Deemed dividend

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 August 2010 There are surplus funds in a pvt ltd co. in form of accumulated profit and loss account.

Can the excess funds be lended (with or without interest) to dirrectors / shareholders for their own personal business?

Can it be given to third party on interest?

The objective is not to reduce the size of the balance sheet of the company and lend money.

srinath

srinath (Expert)
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20 August 2010 if it is given to directors who ve substantial interest in the concern then it would be deemed dividend....

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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20 August 2010 Loan without interest to Directors (having more than 10% shareholding) is to treated as deemed dividend.

Loan to third party can be given on interest, if proper approval is being taken from the Board of Directors.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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20 August 2010 You can give the surplus fund as loan on interest to directors holding less than 10% shares and other outsiders. If your company is a NBFC then you can give loan even to directors holding more than 10% shares.
Please check the provisions of Deemed dividend [Sec 2(22)(e)] carefully before lending