25 May 2011
Suppose A Co. Pvt Ltd and B Co. Pvt Ltd are situated under one roof. The expenses incurred by A Co Pvt Ltd are shared on the basis of turnover. For this purpose, the Co A Pvt Ltd issues debit note to recover exp from B co Pvt Ltd. Whether the provisions of section 2(22)(e) of I T Act, 1961 attracts or not. Please advise with justification.
25 May 2011
Sec 2(22)(e) starts with the words "any payment by a company ........ by way of advance or loan to a shareholder....". Thus it is strict sense not a payment and not by way of advance. Hence, provisions of this section is not applicable to the type of transaction narrated above.
25 May 2011
Agree With Mr Rao. Question of attracting deemed dividend do not arises. Also see article from below link to have a clear idea about sec 2(22)(e).
CAclubindia
