Cash loans from directors for pre operative expenses

This query is : Resolved

Arvind Sharma (Querist)
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18 October 2014 Whether cash loans taken from directors for following purposes are allowed under income tax act -
1) Preliminary Expenses
2) Preoperative Expenses
3) Fixed Assets Purchases

Genuineness is that company was not having bank account at the inception and therefore directors introduced loan in cash.

Whether there is any loop hole in I T Act to be safe from reporting in tax audit report.

Soumitra Basu

Soumitra Basu (Expert)
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20 October 2014 If you can prove the genuineness of the transaction and the circumstances for which it was taken, i think, there should not be any penalty under section 271D of the Income Tax Act.