Definition of “dividend”-Section 2(22) of the Income Tax Act 1961
- Distribution entailing release of any asset of the company: – Any distribution of accumulated profits (whether capitalized or not) to its shareholder leading to release of any or all asset of the Company, would be treated as dividend.
- Distribution of debentures, debenture stock, deposit certificate or bonus: – Any distribution in the form of debentures, debenture stock, deposit certificate to its shareholders (whether with or without interest) and distribution of bonus to Preference shareholders to the extent of accumulated profits (whether capitalized or not), would also be treated as dividend.
- Distribution at the time of liquidation: –Any distribution made to shareholders at the time of liquidation, to the extent it is attributable to accumulated profits immediately before the liquidation (whether capitalized or not), is also covered under the definition of dividend
- Distribution on Reduction of Capital: –Any distribution by company on reduction of capital to its shareholders to the extent the Company possess accumulated profits (whether capitalized or not), also comes under the definition of dividend.
- Loans or advances by a closely held company to specified concern: – Any loans or advances given by a company in which public are not substantially interested to a concern in which the shareholder of former company, having at least 10% equity shares in former Company, is a member/ Partner/ Shareholder in concern with at least 20% share in income of concern or has substantial interest in such concern, would also be treated as dividend.
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