Deemed dividend

Tax planning 754 views 2 replies

Rajesh Poddar

Chartered Accountant

321 Points Posted on 03 October 2009

Dear Friends

There is one Partnership firm with A,B,C,D as 25 % partners. Also there is one Private ltd. company with same persons with same shareholding pattern.

Now there is no money in Partnership firm but money is lying idle in Pvt. Ltd. Co. I understand that if money is transferred from pvt. ltd. co. to partnerhip firm it will be treated as deemed dividend.

To over come that it is proposed that the above pvt. ltd company be made partner in the partnership firm upto say 20 % and existing partners reduce their share and this company brings in capital contribution and money comes into the firm. IS this transaction be treated as Tax planning or it is not within the frame work of the law

Please reply

CA Rajesh Poddar

Replies (2)

surbhi

40 Points Posted on 03 October 2009

good

Originally posted by :Rajesh Poddar

Dear Friends
There is one Partnership firm with A,B,C,D as 25 % partners. Also there is one Private ltd. company with same persons with same shareholding pattern.
Now there is no money in Partnership firm but money is lying idle in Pvt. Ltd. Co. I understand that if money is transferred from pvt. ltd. co. to partnerhip firm it will be treated as deemed dividend.
To over come that it is proposed that the above pvt. ltd company be made partner in the partnership firm upto say 20 % and existing partners reduce their share and this company brings in capital contribution and money comes into the firm. IS this transaction be treated as Tax planning or it is not within the frame work of the law
Please reply
CA Rajesh Poddar

Vivek

Finally passed CA Final...!!!!!

1097 Points Posted on 03 October 2009

I think, it is still be treated as deemed dividend, because private limited co is advancing money to the partnership firm in which member having substantial interest (20% or more share in profits). I suggest you, that private limted company to pay remuneration to those four directors & directors can bring those funds as extra capital to the partnership firm.

Since, it is a pvt limited co, i think there is no restriction on managerial remuneration...