Advances to subsydary company- Disallowance of Interest

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venugopal (Querist)
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18 April 2009 Ours is a limited company and we are having 3 subsydary companies. In the recent Income Tax asst. the assessing officer has disallowed the Interest on advances paid to the subsidaries because the reason there is no business association between the companies

In my view the aove companies are wholly owned subsydaries to the parent company and we are advanced the monies as interest free loans to them and presently all the companies are in prelimanary stage.

please advice if it is correct or not

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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18 April 2009 NO, interest paid for making interest free advances to subsidiary is disallowed

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