Tax Management with reference to -Deemed Dividend-( Any Distribution By Way Of Debenture Etc.)

2.3.      [ SEC. 2(22)(b) ] :  ANY DISTRIBUTION BY WAY OF DEBENTURE ETC.

1.         Any distribution to its shareholders by a company of

2.         Debenture, Debentures-Stock or Deposit Certificates in any form, whether with or without interest, to equity shareholders or preference shareholders ; and

3.         Any distribution of Bonus Shares to its Preference Shareholders.

4.         to the extent to which the company possesses accumulated profits, whether capitalize or not.
Note :

1. In above case the distribution need not entail release of assets of the company as it is required u/s 2(22)(a).

2. And this section is vary specific to define what is dividend like distribution of debenture to shareholders to the extent of accumulated profits shall be treated as Dividend.

3. It may be seen that issue of Bonus Shares to Preference Shareholders is treated as Dividend u/s 2(22)(b). But this is not so in case of issue of Bonus shares to equity shareholders either in Sec. 2(22)(a) or (b).