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Can anyone help me????

24 September 2013

	A proprietor of nursing home(nursing home building is not owned by her, it is on rental agreement) has taken a professional loan of Rs. 15 Lak. In the FY 12-13 she repaid 3,79,000 including interest Rs. 1,74,000. She used such loan as following:

	Give 10,00,000 to her employee as loan and the balance amount has been used for repair, maintenance and renovation of the nursing home building.

	my question is whether she got the deduction as per income tax act for such interest on loan paid and for such building repair expenses ??

	Please help me.

	Thanking U all.

	Regards

	Shibendu Banerjee.

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8 Replies

CA LOVELY ARORA (C.A. B.Com (H) Graduate) (2151 Points)
Replied 24 September 2013

Dear Sir,

No, the interest on such loan would not be allowed to her as deduction u/s 24(b). However, any repair expenses she bear on such building (being a tenant) would be allowed to her u/s 30.

Best Regards,
CA Lovely Arora
ca.lovelyarora @ gmail.com

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shibendu banerjee (student) (62 Points)
Replied 24 September 2013

Thank U CA Lovely Arora for ur reply. Yea she should not get any deduction for payment of interest on such loan u/s 24(b). but my question is as the loan is a professional loan whether interest paid on such loan is deductible as business expense?

Regards

Shibendu Banerjee

CA and CMA Ravinder Singh (CA and CMA) (853 Points)
Replied 25 September 2013

the expenses incurred can be claimed as follows: 1) in relation to repairs and maintenance whole of such can be charged to P&L account 2) in relation to renovation expenses, capitalise it in the books and claim depreciation on it as per the provisions of section 32 under the concept of DEEMED BUILDING.

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shibendu banerjee (student) (62 Points)
Replied 25 September 2013

Thanks Mr. Ravinder Singh for ur reply. i have no idea about the topic Deemed Building, i will defineately see section 32. thanks for such info. but can u say that if a part of such professional loan has been given to employee as a loan as i told in my question, then interest paid on such loan by the proprietor of nurshing home can charge it in the P/L a/c as per income tax act?? plz help me?? i cant find any ans on this issue.

Thanking U again

Shibendu Banerjee

Mukesh Goel (CA,CFA) (103 Points)
Replied 25 September 2013

Hi Shibendu,

Since the loan is used for the purpose of buisness it will get deduction under the income tax act. As you said loan is given to employee, then we can have FBT (Fringe benefit tax) attracted here which the proprieter has to say on the interest benefit given to employee.

Thanks

Mukesh

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CA LOVELY ARORA (C.A. B.Com (H) Graduate) (2151 Points)
Replied 25 September 2013

Agree with Mr. Mukesh on levy of FBT on such perquisite, but i don't think such loan was used for the business.... it's given to employee... not used for business purpose..

Thus, if it's used for business, by employee, then, it's interest payment would be allowed in P&L otherwise not. and such transaction would attract FBT provisions.

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CA and CMA Ravinder Singh (CA and CMA) (853 Points)
Replied 25 September 2013

yes, you can charge the intt. paid on such loan in the p&l accnt. you are not required to pay any FBT as the provisions of FBT are not applicable to proprietorship.....the value of perquisite i.e. loan at concessional rate will be taxable in the hands of the employee.....

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shibendu banerjee (student) (62 Points)
Replied 25 September 2013

Mr. Ravinder Singh, Mr. Mukesh Goel & Mr. Lovely Arora thank u all for sharing ur valuable knowledge. All are very helpful to me and i got my ans.
Thank u all

warm regards

Shibendu Banerjee.