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SECTION 2(22)(e) OF INCOME TAX ACT 1961

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Hari Narayanan

B.COM. CWA CA-FINAL

25 Points Posted on 12 March 2010

Dear Members and friends,

Kindly reply your view on the following situation:-

Mr.A and Mrs.A are share holder of A ltd and B ltd. holding all shares in the same ratio. The A ltd transfer funds to B ltd and B ltd transfer funds to A ltd at different dates other than Business transaction and also business transaction (the A ltd giving business B ltd). Altd having accumulated profits

In the above case, I need to know whether the funds transfer will attract Sec 2(22)(e)- Deemed dividend of the Income tax act, 1961,

Thanks and Regards,

Hari Narayanan, B.com ., Grad C.W.A., CA-PCC.,

Replies (2)

CA. RUPESH JOSHI

Chartered Accountant

236 Points Posted on 12 March 2010

It would be considered as deemed dividend if the following conditions are satisfied: 1. Mr.A & Mrs. A are substantial shareholders of A & B Ltd. 2. A & BLtd are not companies in which the public are substantially interested 3. A ltd & B ltd. has accumulated profits