Thursday 24 November 2016

Meaning of any non-interest bearing amount received or held in trust

I would like to share my views on acceptance of interest free loan by the Companies in the ordinary course of Business and claiming the exemption from the compliance of deposit provisions by invoking the clause “any non-interest bearing amount received or held in trust”.

Pursuant to the Rule 2(1)(c)(XI) of the Companies (Acceptance of Deposits) Rules, 2014, any non-interest bearing amount received or held in trust is exempted from the definition of deposits.


Here the amount held in trust doesn't mean any non interest amount received in trust (on faith). It refers only the amount which is held by the company for any third party & which cannot be used by the company and kept in the books of account till who owes that amount approaches the company for payment. Important point here is the company cannot use the money which is held by it in trust. Eg unclaimed divided/Interest.


Recently the MCA issued the Companies (Acceptance of Deposits) Amendment Rules, 2016 on June 29, 2016, for amending and expanding the list of exempted Deposits. Through the amendment rule, the word ‘OR’ used in “any non-interest bearing amount received or held in trust” has been replaced with ‘AND’ to clarify that any non-interest bearing amount held in trust is exempt from the ambit of ‘Deposit’. It is very clear from the above amendment that the intention of the legislation is also to exclude the non-interest bearing amount received and held in trust from the purview of the deposits as the money received is not intended for any specific purpose/deployment.


Further, prior to the above deposits amendment rules, the Bangalore ROC has also clarified that here the term OR should be read as AND. Hence, any non interest bearing amount which is held in trust alone is not a deposit. Accordingly, company cannot take interest free loan from third parties by invoking above exemption.


In nutshell any non interest bearing amount which is held in trust by the company alone will be exempted from the definition of deposit and hence the unsecured interest free loan received from the third parties will be treated as deposits & compliance as specified under the Act/Rules shall be ensured.

No comments:

Post a Comment

Compliance Calendar for the Month of March,2024

    S.No Particulars of Compliance Forms/returns Due Date Compliance Calendar Under GST ...