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Vikas Gupta (Querist)
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12 September 2011 -As per Section 2(22)(e)
-Any Payment by a Company not being a company in which public are substantially interest
-of any Sum by way of loan or advance to
-to Any concern
-in which such a shareholder
-and in which he has a substantion Interest
-Deemed as dividend in the hands of the concern to the extent to which the company possesses accumulated profits.

Exception:- Any Advance or loan made to a shareholder or a concern by a company in the ordinary course of its business where the money lending is substantionl part of the business. (Only money lending Case)

MY PROBLEM:-
-A Pvt ltd and B Pvt Ltd both are closely held comnpany
-B Pvt Ltd Retain a monoply retain in a particular product in that area
-Mr.X who hold 22% shares of Both Company
-B Pvt Ltd. Condition to all its customer manafucturing is done only after received of advance payment from customer
-A Pvt Ltd. Require to purchase that product for its business.
- Now If A Pvt. Ltd. Gives Advance to B Pvt. Ltd for the purchase of material then it shall be deeded dividend or not as per section 2(22)(e) (Because exception apply only in the case of Money Lending Case not any other case)

Please help

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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13 September 2011 The said transaction does not come within the ambit of section 2(22)(e) by virtue of Delhi high court decision in the case of CIT Vs. Raj Kumar (2009) 181 Taxman 155. Here the court concluded that, trade advance which is in the nature of money transacted to give effect to a commercial transaction can't be covered under the said section.

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Vikas Gupta

Vikas Gupta (Querist)
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13 September 2011 Thanks Sir

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