Whether filing fee or tax deposit by a Professional on behalf of a Company will be treated as a Loan or Deposit under Companies Act, 2013
Any professional be it a Chartered Accountant or a Company Secretary renders various services to a company including filing of documents or filing of tax returns. Many a times, even some portion of tax is deposited by the professional on behalf of the company. In some cases, the professionals also deposit filing fee through their credit cards under online filing regime. In turn, these professionals claim reimbursement from the companies with or without raising bills for professional services. In other words, sometimes filing of forms is done gratis and no bill is raised. The question that arises is what is the nature of such tax payments or filing fee from company’s standpoint?
The tax deposited by a professional or filing fee paid by him on behalf of the company is incidental to service rendered by the professional. It is immaterial whether for such a service a bill is raised or not as service does not loses its character, even if not billed. The tax deposited or filing fee paid by a professional is a mere claim of reimbursement by him. It does not fall under the definition of deposit or loan. The professional, in the books of account of the company, will be shown as trade creditor until paid. It is a transaction in usual course of business and not a loan or deposit.
Let us also examine this aspect from standpoint of whether it falls in one of the exempt categories of Deposit Rules, 2014. On this note, it can be stated that the need to look at exempt categories arises if and only if it falls under the definition of deposit as defined in the Rules.. In terms of Rules,“Deposit includes any receipt of money by way of deposit or loan or in any other form, by a Company“.
The payment of fee or deposit of tax by a professional on behalf of the company is neither a deposit or loan. Hence it does not fall under the term deposit under the Rules. The words ‘in any other form’ will have to be interpreted by using the principles of ejusdem generis. By applying this principle, the amount spent on behalf of the company is neither a deposit nor loan. It is a mere case of reimbursement on account of services rendered. We need to make a distinction on account of nature of transaction. The nature of transaction here is incidental to service rendered and hence the professional can claim the amount as reimbursement.
Let us take another case where a company has to deposit heavy amount of tax and is short of funds, it may take financial assistance from outside to support its tax payment. The nature of assistance here is in the nature of deposit/loan as the intent is also to take financial assistance. It may fall under exempt deposit if the assistance is taken from bank or from other companies or other exempt categories. It is not a case of service rendered. The person who has financed it will be treated as lender and not creditor. A distinctive factor between this transaction and previous one is the element of service. The lender per se is not rendering service but providing financial assistance. The professional, on the other hand, is providing service and not lending money.
It can, therefore, be concluded that professional depositing tax or filing fee on behalf of the company will not be in the nature of deposit or loan.
Ashish Makhija: firstname.lastname@example.org
Disclaimer: The views expressed here are views based on my personal interpretation and should not be deemed as legal or professional advise on the subject. If relied upon, the author does not take any responsibility for any liability or non-compliance.