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Deemed Income

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(Querist)
17 December 2009 Whether the excess repayments made by company to its directors against the loan given by him to company be treated as deemed income? and Why?
Plz Reply....
Its urgent..
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Lalit

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Lalit (Expert)
17 December 2009 Dividend is defined in Section 2(22) and sub clause (e) includes any payment by way of advance or loan to a shareholder holding not less than 10 per cent of the voting power and to any concern in which such shareholder has substantial interest. And such dividend received U/s.2(22)(e) is taxable in the hand of recipient.

If director is holding not less than 10% of shareholding and company made excess repayment of loan to him than it would be deemed as income in the hands of director and would be taxable even if director has repaid the excess loan received by him to company.

But if director is holding less than 10% of shareholding, than it would not be deemed dividend.
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