TMI BlogDEEMED DIVIDEND U/S 2(22)(E)X X X X Extracts X X X X X X X X Extracts X X X X ..... A substantial interest holder in a company has advanced a loan of Rs. 50 lac to the compnay. On 22.01.2008, the company pays him by cheque Rs. 70 lac thereby creating debit balance of Rs. 20 lacs. But on the same days he pays another cheque to company for Rs. 30 lacs. Thus the net effect is that on 22.01.2008, the loan account in the books of the company shows credit balance of Rs. 10 lacs. though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after transaction of Rs. 70 lacs, it shows a debit balance of Rs. 20 lacs. The cheque of Rs. 70 lacs is cleared in the bank account of individual on 23.01.2008 while the cheque of Rs. 30 lacs is cleared on 30.01.2008 as the company presented it late to bank. Now, can the A.O. treat the debit balance of Rs. 20 lacs as deemed divident in the hands of shareholder. If No, are there any case laws supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orting this. If yes, can penalty u/s 271 (1)(c) for concealment of income can also be levied. - Reply By B L Bhojwani - The Reply = It does not stand to reason that the substantial interest holder of the company will first take the loan of Rs. 20 lacs from the Company on 22.01.2008 and give a cheque of Rs. 30 lacs to the Company on the same day.The cheque is cleared in the bank account of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e individual on 23.01.2008, while in the bank account of the Company, it is cleared on 30.01.2008. The substance of a transaction shall always prevail over its form. It is clear that the substantial interest holder owed Rs. 20 lacs to the Company for a few days. It is immaterial whether the loan on which the provisions of section 2(22)(e) are applicable is provided for a short period and carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest. In the case of Walchand Co. Ltd. v. CIT (1975) 100 ITR 598 (Bom) , the loan was repaid by the assessee within 22 or 23 days alongwith interest to the company, even then the loan was deemed as dividend. - DEEMED DIVIDEND U/S 2(22)(E) - Query Started By: - manoj gupta Dated:- 7-11-2010 Income Tax - Got 1 Reply - Income Tax - Discussion Forum - Knowledge Sharing, reply post by an exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ert, personal opinion Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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