Whether Section 2(22)(e) will apply

This query is : Resolved

Nikhil Chhawchharia (Querist)
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26 July 2010 On the date of giving advance to Mr. X, he holds 9% equity shares of the Pvt. Co. & has applied for 3% equity shares.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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26 July 2010 For the applicability of Section 2(22)(e)
requirement sought is the shareholder must be having not less than 10 % of the voting power. By application he does not get any voting right. Hence advance given to him by the Pvt Ltd Company will not be treated as deemed dividend.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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26 July 2010 Agree. Since he holds less than 10% shares sec 2(22)(e) will not be attracted.

For detailed info on sec 2(22)(e) check following article---

https://www.caclubindia.com/articles/deemed-dividend-section-2-22-e-of-income-tax-act-1961-6121.asp

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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27 July 2010 AGREED WITH EXPERTS.
9. Benficial owner of not less than 10% of the voting power

It is not the registered shareholder but the beneficial owner of the shares who is covered by the section 2(22)(e). Also the shareholding as on the date of the loan has to be considered. If preference shareholders are entitled to vote due to default in payment of dividend or in redemption, their holding will also have to be counted.

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