Deemed dividend
This query is : Open
Vivekanand Kushwaha
(Querist)
14 November 2011
1)I have a following situation.
In X Pvt. Ltd. voting right pattern is as follows:
Mr A: 25%
Mr.B: 30%
Mr.C: 10%
MR.D: 35%
These three person are also member in another pvt ltd(Say Y Pvt.Ltd) in which shareholding pattern is as follows:
Mr A: 30%
Mr.B: 60%
Mr.C: 10%
X Pvt Ltd given loan/advances to Y Pvt Ltd Say Rs. 10 lakh. Then how it is to be/in which ration taxed as deemed dividend in each share holder hand?
2) X pvt Ltd has paid taxes of Y Pvt Ltd. Is it to be treated as deemed dividend?
In X Pvt. Ltd. voting right pattern is as follows:
Mr A: 25%
Mr.B: 30%
Mr.C: 10%
MR.D: 35%
These three person are also member in another pvt ltd(Say Y Pvt.Ltd) in which shareholding pattern is as follows:
Mr A: 30%
Mr.B: 60%
Mr.C: 10%
X Pvt Ltd given loan/advances to Y Pvt Ltd Say Rs. 10 lakh. Then how it is to be/in which ration taxed as deemed dividend in each share holder hand?
2) X pvt Ltd has paid taxes of Y Pvt Ltd. Is it to be treated as deemed dividend?
14 November 2011
The three shareholders are common in Ms X Pvt Ltd and Y Pvt Ltd and holding beneficial interst of 10% or more. The amount of loan / advance of Rs 10 lakhs will be treated as deemed dividend in the hands of X Pvt Ltd and would require withholding tax u/s 194 @ 10%. The ratio would be 25:35:10.
The next issue of tax payment by X Pvt Ltd of Y Pvt Ltd. This payment is nothing but amount advanced by X Pvt Ltd to Y Pvt Ltd to meet its payment obligations. In my view the tax treatment is same as above.
Regards
Chandan Agarwal
The next issue of tax payment by X Pvt Ltd of Y Pvt Ltd. This payment is nothing but amount advanced by X Pvt Ltd to Y Pvt Ltd to meet its payment obligations. In my view the tax treatment is same as above.
Regards
Chandan Agarwal
Message likes :
1 times
CA Ayush Agarwal
(Expert)
14 November 2011
Its case of deemed dividend and taxable in hand of those three shareholders in ratio of their holding. Income charged under other source and to be taken in normal slab.
Vivekanand Kushwaha
(Querist)
15 November 2011
Thanks for reply,
Loan/advances will be treated as deemed dividend in the hands of Y pvt ltd shareholders if they have substantial interest(20% or more) in Y Pvt Ltd and 10% or More voting right in X Pvt Ltd. In the above question since A,B,C holds voting right in X Pvt ltd but only A&B hold substantial interest in Y Pvt Ltd. Then why we will distribute on the basis of voting right in X Pvt Ltd. instead of shareholding pattern in y pvt ltd in the ratio of 30:60. So kindly if you have any reference or judgement share with me.
Loan/advances will be treated as deemed dividend in the hands of Y pvt ltd shareholders if they have substantial interest(20% or more) in Y Pvt Ltd and 10% or More voting right in X Pvt Ltd. In the above question since A,B,C holds voting right in X Pvt ltd but only A&B hold substantial interest in Y Pvt Ltd. Then why we will distribute on the basis of voting right in X Pvt Ltd. instead of shareholding pattern in y pvt ltd in the ratio of 30:60. So kindly if you have any reference or judgement share with me.
Vivekanand Kushwaha
(Querist)
15 November 2011
Thanks for reply,
Loan/advances will be treated as deemed dividend in the hands of Y pvt ltd shareholders if they have substantial interest(20% or more) in Y Pvt Ltd and 10% or More voting right in X Pvt Ltd. In the above question since A,B,C holds voting right in X Pvt ltd but only A&B hold substantial interest in Y Pvt Ltd. Then why we will distribute on the basis of voting right in X Pvt Ltd. instead of shareholding pattern in y pvt ltd in the ratio of 30:60. So kindly if you have any reference or judgement share with me.
Loan/advances will be treated as deemed dividend in the hands of Y pvt ltd shareholders if they have substantial interest(20% or more) in Y Pvt Ltd and 10% or More voting right in X Pvt Ltd. In the above question since A,B,C holds voting right in X Pvt ltd but only A&B hold substantial interest in Y Pvt Ltd. Then why we will distribute on the basis of voting right in X Pvt Ltd. instead of shareholding pattern in y pvt ltd in the ratio of 30:60. So kindly if you have any reference or judgement share with me.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Depreciation Chart Companies Act
- EPF ECR NEW FILE SEP 17TH 2026
- Capital Gail Exemption Certificate
- Oct 2025 Invoices
- TAX AUDIT ON PROFESSIONAL INCOME
- Capitalgain tax purposes for valuation report compulsory
- SECTION 393(3) TAX ON CASH WITHDRAWAL
- Under marginal scheme
- Import of Software Service.
- GST on Renting godown to KFCSC for Storage of Raagi
- IMPORT PURCHASE ENTRY PASSED IN BOOKS OF ACCOUNT
- FAST DS 26 Undisclosed Foreign Asset Disclosure Scheme 2026
- Regime change
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
- How to pay remaining amount of TDS after due date?
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
