Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: TAX RATES - GOODS TAXABLE @ 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: list of goods taxed at 4% :: VAT RATES :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TDS :: VAT Audit :: form 3cd :: ACCOUNTING STANDARD :: cpt :: Central Excise rule to resale the machines to a new company :: due date for vat payment :: empanelment
« News Headlines »
  10 incomes you need not pay any tax on
 How To File Income Tax Returns In Three Steps By March 31, 2018
 10 things about income tax every taxpayer should know
 What to do if your TDS is not deposited with the government
 What if you forget to verify your Income Tax return?
 TDS on rent and other tax tasks to complete before March 31
 5 income tax changes which will come into effect from April 1, 2018
 Why you shouldn't be a last-minute tax filer
 How to calculate income tax for this assessment year on Moneycontrol
 6 Tax notices you may get and how to cope with them Income Tax Notice
 Deadline to pay advance tax ends tomorrow: Here is a step-by-step guide

Taxmen or shareholders, profits must be split
April, 14th 2007

In a significant ruling, the Supreme Court has said the funds available with a company in the form of profits should ordinarily be distributed among its shareholders. But if the controlling group of the company refuses to distribute the accumulated profits as dividends to shareholders and decides to advance the profits by way of loan to other concerns for the benefit of its shareholders, it would come under the purview of deemed dividend and be taxable.

A Bench comprising Justices SH Kapadia and BS Reddy said, Companies having accumulated profits and companies in which substantial voting power lies in the hands of the person other than the public (controlled companies) are required to distribute accumulated profits as dividends to the shareholders.

The Legislature realised that though funds were available with the company in the form of profits, the controlling group refused to distribute accumulated profits as dividends to shareholders but adopted the device of advancing the said profits by way of loan to its shareholders so as to avoid payment of tax on accumulated profits. This was the main reason for enacting Section 2(22)(e) of the I-T Act, Justice Kapadia said, writing the verdict. Section 2(22)(e) of the I-T Act deals with deemed dividend.

Relying on two judgements of the apex court, the Bench said Section 2(22)(e) of the Act postulates two factors: whether the payment is a loan and whether on the date of payment there existed accumulated profits. These two factors have to be correlated, said the apex court.

The verdict came in an appeal by the I-T department, which had sought to levy tax on Rs 5.99 crore of undisclosed income of an assessee. The court allowed the revenue departments plea.

In this case, MK Shah Exports made a payment amounting to Rs 5.99 crore to two firms MK Foundation and MK Industries for the benefit of assessee.

The revenue department assessed it as a deemed dividend under Section 2(22)(e) of the I-T Act. The Calcutta High Court had turned down the plea of the I-T department, saying the money was lent and advanced by MKSEPL to MKL and MKI in normal course of business. However, disagreeing with high courts reasoning, the apex court set aside its verdict.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Achievements

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions