Taxation
YAGNESH HASMUKH DAVE
(Querist) 07 February 2014
This query is : Resolved
I AM DIRECTOR IN THE PVT LTD COMPANY DURING THE YEAR AY 2011-12 I HAVE TAKEN RS 10 LAC BEING ADVANCE AGAINST PURCHASE OF PROPERTY FOR PVT LTD THE INCOME TAX OFFICER IS TREATING THE SAME AS DEEMED DIVIDEND U/S 2(22)OF IT ACT EVEN THOUGH LEDGER EXTRACT FROM THE PVT LTD CO IS SUBMITTED STATING THE PURPOSE OF PAYMENT MADE TO HIM . WHETHER INCOME TAX OFFICER IS CORRECT OR NOT PL EXPLAIN BRIEFLY
Anirudh
(Expert) 08 February 2014
Do you hold any shares in the said Pvt. Ltd. Company?
If so, what is the % of shares that you hold?
Rajendra K Goyal
(Expert) 08 February 2014
Private Limited Companies generally give Loan or Advance to their director and family members who are again shareholders holding 10% or more voting power or to a concern in which such shareholder has substantial interest. Such loan or advance is treated as deemed dividend covered under section 2(22)(e) and taxable in the hands of shareholders or concern as the case may b
Section 2(22)(e) of Income Tax Act 1961: “any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) [made after the 31st day of May, 1987 , by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern, in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for- the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits”
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http://www.caclubindia.com/forum/section-2-22-e-deemed-dividend-246640.asp#.UvXKdoVRy_I
T. Kalaiselvan, Advocate
(Expert) 08 February 2014
I agree with expert advise of Mr. Rajendra K Goyal on the subject issue, query very properly addressed.
C. SANJEEVA RAO
(Expert) 08 February 2014
Opening words of the section 2(22)(e) of the Income-tax Act,1961, provided the embargo on the public limited company. But not the private limited company, in that way, the action of the income tax officer is not correct, according to me.
R.V.RAO
(Expert) 08 February 2014
"...not being a company in which public are substantially interested"... in sec 2 (22)(e) means a pvt.ltd.co.
the ITO is not wrong in his action.
R.V.RAO
(Expert) 08 February 2014
In the old co act 1956-sec 2(22)(e)refers to pvt.ltd.co only.
The ITO action is justified if the queriest holds as shareholder not less than 10% voting power.
purpose of loan is immaterial.
the new co act 2013 bars loans to directors except with a few exceptions.
