Pre closure of bank loan

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Querist : Anonymous

Querist : Anonymous (Querist)

07 February 2012 Dear expert ,
Our company obtained TL from from SB bank during 2009-10.During the year 2011-12 we transferred our term loan from SBI to Another Bank.At the time of transfer SBI charged 25 lacs as pre closure int charges.
My doubt is how to treat that pre-closure interest charges in books of accounts.
Can we capitalize such charges.

Thanks in advance.

CA. Hari Kishan

CA. Hari Kishan (Expert)
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07 February 2012 I am of the view that the pre-closure interest charges have to be expensed off and also liable for TDS under section 194A pre closure INTEREST charges. (Please examine the provision laid u/s 194A). Should the term loan be granted for regular working capital of the business the same is to be expensed off.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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07 February 2012 Can't be capitalized because it was not a case of the borrower that there was an enduring benefit and effect thereof was over a period of years.

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Querist : Anonymous

Querist : Anonymous (Querist)

08 February 2012 Chakrapani sir, the purpose of TL is construction of Factory Building & acquisition of Plant & Machinery.