TaxTMI 
TaxTMI 
TaxTMI 
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.
Applicability of Sec 2(22)(e)
Guest
Loan from ABC to XYZ Ltd not deemed dividend under Section 2(22)(e) due to insufficient shareholder interest. Company ABC Ltd advanced a loan to Company XYZ Ltd. A shareholder, Mr. X, holds 10.42% in ABC Ltd and 0.30% in XYZ Ltd. The query is whether this loan attracts Section 2(22)(e) of the Income Tax Act, 1961, which deems certain loans as dividends if the shareholder has significant interest. Both respondents clarified that since Mr. X does not have a substantial interest (20% or more) in XYZ Ltd, Section 2(22)(e) does not apply. The criteria for the section's applicability are not met, as Mr. X's interest in XYZ Ltd is insufficient. (AI Summary)