Deemed dividend

This query is : Resolved

devinder singh (Querist)
Follow

16 December 2011 I am a director of a company with 87% share. I had utilised companys fund in the year 2007-2008 I have paid intrest to the company on it. I had cleared the funds within 3months the year 2008-2009. I have provided funds to the company in the year 2008-2009 and have received intrest from the company for the same. TDS have been deducted by the company. In my personal assesment from the income Tax for the year 2008-2009 they are demanding deemed dividind as an additional income to the extent of the profit of the company. I have opening balance payable to the company and closing balance as receivable from the company. Is this justified, is there any remedy for this. Please convey possibilities.
thanks
regards
shunty

Guest

Guest (Expert)

16 December 2011 Yes, deemed dividend provisions are applicable on you.

2(22)(e) "dividend" includes—

any payment by a company, not being a company in which the public are
substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) 26[made after the 31st day of May, 1987, by way of
advance or loan to a shareholder, being a person who is the beneficial owner of
shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

17 December 2011 The question of deemed dividend arises in the year 2007-08 only and not in 2008-09.

Message likes : 1 times

Upgrade to CAclubindia Pro. Subscribe Now!

Guest

Guest (Expert)

17 December 2011 Deemed dividend arises in the year 2008-2009 also since closing balance is receivable from the company in the said year.

Message likes : 1 times

devinder singh

devinder singh (Querist)
Follow

29 December 2011 Thanks friends, kindly advice if the accumulated profit of the company in the year
year profit B/f profit Accumulated
2005-06 82991 [-] 28410 54581
2006-07 92538 54581 147119
2007-08 42331 147119 189450
2008-09 16481 189450 205931

What is the amount of deemend dividend if my loan amount exceeds the maximum Accumulated profit. Am I liable to pay for all the years,seperately, do i get set off in next consecutive year, or do I have to pay only on the opening balance of accumulated profit in the year 2008-2009.

Please advice , my case is in scurtney and the mater is not clearly defined in the books.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

30 December 2011 You have taken company's money in 2007-08. Deemed dividend arises ,in the given case,in the year 2007-08 only. If money taken is more than ,in the year 2007-08, Rs.189450(being the accumulated profit) deemed dividend will be restricted to Rs.189450/-.