Deemed dividends

Shall try to explain the concept

Deemed dividend provisions are built in to prevent a privately held company divert the earned profits to other companies/entities without declaration of actual dividend ( and therefore payment of Dividend distribution tax).

The primary attack of 2(22)(e) is on the Loans and advances given by a profit earning (earned) company ( in which public are not substantially interested) to specified persons as follows;

1. Members/shareholders of the company holding more than 10% of the shares/profit  sharing rights of the company

2. Concerns ( all types) where such member/shareholder holds substantial interest ( meaning 20% or more shares/profit ratio)

3. To such concerns for the individual benefit of such members/shareholders

The Loan/ advances treated as Deemed dividend is limited to the extent of accumulated profits of the company making the advance.

Hope u get a basic idea

Ask your problems in deemed div