Grey areas of using corporate funds for personal luxury

The provision of a car for

use on company’s business

and phone at residence will not be considered as perquisites. Personal long distance calls and use of car for private

purposes shall be billed by

the company”.

When It Crosses the Line

The bigger problem is when promoters and directors go beyond just taking perks. In many cases, companies buy expensive items like luxury cars, houses, or even furniture in the company’s name — but the real benefit goes to the promoter’s personal life. These could outrightly be flagged as “embezzlement”. This is a clever way to enjoy a rich lifestyle without showing a high salary. And because it is not listed as income, it avoids taxes too. This is unfair to shareholders, employees, and tax payers.

The Gensol Case

In the case of Gensol Engineering, Sebi found that the company had taken loans worth

`978 crore, out of which `664 crore were meant for buying 6,400 electric vehicles (EVs). But only 4,704 EVs were actually bought. Sebi investigation showed that a lot of this money was used for personal luxuries by the promoters, including:

A luxury flat in DLF Camellias worth `42.94 crore

An investment of `50 lakh in a startup Third Unicorn

Lavish travel, including bookings on MakeMyTrip

A golf set worth `26 lakh

Funds transferred to family members