DEEMED DIVIDEND U/S 2(22)(e)
This query is : Resolved
23 October 2008
Mr A is a shareholder of ABC (P) LTD and XYZ (P) LTD HOLDING 14% SHARE IN BOTH COMPANY. NOW ABC (P) LTD HAS GIVEN LOAN OF Rs.20,00,000/- TO XYZ (P) LTD .
WHEATHER IT WILL BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF XYZ (P) LTD.
PLEASE REPLY WITH CASE LAW.
WHEATHER IT WILL BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF XYZ (P) LTD.
PLEASE REPLY WITH CASE LAW.
23 October 2008
Section 2(22)(e) lays down that payment of any sum by a company by way of advance or loan to any shareholder holding more than 10 per cent of the shares of the company will be deemed to be dividends and not just loan or advance only, to the extent to which the company possessed accumulated profits.
In this case ABC P Ltd has given loan to XYZ P Ltd. This would be an inter corporate loan.
Deemed dividend would not apply
In this case ABC P Ltd has given loan to XYZ P Ltd. This would be an inter corporate loan.
Deemed dividend would not apply
23 October 2008
Section 2(22)(e)
"any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) [made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten percent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as said concern)] or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits;"
Hence, sec 2(22)(e) attracts
But,i guess not in the hands of XYZ (P) Ltd but in the hands of A -the shareholder
"any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) [made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten percent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as said concern)] or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits;"
Hence, sec 2(22)(e) attracts
But,i guess not in the hands of XYZ (P) Ltd but in the hands of A -the shareholder
23 October 2008
THANX FOR REPLY.
BUT I WANT TO KNOW THE EXACT MEANING OF SUBSTANTIAL INTEREST.
BUT I WANT TO KNOW THE EXACT MEANING OF SUBSTANTIAL INTEREST.
30 October 2008
It is defined under Explantion 3 to the same subsection.
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