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Sec. 2(22)(e)

This query is : Resolved 
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(Querist)
07 March 2011 Dear sir,
My client was having 8% of share holding of the XYZ Pvt. Limited. He received loan of Rs. 100000 on 1/9/2009. Company was having sufficient accumulated profit. So, Amount received by him is not to be considered as deemed dividend. But on 10/12/2009, he becomes share holder for 16% of share of XYZ Pvt. Limited. Now, ITO views that this shall be added to the assessee's income.

What would be the effect, whether sec. 2(22)(e) is attracted because of subsequent share holding of not lessthan 10%?
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Bhaskaran Chackrapani Warrier

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Bhaskaran Chackrapani Warrier (Expert)
07 March 2011 The words used in the referred section is 'who is beneficial owner of shares' and not 'beneficial owner of shares at any time during the year'. It may therefore, be noted that the shareholder should have 10% voting power ON THE DATE THE ADVANCE OR LOAN IS GIVEN TO HIM/ HER. The inference is, the ITO's view will not sustain.
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