Deemed Dividend under section 2(22)(e)
This query is : Resolved
11 May 2010
A shareholder having substantial interest in the closely held company received cash as per the family settlement to which the company is also a party to it. Whether the receipt of cash in the hands of the shareholder liable to be taxed under section 2(22)(e) of the Income Tax Act 1961?
12 May 2010
YES. IF SHARE HOLDER HOLDS MORE THAN 10% OF SHARES IN THAT COMPANY YOU HAVE SHOW REASON WHY SUCH PAYMENTS WERE MADE THEIR IS NOTHING CALLED FAMILY SETTLEMENT IN THE BOOK OF IT AND HENCE THE SAME AMOUNT WILL BE ADDED IN THE INCOME OF SHAREHOLDER AS DEEMED DIVIDEND U/S 2(22)(e) PROVIDED THE COMPANY HAS SUFFICIENT BALANCE IN RESERVE AND SURPLUS.
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