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

CA. Dushyant ZALA (PRACTISING C.A.) (72 Points)

13 February 2013

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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6 Replies

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 13 February 2013

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.) (72 Points)
Replied 13 February 2013

girdhar

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

CA Gaurav Ajit Potdar (Chartered Accountant) (846 Points)
Replied 13 February 2013

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.