Allowability of interest expense

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VIKRAM JEET SINGH (Querist)
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15 December 2011 Hello,

Please help me in resolving following query :

Showroom has been bought by four co-owners in their personal names by raising loan from NBFC. The loan has been taken in the name of four co-owners and the Company. The said showroom is being used for the business of the Company in which the four co-owners are directors. Initially, the Company was paying rent to the co-owners (directors) for the said showroom but later on the showroom and the corresponding loan have been accounted for in the books of account of the Company and the Company is paying installments of the said loan and interest thereon.

Kindly advice that, will the payment of interest be allowed as a deductible expense to the company?

Thanks and regards

vikram

ABHISEK TOSNIWAL

ABHISEK TOSNIWAL (Expert)
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16 December 2011 Dear Vikram,

Allowance or dis-allowance of expenditure in a business totally depends on the fact that whether the expenditure has been made for the purpose of business or not. so long the expenditure has been made for the purpose of business , it would be allowed as a business expenditure.

In your case the interest is being paid by the company & the loan taken is used for the purpose of business. Thus the interest paid by the company would be an allowable expenditure.

Regards
Abhisek Tosniwal

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