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Income Tax Queries

sivaram (Asst Mgr-Taxation) (6918 Points)

04 September 2009

1.Can any one explain with example the concept of deemed Dividend

2.Suppose a person owns two houses one for self occupation and another for carrying on business how will the property on which the business is carried on be treated in Income tax?

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4 Replies

CA Manish K Dhoot (CA, B. Com, NCFM, CPCM) (5015 Points)
Replied 04 September 2009

1. Deemed divedend (sec. -115o)

tax on distributed profits of co.

Divedend- Domestic co. will pay income tax on any income earned by it. however in addition to such income tax such co. has to pay dividend distribution tax (DDT) @ 16.995 % (15%+10%+3%) on the amount of dividend declared, distributed, paid.

2. The property in which business is carried out will be used for business.

on that building you can claim depreciation and other exp of building.

Building will be treated as an asset.

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sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 04 September 2009

Dear Mr Manish

Thanks for reply for question2.But I am not satisfied with the explanation on Question 1.Where u have just explained Dividend declared by company and paying Dividend Distributon Tax Thereon as per Sec115-0

kapil kumar agrawal (Chartered Accountant ) (169 Points)
Replied 29 September 2009

Dear Manish,,,

Sorry for Saying that Answer given by you on Question 1 is incorrect>..

Deemed Dividend concept is explained in Sec. 2(22) clause a/b/c/d/e Okay dear>>>

Dear Sivaram,

On What topic u want to ask please quote.

please qoute topic related to Sec 2(22) clause a/b/c/d/e....

You can check this section....

Answer given on Ques 2 is correct....

Any help can take from me by sending message to my profile

Krutesh Patel (ACA) (727 Points)
Replied 29 September 2009

Deemed dividend concept is applicable in case of Private Company other than engaged in banking business. Generally, on dividend, company pays dividend distribution tax. But deemed dividend u/s 2(22)e is taxable in hands of share holder.

Whrere the said company has accumulated profit other than capitalised profit and grants advances to following persons it, such advances will be taxable as deemed dividend in the hand of such person.

1. A person who is beneficial owner of more than 10% of paid up capital of company

2. To a concern in which such person (who has more than 10% beneficial ownership in the company) has beneficial interest more than 20%.

3. Or paid for benefit of such person(who has more than 10% beneficial ownership in the company) to any other person. for example company pays to LIC for insurance of such person.

This is called deemed dividend.