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Q. > Please Help: Deemed Dividend
1. S Pvt Ltd is engaged in Transport Business.
2. The Company has 10 directors. One of them is holding 20% of Paid up Capital, 2 are holding 5% each and remaining 7 are holding 10% each. Hence total 100.00. The Authorised and Paid up Capital is Rs 5.00 lakhs
3. S Pvt Ltd owns 14 Trucks. Apart from this, 60 trucks are owned by Directors in their individual name, thereby making them owner of respective trucks. The 60 trucks of Directors are purchased by them against Bank Finance (Commercial Vehicle Loan)
4. S Pvt Ltd sought some Transportation Contracts under its own name.
5. Now, Directors have employed Company owned 14 trucks and their privately owned 60 trucks for their company against fare.
6. Company maintained all 74 (14+60) trucks viz. wear and tear, repairs and maintenance, fuel, etc.
7. The company deducted above truck expenditure from Hire Rent Payable to respective Director.
8. Up to this everything was fine. But, the company has also paid the Truck Loan Installments of almost each Truck owned by Directors in their own name. Now, as the payments made on account of Truck Loan are much more than actual Hire Rent Payable, the Books are showing these extra payments to Directors as Receivable from Directors.
9. Now my question is whether these Truck Loan Installment payments are covered under Provisions of Deemed Dividend? If yes, how these transaction will be charged in case of Income Tax Scrutiny Assessment. Is it chargeable in the hands of Company or Directors in their individual capacity?
10. Please reply.
Experts Panelist
Comments
MANOJ KUMAR AGGARWAL
16-Aug-2014 , 05:48:25 pm1) the trucks hire rent payable is covered vat tax/service tax (right to use) subject to condition. 2) if the trucks hire rent is under service tax than tds is apply in the hand of company subject to condition. 3)excess payment of installment of loan is cover deemed dividend. 4)deemed dividend is covered tds in the hand of company.u/s194 5) deemed dividend is income form other sources in the hand of directors. 6) deemed dividend is only extend to only profit. i give you a example it is only one director mr X and one truck a hire rent charges 120000 b installment of loan is 300000 c)company profit 1500000/- a hire rent charges a/c dr. 120000/- to mr.X 120000/- (being hire rent charges provide.) b mr.X a/c dr. 300000/- to bank 300000/- (being installment of loan paid.) calculation of deemed divident 1500000/60=25000 c mr X. a/c dr. 2778/- to tds payable 2778/- (being tds amt provide (25000+2778=27778@10%) d tds payble a/c dr.2778/- to bank 2778/- (bieng tds amt paid) note balance amt.300000+2778-120000=182778/- deemed dividend is 25000/- balance is loan 182778-25000=157778/- thank you if any query please contract with me i am prepare pending and complicate accounts m no.09910652297