Deemed Dividend U/s 2(22)(e)

This query is : Resolved

RIMPI SINGHAL (Querist)
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22 July 2008 Sir/Madam,

When a company gives loan or advance to director holding more than 10% share in company.Suppose Loan of RS. 195000/- is given to director in previous year 2006-07 and same outstanding in P.Y. 2007-08. What will be accounting treatment to be shown in books and what will be the tax treatment in the hands of director/shareholder and company.

CA Hemant T Dewani

CA Hemant T Dewani (Expert)
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22 July 2008 LOANS GIVEN TO DIRECTORS IS DEEMED DIVIDEND OF THAT DIRECTOR IT IS TAXABLE INCOME IF HE PAYS THE SAME IN FUTURE OR NOT

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
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22 July 2008 The amount of advance can be treated as deemed dividend u/s 2(22)(e) of the Income Tax Act if the company is having accumulated profits available for distribution of dividends to the tune of advances. In that case the amount will be taxable in the hands of director/shareholder u/s 56 of the Income Tax Act. Also, the company will have to deduct Tax at Source u/s 194. Further, dividend distribution tax u/s 115O is not payable in such a case.

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