Deemed dividend Sec 2 (22)(e)

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CA. abhinav kumar (Querist)
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31 August 2009 1) Director is taken loan from public company for purchase of Flat which is used by the the company for their official purpose.
Q i) Is it is treated as deemed dividend because flat is solely used for official purpose.
Q ii) Is there is any obligation as per statute to repay such loan.
Q iii) Is TDS is required to be deducted by the company on such deemed dividend.
Q iv) what are the consequenses if director repay the loan and again taken loan after some years.
Q v)tips for tax planing

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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31 August 2009 1) YES IF OTHER CONDITIONS SUCH AS ACCUMULATED PROFITS ETC IS SATISFIED
2) LOAN MEANS IT IS REPAYABLE AS PER TERMS AGREED OTHERWISE IT MAY BE GIFT
3)YES
4) EVEN IF REPAID , DEEMED DIVIDEND PROVISION WILL APPLY
5) IT WILL BE BETTER IF THE CO PURCHASE THE FLAT ....EVEN IF IN THE NAME OF DIRECTOR...CHECK OUT FOR CO ACT VIOLATIONS

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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31 August 2009 In my opinion on the basis of section 2(22)(e) the loan may not be deemed as dividend on the following grounds-

1. The company is not closely held company.
2. The director may be a person not having
substantial interest in the company as a
shareholder. (10% of Voting Power)
3. The public limited company is not releasing any asset of it as it is showing it as a loan.

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