Re: Section 2(22) E
Addition has been made in 2 years – AY 05-06 and AY 08-09 under section 2(22)e – deemed dividend tax. Assessee, holding majority stake in company had taken unsecured loans in these 2 years.
AO has passed order in 2014 making addition under section 154 in both years levying penalty and interest. Assessee has repaid the loans in the same year these were obtained from the company. Presently case is waiting hearing before CIT(A). Meanwhile Assessee has passed away and is being represented by legal heir who is now a majority shareholder of the company.
Question is if under VSVT scheme if legal heir of assessee wishes to settle both cases by paying tax amount how is the loan account which was at the heart of the matter treated? If we are accepting the amount received by assessee was indeed deemed dividend and book the same under income from other sources, can the loan amount be considered to be receivable again from company as deemed dividend? Company is willing to give undertaking that said amount was indeed deemed dividend and is payable to assessee.
Briefly after accepting the said amount as deemed dividend and paying tax on it, is it still considered loan amount? Can the legal heir file a fresh return of income showing the said deemed dividend as income from other sources, pay tax under VSVT and claim the said deemed dividend from the company?
If the assessee desires to settle the issue , the assessee has to pay the tax on the disputed amount pending in the appeal . Once the tax payment is made the interest and penalty will be waived . Under the scheme there is no provision for filing a revised return by legal heirs .
Sir my main question was whether it would still be treated as loan account after payment of tax ? Is there any provision to consider same as dividend or other income as tax is already being paid on the same ?