treatment of deemed dividend

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 August 2010 a pvt ltd co. has accumulated profits till 31-3-09 is Rs.42000 and made a profit of Rs.75000 during the current financial year.
a company had paid a sum of Rs.200000 each to its two directors both having 50% interest in the company.
company paid them a sum of Rs.100000 each as a director remuneration during the current financial year. now as the company had paid them excess of Rs.200000(both) so what will be the accounting and tax treatment

Aditya Maheshwari

Aditya Maheshwari (Expert)
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11 August 2010 As per section 2(22)(e) profits as on the date of giving the loan needs to be seen and be taxed as deemed dividend u/s 2(22)(e) in the hands of the shareholders.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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11 August 2010 Directors remuneration is out of the purview of section 2(22)(e) of the Income tax Act,1961.

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Aditya Maheshwari

Aditya Maheshwari (Expert)
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11 August 2010 Sorry didnt see remuneration paid was Rs. 200,000/-. It is an expense not in the nature of loan or advance and hence not liable for taxation as deemed dividend.