Deemed Dividend u/s 2(22)

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Parashar (Querist)
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04 August 2010 Hi all
Loan given to a partnership firm by a private ltd. company in which one of the director is also a partner of the firm, will it amount to deemed dividend

please advise its urgent

Aditya Maheshwari

Aditya Maheshwari (Expert)
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04 August 2010 2(22)(e) could be attracted if the shareholder holds more than 10% in the company and more than 20% in the firm.

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CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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04 August 2010 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;"

As per Explanation 3(b) to Section 2(22) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty percent of the income of such concern
yes , amount will be deemed dividend to the extent of accumulated profit of company if partner has at any time not less 20% share in firm. Read above definatin to any concern in which such shareholder is member or a partner.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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04 August 2010 https://www.caclubindia.com/articles/deemed-dividend-section-2-22-e-of-income-tax-act-1961-6121.asp

You can also check above article for details.

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