Is it permissible for a company to give a gift to it's directors
Chaitanya
(Querist) 07 October 2013
This query is : Resolved
One of my relatives wishes to give a gift of the property held by the company, in the name of the company to it's 3 only directors who are family members.
And if so, what would be the tax implications?
ajay sethi
(Expert) 07 October 2013
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R.K Nanda
(Expert) 07 October 2013
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Ms.Nirmala P.Rao
(Expert) 09 October 2013
Dear Mr.Chaitanya,
A company can't give a gift to its members or directors if their is a conflict of interest.It can give dividends etc which can be taxed such as Dividend distribution tax etc.The court's would go behind the corporate veil or lift the corporate vial and they/the directors who dupe public through their fraud etc are subject to penalties and other punishments according to company law.
Raj Kumar Makkad
(Expert) 14 October 2013
The company can provide special remuneration or award or reward but not the gift as desired in the given query.
R.V.RAO
(Expert) 03 February 2014
Role clarity /legal position of director under the companies act 2013 is as follows on gifting co.property to relatives is as follows:
clause 166 (section ) of new companies act 2013 says,
"(4) A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
(5) A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain
to the company.
(7) If a director of the company contravenes the provisions of this section such
director shall be punishable with fine which shall not be less than one lakh rupees but which
may extend to five lakh rupees.
POWER OF A COMPANY IN GENERAL MEETING BY SPECIAL RESOLUTION TO DISPOSE (DISPOSAL INCLUDES SALE/LEASE/GIFTING ) ITS PROPERTY IS AS FOLLOWS:
BUT GIFTING SHOULD BE SPECIFICALLY APPROVED BY GENERAL BODY OF SHARE HOLDERS AND GIFT TAX IS PAYABLE.A COMPANY IS AN ARTIFICIAL PERSON, AND CANNOT HAVE RELATIVES.HENCE GIFT TAXABLE.
(1) The Board of Directors of a company shall exercise the following powers only
with the consent of the company by a special resolution, namely:—
(a) to sell, lease or otherwise dispose of the whole or substantially the whole of
the undertaking of the company or where the company owns more than one undertaking,
of the whole or substantially the whole of any of such undertakings.
Explanation.—For the purposes of this clause,—
(i) “undertaking” shall mean an undertaking in which the investment of
the company exceeds twenty per cent. of its net worth as per the audited balance
sheet of the preceding financial year or an undertaking which generates twenty
per cent. of the total income of the company during the previous financial year;
(ii) the expression “substantially the whole of the undertaking” in any
financial year shall mean twenty per cent. or more of the value of the undertaking
as per the audited balance sheet of the preceding financial year;
