In a Private Limited Company, Director who has 95% stake uses Company’s cash for his personal expenses and personal asset purchases. Accounting is done as if Loan is given to director. Now Amount is Approx 60-75 Lacs a year. How should we account this in order to avoid tax in the hands of director by way of Deemed Dividend U/s 2(22)(e).The company has not Declared dividend since it date of incorporation.
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Deemed Dividend- Query
Replies (7)
Does the company have accumulated profits?
Yes Around 1.5 Crores.
To the extent there are accumulated profits, it shall be treated as deemed dividend...
I am not aware of anyway to escape that... if the loan is given thru an account then you have no choice but make the director offer the income to tax... But if you can show enough losses at the time of giving the loan, then u can escape...:(
Thanks,Can you name some case laws relating to this issue.
In my opinion, you shouldn't pass entries in the books of account.
For maintaining (Difference between book cash and real cash because of such outflow) maintain it through excel or any other excel software.
Most of the concerns do such "reconcilation" through it.
Personal expenses and Personal assets purchased from the Comapany's cash can be adjusted against the Remuneration he draws from the Company as there is no limit on remuneration for directors in case of Private limited Company. It will be helpfull to some extent hope. However, it is taxable in the hands of Director.
How can one not pass any entries if Company's Bank account is used for his expenses
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