Companies Act_Practicle Problems_7

X Pvt. ltd is partner is XY & co a partnership firm. Other Partner is Mr. Y. Mr. Y is also a Director in X Pvt. Ltd. The profit & loss sharing is 99.999% by X Pvt. Ltd and 0.001% by Y. Paid up capital of X Pvt. Ltd is 5 crores. It proposes to buy raw material of Rs. 2,00,000 per month from XY & Co on credit.

a) Whether Government approval would be required to be obtained by X. Pvt. Ltd?

b) Can company argue that XY & Co is nothing but only a different form of business organization created only for tax planning purposes?

c) Will the answer be different if Mr. Y is not a director of X Pvt. Ltd?