Sec 2(22)(e)
Naresh
(Querist) 09 January 2010
This query is : Resolved
Can a loan with 12% rate of interest given to the son of shareholder be treated as Deemed dividend under sec 2(22)(e)?
A V Vishal
(Expert) 10 January 2010
In the light of the intention behind the provisions of section 2(22)(e) and in the absence of indication in said section to extend the legal fiction to a case of loan or advance to a non-shareholder also, loan or advance to a non-shareholder cannot be taxed as Deemed Dividend in the hand of a non-shareholder.
Vineet
(Expert) 11 January 2010
Loan to son of a shareholder cannot be treated as deemed dividend unless the revenue authority proves that such loan has been advanced to the individual benefit of such shareholder. for example if the flow of funds is established to the benefit of shareholder through intermediary, deemed dividend provision can be invoked.
In any case dividend (deemed or otherwise)can be taxed in the hands of shareholder only. So taxation of loan as dividend in the hands of son does not arise at all.
