04 August 2010
Hi all Loan given to a partnership firm by a private ltd. company in which one of the director is also a partner of the firm, will it amount to deemed dividend
04 August 2010
Section 2(22)(e) "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) [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 percent 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 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;"
As per Explanation 3(b) to Section 2(22) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty percent of the income of such concern yes , amount will be deemed dividend to the extent of accumulated profit of company if partner has at any time not less 20% share in firm. Read above definatin to any concern in which such shareholder is member or a partner.
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