TREATEMENT OF LOAN GIVEN TO M.D'S WIFE.can you answer this?

This query is : Resolved

CA bezawada ranga (Querist)
Follow

29 August 2009 Mr X is MD of of ABCD&SONS PVT LTD.
COMPANY HAD ACCUMULATED PROFITS OF RS.750000 AS ON 31.03.2008.
IT GRANTS LOAN OF RS.450000 TO HIS(MR. x, MD) WIFE ON 01.06.2008 FOR PURCHASES OF HOUSE, WHICH WAS REPAID ON 31.12.2008
THE COMPANY CHARGED NO INTEREST ON THE SAID LOAN.
EXAMINE THE CONSEQUENCES OF THESE TRANSACTIONS.
MAKE YOUR OWN ASSUMPTIONS...

(in contest of income from house property.)

MAIL ID :bujji.manu@yahoo.co.in

CA CHINTAN AJMERA

CA CHINTAN AJMERA (Expert)
Follow

29 August 2009 Treated as a deemed dividend in the hands of assessee (i.e. Director).

CA bezawada ranga

CA bezawada ranga (Querist)
Follow

29 August 2009 BUT THE LOAN WAS paid to MD wife

Upgrade to CAclubindia Pro. Subscribe Now!

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

29 August 2009 Yes it is deemed dividend even though the advance ceased to be outstanding at the end of the previous year.

Citation:- 1) Smt. Tarulata Shyam Vs. CIT (1977) 108 ITR 345 (SC).
2) Miss. P. Sarada Vs. CIT (1998) 96 Taxman 11 (SC).

CA bezawada ranga

CA bezawada ranga (Querist)
Follow

29 August 2009 does MD's wife covered under sec2(22)e ????

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
Follow

30 August 2009 Fact of repayment of loan is not relevant - The Legislature has deliberately not made the subsistence of the loan or advance, or its being outstanding on the last date of the previous year relevant to the assessment year, a prerequisite for raising the statutory fiction. In other words, even if the loan or advance ceased to be outstanding at the end of the previous year, it can still be deemed as a â€˜dividendâ€™ if the other four conditions factually exist to the extent of the accumulated profits possessed by the company. - Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 (SC) [See also Miss P. Sarada v. CIT [1998] 96 Taxman 11 (SC)].