Loans to shareholder

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 August 2010 Dear experts,

M/s. X Pvt.Ltd. is a shareholder of M/s.Y Pvt.ltd.

Now, can Y.Pvt.ltd. can lend loan to the shareholder M/s.X Pvt.Ltd.

What is the consequences, if loan given.

Please advice.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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18 August 2010 There is no restriction as per Companies Act.

Check the applicability of Section 2(22)(e) in this trasaction as per Income Tax Act.

In my view it will not be applicable but do double check.

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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18 August 2010 Agreed... there is no restriction

But.. Section 2(22)(e) of Income Tax Act will come into picture in case where the shareholding is 10 % or more. In those cases it will be treated as deemed dividend.

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Querist : Anonymous

Querist : Anonymous (Querist)

18 August 2010 Thanks