15 October 2013
My client has taken interest free unsecured loan from a friend... During the scrutiny proceedings u/s 143 A.O wants to make it addition as it is interest free unsecured loan and told me that interest free unsecured loan from non relative person is liable to tax is the period is more than 3 year. Is the contention of AO is rigt???
17 October 2013
As per law debt becomes time barred after period of 3 years if interest or principal is not paid. Since it is Unsecured interest free loan it will become time barred which leaves income in the hands of borrower. hence contention is correct. Make suitable adjustments to prove that some loan has paid and it has not become time barred.
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