feeleminds.com

Your Knowledge Partner!

Deemed Dividend

Personal Income Tax | Corporate Tax | Advance Tax | Deferred Tax | Deductions | Eligible Investments | Tax Planning | Deductions | Tax Assessment etc.

Moderators: srinivasaraghavan, feele, sumitpahwa

Deemed Dividend

Postby raj1676 » Mon Mar 23, 2009 6:17 pm

Dear Friends

If in private limited company the shareholding pattern is as follows:-
Mr. A 9 %
Mr. A (HUF) 8 %
Mrs. A 7 %
Mr. B(Father of A) 76 %

advances loan to partnership firm with partners as :-
Mr.A 18 %
Mrs.A 17 %
Brother Mr. A 65 %

Is Deemed dividend applicable in the above case. i.e the ratio of 10% and 20% as mentioned in 2(22)(e) applicable on it individually or collectiviely.

Please reply
Rajesh Poddar
raj1676
Newbie eMind !
 
Posts: 2
Joined: Sat Oct 18, 2008 7:15 pm

Re: Deemed Dividend

Postby mehta1vishal » Fri Apr 17, 2009 5:50 pm

In my opinion, the limit of 10% or 20% is calculated individually.

But for the purpose of section 2 (22) e , shareholders means registered shareholder. (Case Law CIT v. C.P. Sarathy Mudaliar ).

As in your case, A holds 9% & A (HUF) holds 8% where registered holder will be A. So total holding will be 17% in this case.

However, A holds less than 20% beneficial ownership in the partnership firm, so the condition of 20% beneficial ownership is not fulfilled.

Accordingly, loan given by private limited company to partnership firm will not be treated as deemed dividend.
mehta1vishal
Professional eMind !
 
Posts: 33
Joined: Tue Jul 10, 2007 2:04 pm

Re: Deemed Dividend

Postby sushil jain » Fri Apr 17, 2009 8:19 pm

yes, no deemed dividend.

sushil jain
sushil jain
Newbie eMind !
 
Posts: 2
Joined: Thu Oct 23, 2008 10:19 am

Re: Deemed Dividend

Postby solid snake » Thu Jul 16, 2009 10:22 am

As per section 2(22e) only a registered shareholder shall be a shareholder for the purposes of this section. ACIT vs Bhaumik Colour (P) Ltd. (313 ITR 146) clearly specifies that "deemed dividend could only be assessed in the hands of a person who was both a registered and beneficial owner of shares in the lender company. Further, the deemed dividend could be assessed only in the hands of the shareholder and not in the hands of a concern in which he held substantial interest." therefore the beneficial interest of 20% is a vital condition. but the holding of Mr. A in total comes up to (8+9 (individual+HUF) =17%) falling below the criterion of a beneficial owner and hence shall not, consider the payment made by the company to the partnership firm as deemed dividend due to lack of beneficial ownership.

Regards,
Ananth
solid snake
Trainee eMind !
 
Posts: 11
Joined: Wed Jul 15, 2009 10:35 am


Return to Income Tax

Who is online

Registered users: AdrianooCix, Bing [Bot], cildUpdaple, Google [Bot], Google Adsense [Bot], hakydiadark

eMinds Legal Counsulting Pvt. Ltd.
D-126, 2nd Floor, Sector 56,
Gurgaon -122011, India,

(O): +91 11 426 0141

(E) : info@emindslegal.com
(W): www.emindslegal.com

Subscriptions

Registration to both the below newsletters is free and entitles you to receive 1 mail per day. We don’t Spam and you can unsubscribe anytime.

Corporate Law Reporter -  the daily journal

We regularly send legal updates related to Corporate Laws, FEMA, Compliances and Direct & Indirect Taxation.

Click here to register your email id for Daily Legal updates from Corporate Law Reporter - the Daily Journal.

feeleminds.com discussion forums

Click here to Subscribe to feeleminds discussion forums to get the gist of all discussions exchanged during the day

Our Service Offerings:

CORPORATE LAWS | FEMA | COMPLIANCE AUDITS | STPI | SEZ | CYBER LAWS | PRIVATE EQUITY | CORPORATE RESTRUCTURING

Follow us on

This legal update is the copyright of eMinds Legal. The update is not intended to be a form of solicitation or advertising. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate thereafter. No person should act on such information without appropriate professional advice based on the circumstances of a particular situation.