cross holding by a pvt ltd company same director

This query is : Resolved

CS Amit Kr Jain (Querist)
Follow

11 August 2010 Sir
Two pvt ltd company having investments in each other and a common director holding more than 10% share in each company .

is this applicable according to corporate law,how or any other law ,like payment made to companies can be treated as deemed dividend.u/s 22 of IT act.

what are the conditions and consequences of this cross holding?

Aditya Maheshwari

Aditya Maheshwari (Expert)
Follow

11 August 2010 If a company lends money to a shareholder holding more than 10% of the share capital then provisions of Section 2(22)(e) of the income tax act applies and it will taxable in the hands of the receiving company as deemed dividend.

There is no such restriction as per companies act since both are pvt. ltd. company.