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Discussion > Income Tax > Tax queries >

Applicability of deemed dividend u/s.22(e)

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PRACTISING C.A.


[ Scorecard : 72]
Posted On 13 February 2013 at 08:30 Report Abuse

I want to know whether deemed dividend provision is applicable in the following situation:-

 

Mr. A who is director in Private Limited Co. He is also having proprietory firm.   His propriety firm has taken advance from the company in which he is director.   On this advance he as a proprietor has paid interest to the comapny.

 

 


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Giridhar S Karandikar
Team Lead


[ Scorecard : 2839]
Posted On 13 February 2013 at 09:27

the provisions of deemed dividend are applicable only in case of a shareholder of the company who has a substantial in the company.

I don't think that the deemed dividend wud apply to director.





CA. Dushyant ZALA
PRACTISING C.A.


[ Scorecard : 72]
Posted On 13 February 2013 at 11:24

girdhar

 

Director has  share holding of 33.33% in the capital of company.

 

 




CA Gaurav Ajit Potdar
Chartered Accountant


[ Scorecard : 596]
Posted On 13 February 2013 at 12:02

Deemed Dividend u/s Sec 2 (22) (e) is applicable to any payment by a company, not being a company in which the public are substantially interested ie Pvt Ltd, of any sum by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares holding not less than ten per cent of the voting power, or to any concern, in which such shareholder is a member or a partner and in which he has a substantial interest ie more than 20% holding.

In ur case Director is holding more than 10% shares in the company, which hv advanced loan to firm owened by the Director. hence Deemed Dividend provisions are applicable. 




Giridhar S Karandikar
Team Lead


[ Scorecard : 2839]
Posted On 13 February 2013 at 12:03

in that case then I think that the provisions of deemed dividend would get attracted to teh extent of accumulated profits of the company.



Total thanks : 1 times



CA. Dushyant ZALA
PRACTISING C.A.


[ Scorecard : 72]
Posted On 13 February 2013 at 12:21

Gaurav and  Girdhar thanks for adivce. Still I have one doubt please clearify it.

 

whether  provision of section 22(e) is applicable though director has paid interest on advance.




CA Gaurav Ajit Potdar
Chartered Accountant


[ Scorecard : 596]
Posted On 13 February 2013 at 12:38

Yes it is applicable irrespective of the fact that Director has paid interest.



Total thanks : 1 times


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