{"id":97371,"date":"2017-01-04T19:43:17","date_gmt":"2017-01-04T14:13:17","guid":{"rendered":"http:\/\/www.scconline.com\/blog\/?p=97371"},"modified":"2017-02-27T23:02:20","modified_gmt":"2017-02-27T17:32:20","slug":"if-shareholder-has-substantial-interest-in-the-huf-the-payment-made-to-the-huf-will-be-deemed-dividend-under-section-222-of-the-income-tax-act-1961","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2017\/01\/04\/if-shareholder-has-substantial-interest-in-the-huf-the-payment-made-to-the-huf-will-be-deemed-dividend-under-section-222-of-the-income-tax-act-1961\/","title":{"rendered":"If shareholder has substantial interest in the HUF, the payment made to the HUF will be deemed dividend under Section 2(22) of the Income Tax Act, 1961"},"content":{"rendered":"

Supreme Court<\/strong>: Explaining the term \u2018dividend\u2019 under Section 2(22)(e) of the Income Tax Act, 1961, the Court said that the said provision gives an artificial definition of ‘dividend’ and creates a fiction, thereby bringing any amount paid otherwise than as a dividend into the net of dividend under certain circumstances. Stating that the dividend taken note of by this provision is a deemed dividend and not a real dividend, the Court explained that loan or payment made by the company to its shareholder is actually not a dividend. In fact, such a loan to a shareholder has to be returned by the shareholder to the company. It does not become income of the shareholder.<\/p>\n

The Court, however, clarified that for certain purposes, the Legislature has deemed such a loan or payment as ‘dividend’ and made it taxable at the hands of the said shareholder. The conditions required to be fulfilled to attract tax under the said clause are:<\/p>\n