sharing exp arrangement and deemed dividend u/s 2(22)(e)

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yogesh vijaykumar shah (Querist)
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25 May 2011 Suppose A Co. Pvt Ltd and B Co. Pvt Ltd are situated under one roof. The expenses incurred by A Co Pvt Ltd are shared on the basis of turnover. For this purpose, the Co A Pvt Ltd issues debit note to recover exp from B co Pvt Ltd. Whether the provisions of section 2(22)(e) of I T Act, 1961 attracts or not. Please advise with justification.

B N Rao

B N Rao (Expert)
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25 May 2011 Sec 2(22)(e) starts with the words "any payment by a company ........ by way of advance or loan to a shareholder....". Thus it is strict sense not a payment and not by way of advance. Hence, provisions of this section is not applicable to the type of transaction narrated above.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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25 May 2011 Agree With Mr Rao. Question of attracting deemed dividend do not arises.
Also see article from below link to have a clear idea about sec 2(22)(e).

https://www.caclubindia.com/articles/details.asp?mod_id=6121

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