Regarding Pvt Ltd Company Taxation

This query is : Resolved

for misc (Querist)
Follow

27 August 2010 Dear All,

You are requested to kindly assist in addressing this following query of mine.

Background

We set up a pvt limited company in 1998

Property was purchased by this company for a value of Rs 'A' but there was no activity in this company.

The proposed business that this company was set up for didnt materialize and there was no activity that was done in this company apart from the property purchase that happened in 1998

About 2008 the property was sold off for Rs 'A+B' and tax on the capital gain was deposited.

Please clarify on the following points

1) What happens to the money that is there in this company account. Can it be given to the shareholders( directors) in the ratio of their holding? If yes, is there any tax that needs to be paid ( as tax on the capital gain has already been paid)

2) If the shareholders cannot take the money, then how can it be distributed to the shareholders(Directors)

3) If the shareholding stake is less than 10% can they take a loan from the company.

4) If the shareholding stake is 10% or more than 10% can they take a loan from the company.

5) If we need to close the company, then how would the money lying in the corporate account be distributed and if there would be any tax that would applicable.

Regards

Arun

Arun (Expert)
Follow

27 August 2010 Sec 2 (22) of the Income tax appliacble to the extent of accumulated profit. Since the company does not have any profit on the distribution of asset during the time of liquation need not to pay any tax u/s 115O. but the Capital gain scheme needs to be withdrwan before liqudation if that is the case then tax needs to be paid as Capital Gain tax.

The company can give as loan to the shareholders even shareholding is more than 10%. Because the sec 2(22)(e)states that the loan or advance to the extent of accumulated profit will be treated as Deemed Dividend. Since the company does not have any accumulated profit it can give as loan or advance.