02 November 2012
2. A person has taken four loans for buying four cars. All the four cars are used for business purpose. So the interest paid should be allowed as an expense under PGBP. Assume the total loan taken amounts to Rs 10L and interest free loans and advance are given amounting to Rs 30L. But the AO is of the opinion that interest paid on loan should be disallowed proportionately because it is incorrect to take loan and claim expense as it reduces tax liability. Instead of giving this amount as interest free to family members it can be used to purchase cars But if the nexus is proved that the amount of loan taken is purely used for purchasing cars for business purpose then why is the AO taking any objection. Because it is a proprietory concern and the proprietor and the concern are considered as one entity in the eyes of law. So it depends on the proprietor where and how he wants to use his business money...HOW SHOULD THE ASSESSEE DEAL WITH THE ABOVE SAYING OF THE AO..IS THERE ANY RELEVANT CASE LAW THAT CAN PROVE THE NEXUS..???PLEASE HELP...
CAclubindia
