DIPAK AGARWAL (Service) (554 Points)
20 January 2009Query related to deemed dividend u/s.2(22)e
Say Mr. Arun is a shareholder of Co. X (holding more than 10% shareholding) & he is also a shareholder in Co.Y (holding more than 20% shareholding, means substantially interested)
Now Mr. Arun had taken loan from both the cos. of Rs.10 Lacs each. Therefore my question is that what amount will be treated as deemed dividend in the hands of Mr. Arun & at what percentahe he will have to pay tax thereon?
Pavan Jain S
(Chartered Accountant)
(1575 Points)
Replied 20 January 2009
To attract the provisions of section 2(22)(e), it is necessary that the Company is Closely held.
The Chargeability is attracted to all persons who has obtained loan from the company in which he holds 10% or more of the share capital
In you case, MR. Arun is liable to tax such amount of loan received as is equal to accumulated profits of the Company. The Company has the obligation to deduct TDS on the same.
The Dividend income shall be included in IOS and will be taxed at normal slab rates applicable to individual.
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