Deemed dividend & accumulated profits

This query is : Resolved

Pranav S.Sanghvi (Querist)
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14 April 2009 Deemed dividend is subject to accumulated profits and profits earned upto the date of payment of loan or advance made by a company to a shareholder having substantial interest in the company.

My Query is

What is the basis for calculating profit in the financial year upto the date of payment of Loan or Advance made by Company to its shareholder having substantial interest in the company?

Whether profit for that purpose is calculated on proportionate basis during the year or whether it should be calculated on actual basis after considering the provision for income and expense entries? If actual profit is difficult to derieve due to the fact that the company is having large volume of transactions having 10 branches and the figures upto the date of loan is not audited figures than what profit should be considered?

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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15 April 2009 If you are a public limited company and shares on listed on the stock exchange the results which you publish quarterly will be considered ie the preceeding quarter resutls at the date of giving loan.

If it is a private limited company and where you can provide audited accounts then the profit disclosed there will be considered.

If you are not in a position to provide the audited accounts then the total profit as per auditied accounts will be considered and based on sales figure or revenue figure to that date divided by total revnue will be considered for the purpose of profit.

Say total renue - 10 Crores
upto the date of loan - 5 Crores

Profit (audited) annual - 3 Crores

Then proportionate profit will be 1.5 Crores.

Profit will not averaged by days method.