DEEMED DIVIDEND

Dear Sakshi,

Co (Loan giving Co.-LGC) can give advance or Loan to Sister Conceren Co(Loan Receving Co.-LRC) provided the person or member(Registered based on decided case law) holding 10% or more of share capital of LGC is not holding 20% or more in LRC then provision of section 2(22)(e) will not apply to such advance or loan.

Furthermore this provision also do not apply to Preference share holding and where the LGC is engaged in Money lending business.

Thanks & Regards

Hitesh

YES,It covered under 2(22)(e).
 

Dear

Any body having copy of trustee member ship form format. If you are having pls send me.

Regards

Mohanasundaran.T

THNX FOR THE REPLY.

But still the matter is same. The Co. is giving loan to its subsidiary or sister concern in which same shareholders exist having more than 10 / 20 % voting rights. So what will be the tax implications on such advances. If you can support your answer with any case laws then it will be very very favourable for me.

If anyone can cite a case law with regard to my above case it would be helpful

you can use redeemable preference shares for assisting the sister company. That will not attract deemed dividend.

There are some glaring lacuna in the provisions for deemed dividend...However, Delhi High Court in case of CIT Vs. Creative Dyeing and Printing P Ltd (2009) 184 Taxman 483 has held that the 'advance' given for commercial purpose of expansion of business cannot be treated as loan or dividend income in the hands of the shareholders of the assessee company as the shareholders also contributes the pool of funds required for expansion.