Deemed dividend u/s 2(22)(e)

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2010 If a Private limited company has given loan to it's Director cum Promoter which has Shares - 50% and the Director regularily repaid in time between months and set-off it's loan,there section 2(22)(e)applicable in that case for deemed dividend. If yes, than what is the taxability of the Director u/s 56.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
Follow

23 December 2010 Section 2(22)(e) does not say that in order to come in the category of deemed dividend, loan should be of particular minimum duration. A loan for few days would be within its ambit. Thus duration of loan is not material [Walchand & Co. Ltd. vs. CIT (1975) 100 ITR 598 (Bom) : TC41R.305]

As soon as loan is advanced to shareholder by closely held company from accumulated profits statutory fiction under section 2(22)(e) becomes operative and such loan is deemed to be dividend. Such loan does not cease to be deemed dividend on account of any subsequent event. Even if the loan is repaid by the shareholder in the same previous year, the statutory fiction arising at the time of giving loan by the company does not cease to be operative. Such a loan would be taxed as deemed dividend even if repaid in the same previous year.

For details see below link---

https://www.caclubindia.com/articles/details.asp?mod_id=6121

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2010 In the next year, All loans and advances has accouning treatment for Director fees and chrging tax in it's personal account.Is it possible?

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
Follow

23 December 2010 If you are paying the amount as Director remuneration and fees then no problem. But in case of loans and advance sec 2(22)(e) will be attracted.

Message likes : 1 times

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now