The facts of the case is as follows. Mr. A & Mr. B are 2 individuals, both A and B hold 20 % shares in C Pvt. Ltd. Moreover, there is a company called D Pvt . Ltd. where in both A & B holds 50% shares each. Now C Pvt. Ltd. wants to give loan to D Pvt. Ltd. My Queries are 1) Does this proposal attract the provision of Deemed Dividend u/s 2(22)e , if yes on which amount?? 2) What is the best legal route to escape the incidence of deemed dividend.
05 March 2013
Person Covered under this Section….….. Any shareholder who is a beneficial owner of 10% or more of Voting power of the Company (but the shares shall not be entitled to a fixed rate of dividend, whether with or without a right to participate in profits); Or [See Note 9] To a concern (includes {HUF, Firm, AOP or BOI, Company}) in which such shareholder is a partner or a member , AND; Has substantial interest (when entitled to 20% or more of the income of such concern).
So as per your case it is Considered as Deemed Dividend 2(22)(e) of The Income Tax Act, 1961
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