Question ID :
31676
Deemed Dividend u/s 2(22)(e) or not ?
A closely held private limited company is having 2 shareholders each having 50 shareholding. The company incurs some business expenditures including incorporation expenses of LLP which has to be ultimately borne by LLP. The expenditures incurred by the company on behalf of LLP is shown as LoanAdvance to LLP in the books of company. The aforementioned 2 shareholders of company are also 50-50 partners in LLP. So whether the debit balance of LLP shown as LoanAdvance in the books of company would be treated as deemed dividend us 2(22)(e) of the I.T. Act?
Posted by
NIKITA LONGWANI
on
Jun 05, 2018
Filed Under
DIRECT TAXES
Prima facie, it will be treated as deemed dividend us 2(22)(e) of the IT Act.
Posted by
CA PRADEEP C B on
Jun 05, 2018
Answer ID :
68735
apparently ,yes
Posted by
SANDEEP KAPOOR on
Jun 05, 2018
Answer ID :
68736
In most of the cases the revenue would treat it as Dividend.
However the provisions are based on Deemed Dividend and hence if the LoanAdvance is on returnable basis and backed up by repayment document, then it would be a little beat easy to argue with revenue.
Can be settled at ITAT or above level.
Posted by
CA. LONIKAR SHASHIKANT ACHYUTR on
Jun 05, 2018
Answer ID :
68745
if we go strictly, Deemed Dividend is applicable.
Posted by
CA. SATISH CHAND GARG on
Jun 06, 2018
Answer ID :
69819
yes...deemed dividend since LLP is also a concern...
Posted by
SIVADAS CHETTOOR on
Jun 24, 2018