Ghosh having 25% of the share capital in Ghosh Mfg. Industries (P) Ltd. took loan of ₹3,50,000 on 15-9-2018 from the company. He repaid ₹1 lakh on 20-3-2019. The company has accumulated profit of ₹8 lakh as on 1-4-2018.

Official answer key: (C), (D). Official source note: Any income by way of dividends referred to in section 115-O is exempt u/s 10(34) of the Income Tax Act, 1961. Dividend includes deemed dividend u/ s 2(22) (e) also as per section 115-O. Though the dividend is chargeable to tax in the hands of Mr. Ghosh but by virtue of exemption granted u/s 10(34) the same is exempt. The question is required to compute amount assessable as deemed dividend may be referred to as value of deemed dividend chargeable to tax i.e. 350000 or taxable value of deemed dividend i.e. Nil.