22 August 2011
Frnz, assessee is an individual and a director in a company. the assessment of the company has been over. Now the dept. raised the assessment of the assessee saying that if the directors' current account balance, during the year, any time reach to debit then the said amount will be considered as a deemed dividend and becomes taxable. No matter that closing is credit. Whether it is the right concept. What is the solution of this. T & R, JMD
22 August 2011
Yes, my friend income tax departmnet surely do this, If in previous year any balance debit then section 2(22)e will be applicable and considered as deemed dividend. section 2(22)e is inclusive section. this section covers big area of taransaction. FROM ESCAPE WHEN U FORM A COMPANY MAKE SEPARATE A/C AS LOANS AND ADVANCES IN THE BOOK OF DIRECTOR AND ONE WHICH IS IN INVESTMENT A/C.
INVESTMENT A/C WILL BE CONSIDERED AS CAPITAL IN THE BOOK OF COMPANY.
LOANS AND ADVANCES(DIRECTOR) WILL BE CONSIDERED AS UNSECURED LOAN IN THE BOOK OF COMPANY,
22 August 2011
Interest should be collected on sum advanced to the director at prevailing market rates. This can justify that advance is for a consideration and does not amount to appropriation of funds of the company.
CAclubindia
