Section 2(22)(e)

Some Significant Cases Related To Deemed Dividends

Income Tax - 1. PCIT Vs. Dr. Ranjan Pai(2021)431 ITR 250(Krnataka) QUESTTION: Can Bonus Shares received by shareholders be taxable under head “ Income from other sources” as per provisions of Section 56(2)(x) , as they are received without consideration? ANSWER: The issue of Bonus Shares by capitalization of reserves is merely a reallocation of th...

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Meaning of expression ‘substantial part of business’ for Section 2(22)(e)

Income Tax - The meaning of the expression ‘substantial part of business’ for the purpose of Section 2(22)(e) Introduction Section 2(22)(e) of the Income Tax Act, 1961 will not be attracted if the company making the payment by way of loans or advances, have made such payment in the ordinary course of its business and lending of money [&hel...

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Inter-Corporate Deposit cannot be treated as loan for Section 2(22)(e)

Income Tax - The Inter-Corporate Deposit does not fall within the ambit of the expression 'loan' specified in Section 2(22)(e) of the Income Tax Act, 1961 for the purpose of treating it as deemed dividend....

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Whether Gift to Shareholder’s Son is Deemed Dividend?

Income Tax - Issue: Whether gift or amount paid by a closely held company to relative of shareholder will be treated as deemed dividend?  In this article we are going to analyse a situation in which a company has gifted Rs. 50,000/- to one of shareholders’s son and AO has consider the gift as deemed dividend.  PROBLEM: Mr. […]...

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Section 185 & 186 of Companies Act r.w. Section 2(22)(e) of Income Tax – Consequences of non-compliance

Income Tax - Practical application of Section 185 and Section 186 of Companies Act,2013 read with Section 2(22)(e) of Income Tax Act, 1961 and consequences on non- compliance’s of these sections. Let’s summarise these sections and understand the provision of relevant acts. Section 186 of Companies Act,2013 – Whether Loan, advance or guarante...

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Sections 2(22)(e) not applies to loans from sister concern on commercial basis

Jayson Industries Vs ITO (ITAT Delhi) - Assessee firm has obtained loans from the sister concern on commercial basis. On facts it has emerged that the lender company has charged interest on advances made to assessee firm. The assessee has taken plea that the advances made by the lender company to the borrower assessee firm is not a loan/a...

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Deemed dividend provision not invocable on recipient of loan not being shareholder in payer company

Pallava Resorts Private Limited Vs ITO (ITAT Chennai) - Held that provision of deemed dividend u/s 2(22)(e) cannot be invoked unless the recipient of loan is a shareholder of the company. If recipient of loan is not shareholder in a company from which loan is received, such loan cannot be assessed as deemed divided....

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No Addition for ‘Deemed Dividend’ if payment to person holding substantial interest not established

DCIT Vs Essel Finance VKC Forex Ltd. (ITAT Chennai) - DCIT Vs Essel Finance VKC Forex Ltd. (ITAT Chennai) assessee has advanced sum of Rs.7.5 Crores to another entity for taking a property on lease. The same has been treated by Ld. AO as deemed dividend u/s 2(22)(e) of the Act on the ground that one of the directors of the assessee company held substan...

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Advance for Business Transactions Cannot be Treated as Deemed Dividend

Reliance Motor Company Pvt. Ltd Vs ACIT (ITAT Chennai) - ITAT held that if the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend under Section 2(22)(e) of the Act....

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Loan to assessee cannot be treated as deemed dividend when Assessee given personal Security as collateral for loan of Company

Smt. Sabhapathi Padmasree Vs ITO (ITAT Visakhapatnam) - Smt. Sabhapathi Padmasree Vs ITO (ITAT Visakhapatnam) In the present case , the deemed section 2(22)(e) has no application as the debit balance in the company’s books of accounts is normal current account wherein the company has credited amounts payable to her and debited amounts withdrawn by her ...

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No deemed dividend U/s. 2(22)(e) on trade advances in the nature of commercial transactions: CBDT

Circular No. 19/2017-Income Tax - (12/06/2017) - Section 2(22) clause (e) of the Income Tax Act, 1961 (the Act) provides that dividend includes any payment by a company, not being a company in which the public are substantially interested, of any sum by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares...

