deemed dividend

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Querist : Anonymous

Querist : Anonymous (Querist)

05 May 2011 Co. A gives loans and advances to unrelated co.B(ie.B is not a shareholder in co.A) , however one shareholder has more than 10% share in loan giving co and more than 20% shares in loan receiving co. can this loans & advances be considered as deemed dividend? Reply soon

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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05 May 2011 No.Sec 2(22)(e) is not attracted. If Co B had more than 10% shares than it may have attracted sec 2(22)(e).

Please read article from below link to get a clear picture.

https://www.caclubindia.com/articles/details.asp?mod_id=6121

Querist : Anonymous

Querist : Anonymous (Querist)

05 May 2011 You mean only receiving co. should be the shareholder having more than 10% shares of lending co. Common shareholders of the lending company and receiving co. an their shareholding pattern is immaterial in case of deemed dividend.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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05 May 2011 Yes. That shareholding is immaterial.

Querist : Anonymous

Querist : Anonymous (Querist)

06 May 2011 Sir, pls. go through this decision and pl. give me final reply in regard to my question. [2009] 27 SOT 270 (MUM.)(SB)
IN THE ITAT MUMBAI BENCH ‘E’ (SPECIAL BENCH)
Assistant Commissioner of Income-tax, Circle-33
v.
Bhaumik Colour (P.) Ltd.*

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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17 May 2011 https://advocatesivasubramanian.lawyersclubindia.com/judiciary/Section-2-22-of-the-Income-tax-Act-1961-Deemed-dividend-773.asp

This is the link of case law mentioned by you.

In this regard please see---

it was opined that deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender company and not in the hands of a person other than a shareholder. Further, the expression ‘shareholder’ referred to in section 2(22)(e) refers to both a registered shareholder and beneficial shareholder. If a person is a registered shareholder but not the beneficial shareholder then the provisions of section 2(22)(e) would not apply. Similarly, if a person is a beneficial shareholder but not a registered shareholder then also the provisions of section 2(22)(e) would not apply. [Para 41]

In view of aforesaid, there was no merit in appeal filed by the revenue and, therefore, same was to be dismissed. [Para 42]

Therefore sec 2(22)(e) is not attracted.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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17 May 2011 Sanjay Ji

I fully endorse with your view.

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