Deemed dividend

This query is : Resolved

deepak (Querist)
Follow

07 July 2020 Dear sir, if there is a common shareholding in Holding & subsidiary company, and holding company given a loan to subsidiary company, can it is be treated as deemed dividend because i think we covered in i.e. loan to a concern in which such shareholder has substantial interest, in my case Mr A is a 50% shareholder in holding company as well as in subsidiary company, because in so many cases we see where Holding company given a loan to subsidiary company and has common shareholders for business purposes. but as per deeming fiction of section 2(22) (e) it is covered in deemed dividend.

please clarify.

whether there is any other interpretation or my interpretation wrong.

VIKASH KUMAR

VIKASH KUMAR (Expert)
Follow

09 July 2020 Section 2(22)(e) of the Income Tax Act mandates that deemed dividends are loans or advances extended by a company (barring a closely held one) to the following personnel:

A shareholder who is the beneficial owner of shares,
and holds a minimum of 10% of the voting rights

In case shareholding is 10% or more then Sec 2(22)e attracted in each case, irrespective of holding or subsidiary co.

deepak

deepak (Querist)
Follow

11 July 2020 Thanks for reply,

sir ,Normally holding company gives a loan to a subsidiary and having common shaeholders, whether section attracted.

please Read this line in section 2(22)(e) :

or to a concern in which he is a member/partner and is beneficially entitled to not less than 20% of income of the concern ;

Upgrade to CAclubindia Pro. Subscribe Now!