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Section 2(22)(e)’s Popular Posts

Recent Posts in "Section 2(22)(e)"

Sections 2(22)(e) not applies to loans from sister concern on commercial basis

Jayson Industries Vs ITO (ITAT Delhi)

Assessee firm has obtained loans from the sister concern on commercial basis. On facts it has emerged that the lender company has charged interest on advances made to assessee firm. The assessee has taken plea that the advances made by the lender company to the borrower assessee firm is not a loan/advance but is beset with the character o...

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Deemed dividend provision not invocable on recipient of loan not being shareholder in payer company

Pallava Resorts Private Limited Vs ITO (ITAT Chennai)

Held that provision of deemed dividend u/s 2(22)(e) cannot be invoked unless the recipient of loan is a shareholder of the company. If recipient of loan is not shareholder in a company from which loan is received, such loan cannot be assessed as deemed divided....

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No Addition for ‘Deemed Dividend’ if payment to person holding substantial interest not established

DCIT Vs Essel Finance VKC Forex Ltd. (ITAT Chennai)

DCIT Vs Essel Finance VKC Forex Ltd. (ITAT Chennai) assessee has advanced sum of Rs.7.5 Crores to another entity for taking a property on lease. The same has been treated by Ld. AO as deemed dividend u/s 2(22)(e) of the Act on the ground that one of the directors of the assessee company held substantial […]...

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Advance for Business Transactions Cannot be Treated as Deemed Dividend

Reliance Motor Company Pvt. Ltd Vs ACIT (ITAT Chennai)

ITAT held that if the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend under Section 2(22)(e) of the Act....

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Loan to assessee cannot be treated as deemed dividend when Assessee given personal Security as collateral for loan of Company

Smt. Sabhapathi Padmasree Vs ITO (ITAT Visakhapatnam)

Smt. Sabhapathi Padmasree Vs ITO (ITAT Visakhapatnam) In the present case , the deemed section 2(22)(e) has no application as the debit balance in the company’s books of accounts is normal current account wherein the company has credited amounts payable to her and debited amounts withdrawn by her and net result of which is shown [&helli...

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Income Tax: Section 2(22)(e) Act can be invoked in respect of shareholder

ACIT Vs Vserve Business Solution Pvt. Ltd. (ITAT Delhi)

ACIT Vs Vserve Business Solution Pvt. Ltd. (ITAT Delhi) Assessing Officer has not disputed the fact that the assessee is not a share holder in Intersoft Data Labs Labs Pvt. Ltd. which provided interest free loans to the assessee only because the assessee as well as lender entity are having a common shareholder the Assessing […]...

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No Deemed Dividend If Loans & Advances in Normal Business benefits both Payer & Payee

DCIT Vs Entrack Organic Haus Pvt. Ltd. (ITAT Rajkot)

ITAT held that where loans and advances are given in normal course of business and transaction in question benefits both payer and payee companies, provisions of section 2(22)(e) cannot be invoked....

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Some Significant Cases Related To Deemed Dividends

1. PCIT Vs. Dr. Ranjan Pai(2021)431 ITR 250(Krnataka) QUESTTION: Can Bonus Shares received by shareholders be taxable under head “ Income from other sources” as per provisions of Section 56(2)(x) , as they are received without consideration? ANSWER: The issue of Bonus Shares by capitalization of reserves is merely a reallocation of th...

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Deemed Dividend – Accumulated profit includes Profit up to date of payment

Sanjay Subhashchand Gupta Vs ACIT (ITAT Mumbai)

Sanjay Subhashchand Gupta Vs ACIT (ITAT Mumbai) As per the provisions of section 2(22)(e), loan or advance paid by a company shall be considered as deemed dividend on fulfillment of following conditions (i) the company must be a company in which the public is not substantially interested; (ii) such a company has given advance or […...

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Loan for Commercial Consideration & Business Expediency not attracts Deemed Dividend Provisions

Yogesh Mehra Vs DCIT (ITAT Mumbai)

Yogesh Mehra Vs DCIT (ITAT Mumbai) Co-ordinate Bench has given categorical finding that all these loans and advances given to different companies by other companies are in the nature of loans and advances out of commercial consideration and business expediency. The co-ordinate Bench has given detailed reasons which stated that company has...

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