Waiver of govt. loan

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 March 2013 I have got mixed compendium of opinions from the expert committee of the institute in regard to accounting treatment of the waiver of principal amount of govt.loan taken for the purpose of capital projects.
Some of the experts have given their opinion in favor of crediting the sum to profit & loss a/c while the others in favor of capital
Reserve.
I personally in favor of the latter.
Seek suitable advice in this regard

Snehanshu

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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07 April 2013 There are two parts of the Loan. First is Capital Account and the Second is Interest componant. Suppose you have taken loan of Rs. 1,000 and now the same has become 1,500 by charging interest and the loan has waived to the extant of 900/- then out of 900 you have to transfer Rs. 500/- to P & L a/c and balance 400 to capital account. Waiver of less than 500/- has to be credited to P & L a/c as you have already charged this amount to P & L A/c and claimed the benefit of deduction and thereby you have paid less tax.