Acceptance of ‑ Scope and provision of Companies (Acceptance of Deposits) Rules, 1975 explained - Companies Law - Letter : No. 4/28/81‑CL‑X,

Letter : No. 4/28/81 ‑ CL ‑ X, dated 2 ‑ 9 ‑ 1981. Subject:- Acceptance of ‑ Scope and provision of Companies (Acceptance of Deposits) Rules, 1975 explained Rule 3(2) : WHETHER AMOUNT OF UNPROVIDED DEPRECIATION FROM AGGREGATE OF PAID ‑ UP SHARE CAPITAL AND FREE RESERVES ARE TO BE DEDUCTED FOR DETERMINING LIMITS UP TO WHICH DEPOSITS CAN BE ACCEPTED Rule 3(2) prescribes the limits up to which a non‑banking non‑financial company can accept deposits. The limits of deposits are to be computed with reference to aggregate of paid‑up share capital and free reserves. Explanation below rule 3 provides that in arriving at the aggregate of paid‑up share capital and free reserves of a company, there shall be deducted from the aggregate of paid‑up share capital and free reserves as appearing in the latest audited balance sheet of the company, the amount of accumulated balance of loss, balance of deferred revenue expenditure and other intangible assets, if any, as disclosed in the said balance sheet. While it is obvious that the term accumulated loss should also include amount of unprovided depreciation, yet it has come to the notice of the department that in a couple of cases companies have not deducted the amount of unprovided depreciation while computing the permissibie limits of deposits. It is essential to deduct the amount of unprovided depreciation from the aggregate of paid‑up share capital and free reserves for determining the limits up to which deposits can be accepted by them.