Loans & Advances by closely held company deemed as Dividend [Sec. 2(22)(e)]

Deemed dividend: loans and advances by closely held companies treated as dividend with tax consequences.

Loans or advances by a closely held company to certain related persons are deemed dividend under section 2(22)(e) to the extent of accumulated profits on the date of payment. Covered recipients include beneficial shareholders with significant voting power, concerns where the shareholder has substantial interest, or persons receiving funds for a shareholder's individual benefit. Deemed amounts reduce accumulated profits even without book adjustments; repayment or charging market interest does not prevent deeming. Companies must deduct tax at source on deemed dividend, and deemed dividend is subject to Dividend Distribution Tax with corresponding shareholder exemption treatment.