Loan To Director

Crypto- asset or liability? How is it classified? Rationale behind taxing crypto?
The IRS (USA) treats cryptocurrencies as property (Similar to stocks and bonds) for tax purposes,
which means: You pay taxes on cryptocurrency if you sell or use your crypto in a transaction, and it is
worth more than it was when you purchased it. This is because you trigger capital gains or losses if its
market value has changed. Re-iterated in Commissioner v. Hicks (USA 2014). Therefore, seen as
current assets.
In India, Crypto currencies are not owned or controlled by any particular country or a bank. They are
not legal tender. While they are not being regulated by any Regulatory body, as on date. There are no
laws that prohibit trading in crypto. In that sense, cryptocurrency is like any other asset class such as
gold, commodities or real estate. People trade in gold or other assets without the government creating
a law for it. Same is the status of cryptocurrency at the moment.
India: https://finmin.nic.in/
Budget 2022: The Indian government introduced a tax regime for cryptocurrencies in the 2022
budget: 30% Tax on Gains: A 30% tax is levied on any income from the transfer of virtual digital
assets (VDAs), which likely refers to cryptocurrency.
Rationale for Taxation: The government likely views cryptocurrency as a source of income and aims
to tax it similarly to stocks or other capital gains. Taxing cryptocurrency transactions helps prevent
people from using them to evade taxes on income generated through these assets.
Can a director give a loan to a company?
Yes, as per 73(2) of the companies act 2013 wherein “deposits” includes loans as well. The director
from whom money is received, must furnish to the company at the time of giving the money, a
declaration in writing to the effect that the amount is not being given out of funds acquired by him by
borrowing or accepting loans or deposits from others.
Section 2(31) of the Companies Act (herein after called the act) defines deposit as under “deposit”
includes any receipt of money by way of deposit or loan or in any other form by a company, but does
not include such categories of amount as may be prescribed in consultation with the Reserve Bank of
India.
[ ONLY FOR REFERNCE: 73(2): Conditions for acceptance of deposits from Members Section 73(2)
states that a company may, subject to
(i) the passing of a resolution in general meeting; and (ii) subject to such rules as may be prescribed in
consultation with the Reserve Bank of India, accept deposits from its members on such terms and
conditions, including the provision of security, if any, or for the repayment of such deposits with
interest, as may be agreed upon between the company and its members, subject to the fulfilment of the
following conditions, namely:— (a) issuance of a circular to its members including therein a
statement showing the financial position of the company, the credit rating obtained, the total number
of depositors and the amount due towards deposits in respect of any previous deposits accepted by the
company and such other particulars in such form and in such manner as may be prescribed; (b) filing
a copy of the circular along with such statement with the Registrar within thirty days before the date
of issue of the circular; (c) depositing such sum which shall not be less than fifteen per cent. of the
amount of its deposits maturing during a financial year and the financial year next following, and kept
in a scheduled bank in a separate bank account to be called as deposit repayment reserve account; 8
Acceptance of Deposits (d) providing such deposit insurance in such manner and to such extent as
may be prescribed; (e) certifying that the company has not committed any default in the repayment of
deposits accepted either before or after the commencement of this Act or payment of interest on such
deposits; and (f) providing security, if any for the due repayment of the amount of deposit or the
interest thereon including the creation of such charge on the property or assets of the company. In case
when a company does not secure the deposits or secures such deposits partially, then, the deposits
shall be termed as ‘‘unsecured deposits’’ and shall be so quoted in every circular, form, advertisement
or in any document related to invitation or acceptance of deposits.]
Who is depositor?
Rule 2(1)(d) under Chapter XV defines depositor as under ‘Depositor’ means- (i) any member of the
company who has made a deposit with the company in accordance with sub-section (2) of section 73
of the Act, or (ii) any person who has made a deposit with a public company in accordance with
section 76 of the Act.
However, this is to EXCLUDE: (only remotely relevant pointer in the list)
Any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking
pari passu with the first charge on any assets referred to in Schedule III of the Act excluding
intangible assets of the company or bonds / debentures compulsorily convertible into shares of the
company within five years. If such bonds or debentures are secured by the charge of any assets
referred to in Schedule III of the Act excluding intangible assets, the amount of such bonds or
debentures shall not exceed the market value of such assets as assessed by a registered valuer;
Can crypto be loaned to a company?
- Since gold (through Gold Loan) and bonds can also be loaned to a company, technically it can
also be loaned.
- Exhaustive list exists explaining what is NOT deposit and cryptocurrency doesn’t fall in it.
(https://www.icsi.edu/media/portals/0/ACCEPTANCE%20OF%20DEPOSITS.pdf)
- SC takes a progressive view on crypto through IAMAI v. RBI wherein the SC lifts the ban on
right to trade in crypto.
- POSSIBILITY OF REJECTION: However, since it is a non-traditional asset and the
companies act did not envision the same while formulating the act, it might also be rejected.
- IF IT IS LOANED: Make full disclosure to the government as it unregulated and any non-
communication may not be taken well.

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Crypto- asset or liability? How is it classified? Rationale behind taxing crypto?

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