Loan to Director of a Co. even Loss:Deemed Dividend

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Nagendra PGupta (Querist)
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05 June 2009 Dear ALL,

As per Sec 2(22) (e), if a laon/advance is given to a director/s is given in case of Loss, it is taxable dividend in the hand of the Director/TDS to be deducted. Again accumulated profit means only profit or vice versa also.
Plz answer with all treatment in the Books, taxation etc.
Regards
Nagendra Prasad Gupta
ACA509615

Parveen Bansal

Parveen Bansal (Expert)
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05 June 2009 Explanation 2 of section 2 (22) (e) says that accumulated profit shall include all profits of the company.

Accumulated profits means profits only. Hence, loans . advances given to director shall not be taxable dividend.

Radheyshyam Falod

Radheyshyam Falod (Expert)
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05 June 2009 Accumulated profits within the meaning of section 2(22)(e) will necessarily be comprised of the amount available for being distributed as profits. The word ‘accumulated’ means the profit earned bit by bit and accumulated. It does not mean that it should be carried forward from year to year. Profits can accumulate even within a single year. The entire amount which is available for distribution as profits on a particular date would be the accumulated profit and any amount paid as advance or loan to the shareholder to the extent of this amount of accumulated profits will be dividend within the meaning of section 2(22)(e) - CIT v. Roshan Lal [1975] 98 ITR 349 (All.).

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