DEEMED DIVIDEND U/S 2(22)(E), Income Tax

[JAYUL DANECHA]

DEAR ALL, 

IF A  PVT. LTD. CO. GIVES UNSECURED LOANS TO ANOTHER PVT. LTD. CO. OR P'SHIP FIRM IN WHICH SHARE HOLDER OF THE PVT. CO. IS ALSO SHARE HOLDER OR PARTNER IN OTHER PVT. CO/FIRM TO WHICH LOAN IS GIVEN. IS THIS TRANSACTION ATTRACTS PROVISION OF SEC 2(22)(E). IS THERE ANY EXCEPTION...?

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[GOPALJI AGRAWAL]

In such case, the shareholder in loan giving company must hold at least 10% equity shares beneficially in loan giving company and substantial interest i.e. 20% equity shares beneficially or 20% income incase of partnership. If these conditions are not met out then provisions of section 2(22)(e) would not be attracted.