Mr. Ravi received an advance of 2,00,000 on 10.5.2023 from a closely held manufacturing company (private company in which the public are not…
CA Intermediate · Taxation · PYQS · May 2024
Mr. Ravi received an advance of 2,00,000 on 10.5.2023 from a closely held manufacturing company (private company in which the public are not substantially interested) in which he holds 22% shareholding. The company had an accumulated profit of 1,00,000 at the time of giving the advance. Compute the amount of income to be included in the hands of Mr. Ravi for the assessment year 2024-25 and also state the head under which it is to be included.
Suggested Answer and Working Notes:
In the present case, the amount of advance of 2,00,000 received by Mr. Ravi from closely held manufacturing company would be deemed as dividend to the extent of accumulated profit of 1,00,000, since Mr. Ravi holds 22% shareholding in the company which is not less than 10% of the voting power in the company. Accordingly, deemed dividend of 1,00,000 would be taxable in the hands of Mr. Ravi under the head "Income from Other Sources" for the A.Y. 2024-25.
Topics: Paper 3A: Income Tax Laws
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