Sec 2(22)e is not attracted on Security deposit made in normal course of business

From a reading of Section 2(22)(e) of the Act, it is apparent that it has the effect of bringing to tax as dividend where any payment of any sum is made by way of advance or loan to a shareholder in which a shareholder holds a substantial interest or any payment is made on behalf of a shareholder or any payment is made for the individual benefit of a shareholder. Any of the above three conditions would be taxed if the “advance” or “loan” is made to a shareholder and the Company possesses a cumulative profit at the time it makes the payment and, therefore, such payment would be deemed to be a dividend only to the extent of such profits.

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