Legal implications of sale of Mafatlal flatAs per the Companies Act 1956, Mr. Likhite was a director of Mafatlal Industries at the time of this suspicious sale. So:
- The company was required to pass a board resolution for such a transaction.
- A shareholder can ask justification for this transaction in which the director is being rewarded indirectly, and shareholders are being fleeced of their company’s asset.
- For the Company, it is a dividend given to its director, which is taxable.
- The difference amount between actual value (reckoned at Rs 6 cr.) and the sale price (Rs 1.25 cr) would be considered as income of Mr. Likhite, which is taxable at 30% and more.
- Further, under section 271(1)(c)- concealment of income or inaccurate particulars attract 100% to 300% penalty.
- The company was required to deduct TDS on this deemed income of Mr. Likhite.