Deduction of interest expenditure

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 November 2014 A Pvt. Ltd. Co. deals in shares i.e.dealing in shares contitutes
its business. It makes investments in Mutual fund, debentures etc.
It also gives loan to other parties. During the F.Y. 2013-14, it
obtained a loan @ 24% p.a. For obtaining loan, it gave professional fees
to another company who processed the loan and made arrangements
to give us loan from Lender.

The company after obtaining the loan gave a part of loan to
another person on which no interest is charged i.e. loan given is interest free.
Part of loan is given to a party from whom we are charging interest.
Some part of loan is used in making FDR with banks.

Query is:

Whether the professional fees paid for obtaining the loan will be
allowed as deduction or same will be added in computing income
under Head " Business or Profession".

Nikhil Kaushik

Nikhil Kaushik (Expert)
Follow

05 November 2014 AO often disallow part of the interest on/fee paid for obtaining interest bearing loans when they are utilized for giving interest free loans.

so you can expect partial disallowance..

Nikhil Kaushik

Nikhil Kaushik (Expert)
Follow

Upgrade to CAclubindia Pro. Subscribe Now!