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...
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 ‘dividend’ 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)].
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