sunilpali (OPERATION HEAD(TAX AND AUDIT)) (129 Points)
02 October 2010ALLOWABILITY OF INTEREST PAID U/S 36(1)(III)
THE ASSESSEE HAS PAID INTEREST TO RELATIVE & FINANCIAL INSTITUTION OF Rs. 5.78 LAC BUT NOT CHARGED / RECEIVED INTEREST ON ADVANCE TO PARTNER BROTHER DUE TO DISPUTE AND OTHER CIRCUMSTANCES
IS IT NECESSARY TO CHARGE/RECEIVED INTEREST FROM PARTNER BROTHER OR BLOOD RELATIVES.
CAN INCOME TAX OFFICER DISALLOWED THE INTEREST PAID ON BORROWED FUND TO THAT EXTENT.
PLEASE GIVE CITATION OF SUPREME COURT / RAJASTHAN H.C. JAIPUR /JODHPUR I.T.A.T.
Arun Kumar
(Deputy Manager Assurance)
(230 Points)
Replied 02 October 2010
Hi,
If the aggregate of Capital&Current account of the firm is in credit balance and if such credit balance is more than the amount given to the brother then the amount so given can be either regarded as drawings instead of showing it in the books as advance to the relative
or
If you are able to prove that the advance given is for business purposes only then there is no problem if you have sufficient credit balance in the Capital front. You can argue that the loan is out of the fund brought in by partner or out of internal accruals.
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