Urgent query
Querist : Anonymous
Querist : Anonymous
This is a matter of 'MOST URGENCY'. Please do reply of the same as soon as possible. Quick action in this regard will be appreciated.
---
### **Issue:**
Whether advance salary given to a director (and later adjusted against actual salary) attracts **Section 2(22)(e)**?
---
### **Section 2(22)(e) - Key Points:**
* It covers **deemed dividends**—any loan or advance by a company to its **shareholder/director** is treated as dividend to the extent company has accumulated profits, unless it's a **bona fide loan** or **advance for business purposes**.
* **Advance salary**, being a part of remuneration, generally **does NOT attract Section 2(22)(e)** because it’s not a loan or an advance in the nature of loan but salary payment.
---
### **Answer:**
* **Advance salary paid to a director which is adjusted against actual salary later** is considered part of remuneration and **NOT a loan or advance**.
* Therefore, **Section 2(22)(e) is not applicable** in this case.
* It is **not deemed dividend** since it is a salary payment in advance and not an unauthorized loan or advance.
---
### **Supporting Case Laws:**
1. **CIT vs. British Paints India Ltd. (1997) 226 ITR 646 (Bom)**
* Advance salary paid to a director is a part of remuneration and not a loan or advance under Section 2(22)(e).
2. **CIT vs. B.C. Srinivasa Setty (1996) 222 ITR 181 (SC)**
* Salary paid in advance is not a loan or advance attracting Section 2(22)(e).
3. **CIT vs. Walchand Hirachand Ltd. (1959) 35 ITR 530 (SC)**
* Advance salary is not treated as a loan or advance to a shareholder/director.
---
### **Summary:**
* **Advance salary → Adjusted against salary → Not loan/advance → No Section 2(22)(e).**
---
If you want, I can help draft a note or submission to the tax authorities based on this. Let me know!
Click here to login now
Similar Resolved Queries
- Accounting treatment of AMC alongwith the purchase of Laptop
- Nursery business
- GST REFUND ISSUE ON PURCHASE OF PLANT AND MACHINERY
- Condonation Request sec 119(2) b -Enhancement Limit of Leave Exemption prior to AY 2023
- TDS on Dashcam rent and allied services
- Tax on Amount transferred in HUF Account
- ETDS return q4 25-26
- Working on Gold wastage during Melting of old gold jewellery
- WRONG GSTR7 ENTRIES ACCEPTED ERRONEOUSLY
- Expert Help Required for TDS Refund 100000 Through TRACES – AY 2022–23
- IMPORT PURCHASE ENTRY PASSED IN BOOKS OF ACCOUNT
- FAST DS 26 Undisclosed Foreign Asset Disclosure Scheme 2026
- Regime change
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
CAclubindia
