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of <h1>CBDT Instruction 737: Tax Loans by Closely Held Companies as Deemed Dividends Under IT Act Section 2(22)(e.</h1> Instruction No. 737 issued by the Central Board of Direct Taxes on August 14, 1974, addresses the taxation of loans or advances made by closely held companies to shareholders with substantial interest. Under Section 2(22)(e) of the Income Tax Act, 1961, such loans are considered taxable as deemed dividends to the extent of the company's accumulated profits. The instruction highlights a case where a shareholder's loan was not taxed due to a lack of communication between assessing officers. It directs officers to ensure scrutiny and proper communication regarding such loans to prevent tax evasion.
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