X Pvt Ltd is having 85% shareholding in Y Pvt Ltd and X Pvt Ltd gave loan to Y Pvt Ltd. Whether the loan given by X Pvt Ltd is deemed dividend? If so, in whose hands the same should be taxed?
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Deemed dividend
Replies (3)
Facts:
1)X Ltd is the holding company of Y Ltd
2)Y Ltd is the subsidiary of X ltd
3) X Ltd gave loan to Y Ltd
In simple terms, Dividend is a payment made by the company to its shareholders.
In the above instance, its the shareholder who is giving loan to the company.
Hence, the question of it being dividend or deemed dividend does not arise.
If Y Ltd had given loan to X Ltd, it could be treated as deemed dividend as defined in sec 2(22)(e) of the IT Act
Hope this helps you!!
Dividend is always taxed in the hands of the company which gives it. That's why dividend income is not taxable in the hands of the receiver
Thanks. I wish I need to clarify my point clearly.
1) X is a private limited company.
2) The company gave loan to Y another private limited company.
3) X-company has 85% shareholding in Y (private limited company).
4) Whether the loan given by X-company to Y is deemed dividend or not?
5) If so, in whose hands the amount to be taxed?
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