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Loan from Closely held Company to pay Salary is ‘Commercial Transaction’ for the purpose of ‘Deemed Dividend’

The Hyderabad bench of ITAT recently declared that any loan taken from the closely held company to discharge the payment of salary is ‘commercial transaction’ for the purpose of ‘Deemed Dividend’ under Section 2(22)(e) of the Income Tax Act, 1961. 

The bench comprising D. Manmohan, vice president and S. Rifaur Rahman, accountant member was hearing an appeal preferred by the assessee against the order of CIT (A) Hyderabad. During the assessment proceedings AO noticed that the assessee had takloanen a  from two companies, which are closely held companies and assessee holding substantial interest in that company. 

The sole issue in the instant appeal was AO treated the loan amount taken by the assessee to the extent of Rs. 40,01,816/- as deemed dividend in the hands of the assessee.

 Article referred: http://www.taxscan.in/loan-closely-company-pay-salary-commercial-transaction-purpose-deemed-dividend-itat/16710/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+Taxscan+%28Top+Stories+%E2%80%93+Taxscan+%7C+Simplifying+Tax+Laws%29

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