M/s DFC Private Limited, a closely held non-banking financial company engaged in the business of money lending having equity share capital of ₹ 50 Crore divided into 5 Crore equity shares of ₹ 10 each fully paid up and a

As per section 2(22) (e) of the Income tax Act, 1961 'the Act' any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits shall be considered as deemed dividend. In this case, the company provided interest free loan, being not in the normal course of business to a firm. However, Nitin, holding only 5% of the voting power of the company is substantially interested having more than 20% share in the firm i.e. 25%. As, the shareholding of Nitin in the Company is only 5% i.e. not 10% or more, the loan given here by the company to the firm would not considered as deemed dividend u/s 2(22) (e) of the Act.