deemed dividend-2(22)9e)

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veena (Querist)
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11 August 2009 A company has capital and reserves of approximately 70 lakhs, shareholder interest free loan 2.5 crores and loan to other concern where shareholder interested is Rs.55 lakhs. Whether section 2(22)(e) is applicable for the same.
if teh interested shareholders are having more than 20% voting rights- what will be the situation.
and if te shareholders are having less than 10% how do we analyse it.
REquest for reply ASAP
Thank You Sir, if teh said query can be modified so as to:
If teh company has during teh year unsecured loan of say 5 lacs and loans and advances of RS.15 lacs, carry forward from last 2 years. These are from directors who also hv their own proprietory concern, can it be said that teh net loans and advances Rs.10 lacs is deemed dividend. The shareholding of such directors is less than 20% in teh company. Please reply ASAP

Sandeep Diwan

Sandeep Diwan (Expert)
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11 August 2009 Payment by way of advance or loan to shareholder holding not less than 10% of voting power or to any concern in which such shareholder is member or partner and in which he has substantial interest - ,are deemed as dividend to the extent of accumulated profit.

Substantial Interst mean he is entitled to not less than 20% of income of such concern.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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11 August 2009 Continuing Mr.Diwan two citations are given for reference.

1) CIT Vs. P.V.John (1990) 181 ITR 1(Ker).
2) R.Dalmia Vs. CIT (1982) 133 ITR 169(Del).

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