Sec 2(22)(e)
This query is : Resolved
12 October 2012
One Company lends money to the other company at 12% rate of Interest,both are having common directors.The company paying interest will deduct TDS while paying interest.Will the transaction be hit by 2(22)(e)?
12 October 2012
applicability of Sec 2(22)(e) depends on the shareholding not on the directorship.
If a shareholder holding 10 % or more in lending co also holds 10% or more in the borrowing co then sec 2(22)(e)will be applicable.
If a shareholder holding 10 % or more in lending co also holds 10% or more in the borrowing co then sec 2(22)(e)will be applicable.
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12 October 2012
Thankyou for such a quick reply,The director is holding more than 10% shares in both the Companies.Will the section be applicable if the lending is at arms length price and the money is used exclusively for the business of the Company.
12 October 2012
Yes the sec is still applicable.
Whether interest is charged or not and the use of money does not affect the applicablility of sec 2(22)(e).
Whether interest is charged or not and the use of money does not affect the applicablility of sec 2(22)(e).
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12 October 2012
If the money lending is the substantial part of co's bussiness and loan is made by the co in the ordinary course of business then it wont be considered as deemed dividend u/s 2(22)(e) (CIT v V.S. Sivasubramaniam (1998) 231 ITR 656 (Mad))
12 October 2012
I am not clear regarding use of money will affect applicability of the section.Does it mean .If the money is used for the business of the Company the section will not apply.or will it be interpreted as it is being used for the benefit of the shareholder.
12 October 2012
Earlier i have forgot to wrote "not" in my sentence and i have modified that now read it again.
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