Loan to Directors
hussain
(Querist) 22 September 2009
This query is : Resolved
Sir,
The company as given loan to directors in financial year 2005-06 and it was recoverd by deducting from remunaration in the next finacial year 2006-07.for that the ITO says that the company is closely a private company and in that year the profit is about 15lac and the director holds 79% share in the company so as per ITO provision of sec 2 (22) (e) of the act the above loan is to be treated as deemed divided.so there is decision from high court & supreme court for the above section that Sec 2 (22) (e)
Thanking you
Hussain
riven
Vineet
(Expert) 22 November 2009
Dear Mr Hussain,
If:
1. The Director to whom the loan has been advanced holds more than 10% of the shares of the company
2. The amount of loan is less than the accumulated profits of the company as on day of advancement of loan
Then the stand of ITO is perfectly legal.
The constitutional validity of deemed dividend u/s 2(22)(e) [section 2(6A)(e)] of 1922 Act has been upheld by Supreme Court in 57ITR1 and 56 ITR 198.
