A Private Ltd. Company wishes to take a property on Lease from four Shareholders each holding around 9 % shares, the remaining shares being held by their relatives/closely held companies/outsiders. The said Shareholders are also Directors in the company. The Company shall pay around Rs. 5 Crores as Security Deposit to the above shareholders proportionately i.e. say Rs. 1.25 Crore per shareholder and a nominal rent of say Rs. 3,00,000 p.a per shareholder i.e. totaling to Rs. 12 Lakhs p.a. (Prevailing market rent is say around Rs. 30 Lakhs p.a.)
Now the issue is that in the books of shareholders the Income tax officer:-
· shall treat the rental income of Rs.3 Lakhs p.a. per shareholder. or
· will he replace it with Rent of Rs. 30 Lakhs p.a. collectively i.e. prevailing market rate i.e Rs. (30/4 = Rs. 7.5 Lakhs per shareholder) or
· will he take notional interest on the security deposit and add it to rental income or
any other value
Rajesh Poddar
CAclubindia
