Loan given by a sister concern

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 February 2012 Dear Expert,

i am working in a partnership firm wherein one of the partner is also a director in a pvt. ltd. co. and pvt. ltd has tool loan from bank and part of the loan given to the firm on same terms and condition as apply to it by bank.

my quarry is whether loan give by pvt. ltd. to its sister concern will get attract provision of sec 2(22)(e)of the income tax act.

will there any tax applicability be arise in this case.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

12 February 2012 1. If The director holds more than 10% shares in the pvt ltd. company , and the said director is having not less than 20% share in the firm, provisions of section 2(22)(e) is attracted.
.
To the extent of accumulated profit in the Pvt Ltd Co. , the amount will become taxable as deemed dividend, in the hands of the Individual who is a Director -cum-partner.

Querist : Anonymous

Querist : Anonymous (Querist)

12 February 2012 Thank you sir,

but is there any other things possible in my case to avoid such implication of 2(22)(e).

also guide me if other than above provision any other provision also gets attracted.

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