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Section 2(22)(e)
X ltd. is a closely held company. A holds 10% of its ESC and B holds 15% of its ESC. X ltd. on the same day make advances to A and B of Rs. 15 lacs and Rs. 20 lacs respectively. Accumulated profit (other than capitalized profit) of X ltd. on that day was Rs. 20 lacs. Now my question is how deemed dividend u/s 2(22)(e) shall be treated in the hands of A and B?
Replies (5)
deemed dividend shall be in the hand of shareholder on the basis of their shareholding out of accumulated profit. i.e. in this case deeemed dividend shall be on propotionate basis.
Deemed dividend is not taxable based on shareholding of the registered shareholder. I mean, suppose in the given case if advance is made only to A of Rs. 15 lacs then it is wholly treated as deemed dividend and not based on his shareholding. i.e. 10% of 20 lacs.
proportionate basis would be applicable.
it is taxable in the hands of share holders on the basis share holding in the co. .
It is taxable in the hands of Share holder i.e. A and B on the proportionate basis of the advances made to them not on the basis of the share holding as per section 2(22)(e).
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