sec 2(22)(e)

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mahak wadhwa (Querist)
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09 February 2010 as per the income tax rules:
for this sec. any payment made by a company, not being a company in which the public are substaintially interested, of any sum ( whether as representative a part of the asstes of the company or otherwise) by way of advance or loan to a shareholder, being a person who is 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 rights, or to any concernin which such shareholder is a member or a partner ...to the extnt of the accumulated profits the company posses.

my query is that in under this clause...what do we consider as an advance or payment? whether it is suppose to be the net of the transactions between the shareholder and co. at year end or whether it is the absolute sum of the payments by the co. to the shareholder?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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09 February 2010 My understanding is the absolute sum will be considered as deemed dividend in view of the findings in the case decision cited below.

Citation : - Miss.P.Sarada Vs. CIT (1998) 96 Taxman 11 (SC).

Held that,even if the loan or advance ceased to be outstanding at the end of the previous year, it can still be a deemed dividend if the other four conditions factually exist to the extent of the accumulated profits possessed by the company.

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