Substantial interest u/s 2(22)(e), Income Tax

[S SHANMUGASUNDARAM]

Can you explain the meaning of Substantial interest u/s Sec 2(22)(e)

Posts / Replies

[GOPALJI AGRAWAL]

Section 2 (22)(e) itself contains the meaning of the same as under:

 

http://www.taxmanagementindia.com/visitor/detail_act.asp?ID=8614

[B L Bhojwani]

Shri Gopalji Agrawal has rightly pointed out that a bare reading of the provisions of section 2(22)(e) will provide the answer to your query. 

As per section 2(22)(e), any payment by a company of any sum (whether as representing part of the assets of the company or otherwise) by way of advance or loan to a shareholder will, to the extent the company possesses accumulated profits, will be deemed dividend. This will be, inter alia, subject to the condition that the payment should be to :

(a)  a beneficial owner of equity shares holding at least 10% of the voting power;

OR

(b) a concern in which, the above equity shareholder being beneficial owner of atleast 10% of the voting power, is a member or a partner and having a substantial interest.

Substantial interest here means in case of a company beneficial holding of at least 20% of the voting power and in case of a concern other than company, which can be a Hindu undivided family, or a firm or an association of persons or a body of individuals, beneficial interest of 20% in the income of such concern.