced by a Holding Company to its Wholly Owned Subsidiary and not to loans advanced to Subsidiaries which are not Wholly OwnedSection 2(22)(e) of the Income Tax Act, 1961 will apply only to loan given by a Company to a share holder being a person who is the beneficial owner of shares holding of not less than 10% of the voting power. In the instance cited by you the holding company has advanced loan to its subsidiary. As per section 19 of the Companies Act, 2013, except under certain situations provided in the section, a subsidiary cannot hold any shares in its holding company. Therefore the question of taxing deemed dividend in the case of a loan advanced by a holding company to its subsidiary is not likely to arise.RegardsCA M.K.KrishnanVelloreTamilnaduDear ColleguesIf the Holding company is appearing as Creditor in the books of its subsidiary - kindly clarify whether it will come within the bit of Sec 185 / 186 of the Companies Act and Sec 2(22)(e) of Income Tax.Kindly Clarify pleaseRegards
J.Madhukar Bhat
Bangalore
Mobile : 0-9845889837
Email : jmadhukarbhat@yahoo.co.in
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Posted by: Dipak Shah <djshah1944@yahoo.com>
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