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Deemed dividend

GAURAV TIWARI (CA FINAL STUDENT) (105 Points)

28 December 2011

What will be the amount of Deemed Dividend and who is liable to pay the DDT ?

A Ltd having his office, on Rent of Rs. 50 lakh Annually, in the premises of B Ltd. Managing Director of A Ltd holds 10% shares in A Ltd. and he is also having substantial interest in B Ltd.

A Ltd. pays Rs. 1.50 Crores as an advance for 3 year as per the terms and conditions of the rent agreement.

A Ltd having his accumulated Profit Rs. 74 Lakhs.

Question is whether any amount treated as deemed dividend ? & who is liable to pay DDT..

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3 Replies

Yogesh Bhandari (CA FINAL Student) (429 Points)
Replied 28 December 2011

As i think,,
the above case amount to dividend to the extent of the accumulated profits of A Ltd. and A ltd. would be liable for DDT.

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abcde (student) (22 Points)
Replied 29 December 2011

I think it is not a case of deemed dividend since it is an advance given in the ordinary activities of the company. You can place reliance on CIT v/s Raj Kumar (Rajhasthan High Court)

Yogesh Bhandari (CA FINAL Student) (429 Points)
Replied 29 December 2011

Thanks for case law reference,, But i feel that advance for 3 years is not the normal practices followed. if you can give a supreme court decision on deemed dividend is highly appreciable.