06 March 2009
Loan to a closely held co. to the extend of reserves is taxable as deemed dividend in the hands of recepient. My query is whether in case where reserves consists of only share premium and no ther profit can loan given be added as deemed dividend.
06 March 2009
Dear Hiren, As per 2(22)_a/b/c/d/e we have to consider accumulated profit, which includes credit balance of P&L, GR, Investment Allowance reserve, Capitalisation profit and profit for the year upto date of distribution / liquidation.
06 March 2009
CAPITAL RESERVE WHICH IS NOT DISTRIBUTABLE AS DIVIDEND CANNOT UNDER ANY CIRCUMSTANCES BE INCLUDED AS DIVIDEND & THE ITO WILL NEVER DO SUCH FOOLISHNESS OF CONSIDERING CAPITAL RESERVE AS DISTRIBUTABLE PROFIT. SO EXCEPT CAPITAL RESERVE ALL THE AMOUNTS UPTO THE EXTENT OF DISTRIBUTABLE UPTO DATE OF GIVING OF LOAN WILL BE TAKEN AS DEEMED DIVIDEND & YOU WILL BE TAXED. THERE ARE SEVERAL ISSUES ALSO TO BE LOOKED INTO WHICH CAN SAVE YOU FROM THE PROVISION OF DEEMED DIVIDEND u/s 2 (22)E. INCASE YOU REQUIRE FURTHER DETAILS OF OTHER PROVISIONS PERTAINING TO YOUR CASE QUERY IT BECOMES IMP TO UNDERSTAND THE CASE IN DETAIL AS 2(22)IS A TACTFUL ISSUE. I HAVE HANDLED SCH ISSUE IN OPRACTICAL ALSO WINNING THE CASE, SO IF YOU FEEL YOU CAN CALL ME I HAVE GOT FEW DIFFERENT CASE LAWS ALSO ON THIS ISSUE
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