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)
15 Nov 2010 
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Deemed dividend rules: loan to related concern not treated as dividend where shareholder lacks required beneficial or substantial interest.
A company's loan or advance will be a deemed dividend from accumulated profits if made to a beneficial equity shareholder holding at least ten percent voting power, or to a concern where such shareholder holds a substantial interest (twenty percent); where those ownership thresholds are not met, the advance is not treated as deemed dividend. (AI Summary)
A company's loan or advance will be a deemed dividend from accumulated profits if made to a beneficial equity shareholder holding at least ten percent voting power, or to a concern where such shareholder holds a substantial interest (twenty percent); where those ownership thresholds are not met, the advance is not treated as deemed dividend. (AI Summary)