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Deemed dividend on interst paid on directors loan

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Querist : Anonymous

Querist : Anonymous (Querist)

31 August 2010 Dear Experts,
A Pvt Ltd Co has paid interest on loan given by the director.
So my query is, whether the interst paid is allowed ? And secondly whether deemed dividend is applicable, even if the Pvt Co has not paid any dividend in that previous year.

Thnx in advance.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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31 August 2010 Deemed dividend Sec 2(22)(e) is applicable when loan is given to shareholders holding 10% or more shares. In your case Pvt Ltd company has taken loan from directors and paid interest so deemed dividend not applicable and expense will be allowed in the hands of the company.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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31 August 2010 https://www.caclubindia.com/articles/details.asp?mod_id=6121

Also check above article for detail knowledge of deemed dividend provision.

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