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TMI BlogApplicability of Sec 2(22)(e)X X X X Extracts X X X X X X X X Extracts X X X X ..... Company ABC Ltd is advanced loan to Company XYZ Ltd. In company ABC Ltd one of the share holder Mr.X having 10.42% share holding and also Mr. X being a share holder of XYZ Ltd having 0.30% Kindly clarify wheather the loan given by ABC Ltd to XYZ Ltd will attract Sec 2(22)(e) of Income Tax Act, 1961 . Note: ABC Ltd is holding 99.40% shares of XYZ Ltd. - Reply By B L Bhojwani - The Reply = As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 undivide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d family, or a firm or an association of persons or a body of individuals, beneficial interest of 20% in the income of such concern. The loan has been given by ABC Ltd. to XYZ Ltd. Although the shareholding of Mr. X in ABC Ltd. exceeds 10%, he does not have substantial interest in XYZ Ltd. Therefore, the rigour of section 2(22)(e) will not be attracted in his case. - Reply By Priyank Banker - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Reply = As per the relevant Section , the person should have either 10% interest in the company,or 20%substantial holding in the concern to which the loan or advance is advanced. Since neither of the criteria is hit, Sec.2(22)(e) stands unattracted. - Applicability of Sec 2(22)(e) - Query Started By: - S SHANMUGASUNDARAM Dated:- 15-11-2010 Income Tax - Got 2 Replies - Income Tax - Discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion Forum - Knowledge Sharing, reply post by an expert, 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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