DEEMED DIVIDEND U/S 2(22)(e)

This query is : Resolved

AJAY PANDHI (Querist)
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22 May 2011 Dear Sir,

My client X (proprietor)is under scrutiny. My Client X is a proprietory firm. X has also a Private Limited Company (Y) he owns majority of shares.

X has purchased a 3 storey building which is mostly used by his Company Y as business of Y is more than X. Both are in same line.

For purchase of 3 storey building, X has paid Rs 66 Lacs. X has received Rs 26 Lacs from Y Company as Interest free deposit for use of 3 storey building without Rent.
The same amount of Rs 26 Lacs was used to purchase 3 storey building.

The Assessing officer wants to tax as deemed dividend U/s 2(22) (e).

Please advice in this matter

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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22 May 2011 If the company Y possesses accumulated profits, to that extent or Rs. 26 lacs which ever is less is deemed dividend in the hands of X.

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