A comparative analysis of the provisions of the Companies Act, 2013 vis a vis Companies Act, 1956 including our approach/opinion is as below:

PROVISION

The Board of Directors of a company may contribute to bonafide charitable and other funds.

Provided that prior permission of the company in general meeting shall be required for such contribution in case of any amount the aggregate of which, in any financial year, exceeds 5% of its average net profits for the three immediately preceding financial years.

ANALYSIS OF THE PROVISION

In order to analysis the provision of section 181 as per CA, 2013, we have to analysis the corresponding provision of CA, 1956.

As per CA, 1956, section 293(1)(e) deals with the corresponding provisions, here in the old act the BOD was having the power to contribute up to Rs. 50,000/- even though the company working at a loss.

However, in the CA, 2013 the limit of Rs. 50,000/- has not been provided. Accordingly, confusion arises whether the company can contribute in case of losses.

APPROACH

1. Liberal approach

Situation 01: OR is not required in case 5% criteria is fulfilled.

Situation 02: In “all other cases” OR is required.

Since the law is silent whether a company can or cannot contribute in case of loss and considering the stand of CA, 1956, we can conclude that making contributions in case of loss can fall into “all other cases” as mentioned above and by passing OR the company can contribute even in case of losses.

2. Conservative Approach

There is no provision in the act where the board is expressly permitted to contribute in case of losses. Therefore, we can interpret that the company cannot make any contribution in case of loss. Further, the section doesn’t provide any provision where contribution can be made out of any reserves/security premium account/any other specific reserve account, and accordingly it can be interpreted that the contribution cannot be made in case of losses even if the company is having a positive general or specific reserve.

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A new section 194Q has been introduced in Finance Act 2021 where a buyer, who is responsible for paying any sum to any resident with respect to purchase of any goods aggregate value of which if exceeds ₹ 50,00,000/- in the previous year, shall be liable to deduct TDS @ 0.1%/5% as the case may be. Certain relevant queries in connection with the same have been dealt with below: –

Q1. What is the % of TDS that needs to be deducted?

Ans: TDS needs to be deducted @ 0.1% or 5% as per below

Q2. What is the threshold amount for deduction of TDS?

Ans: When a Buyer purchases goods of Rs. 50,00,000/-or more in a Financial Year, the buyer has to deduct TDS on such amount exceeding Rs. 50,00,000/-

Q3. Whether this section is applicable to all the buyers?

Ans: NO, this section is applicable to those buyers whose annual Turn over in the Previous Financial Year exceeds Rs. 10 Crore

Q4. What is the time of deduction of TDS under such section?

Ans: The TDS shall be deducted at the time of credit of such sum (as mentioned above) to the account of the seller or at the time of payment there of by any mode, whichever is earlier

Q5. Whether TDS is not deductible in case TCS is collected by the Seller?

Ans: The applicability of TDS under Section 194Q prevails over the applicability of TCS under section 206(1H), therefore in case the buyer is required to deduct TDS, simultaneously the Seller is not required to collect TCS on the same amount.

Q6. What is the due date for the deposit of TDS deducted under this section to the Government of India?

Ans: TDS deducted shall be deposited within 7th of the next month from the month in which TDS is deducted.

Q7. What shall be the effective date for applicability of Section 194Q?

Ans: The provisions of Section 194Q shall be applicable with effect from 1st July 2021

Q8. What are the consequences of non-compliance of this provision?

Ans: The non-compliance of provisions of such section shall attract a disallowance of 30% of the amount of expenditure on which TDS is not deducted and deposited

Example of applicability of Section 194Q vis-à-vis Section 206(1H)