CAF-2 · Chapter 10 · Question 6 of 15
XYZ (Pvt.) Limited extended a loan of Rs. 3,000,000 to one of its shareholders on 1 July 2025. The company’s accumulated profits on that date were Rs. 2,200,000. How much of this loan will be treated as a "dividend" for the shareholder under Section 2(19)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) C) Rs. 2,200,000
Explanation
Any payment by a private company by way of advance or loan to a shareholder is treated as a dividend *to the extent* to which the company possesses accumulated profits. Therefore, Rs. 2,200,000 is treated as a dividend.
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