What would be the implications related to tax when a private company gives loan to its director and the director uses the loan money to buy the shares of the same company (more than 10%).
Will it be considered as deemed dividend under Section 2(22)(e). Please also tell if any other relevant section applies
No, a private limited company cannot give loan to directors.
According to Section 185 of Companies Act, no company can directly or indirectly provide any loan to its director or to any other individual with whom the director is related to or is interested in.
Under the amendment in section 185, any private company where it has common directors can give inter-company loans so long as it is in the business interest.
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