I had borrowed Loan, tht loan i'd lended interest free to some parties.
The Assessing officer is of the stand tht the Interest paid on borrowed loan is totally disallowed.
My contention is tht it is my bussiness's normal practice to give advances.
Who is right?
pls Suggest any CASE LAW.
Hi Deep,
The contention of A.O. is correct, even if its a normal business practice to give advances, it shouldn't be interest free (unless and until the same are given to customers towards credit sales), since otherwise it will be transfer of borrowed funds to other parties.
In order to continue my businesss i have to lend advance. I think it should not be disallowed.
In compititive situation how can i charge interest to parties?
Sunali Mam, Please support your answer with appropriate case law! plz!
Hi the basic two reasons according to me, for the denial can be :
1. This can be considered as PERSONAL EXPENDITURE.... As, its your choice to borrow the amount and pay interest on it, and thereafter lending it interest-free....
2. Secondly, its not the amount borrowed for ur regular business, but to lend someone.. So, interes on such borrowed capital is disallowed......
Nywz, let some exert advise or suggest on this
ITO vs Naresh Fabrics [2002] 75 TTJ (Jodh) 386
Pls refer S.A. Builders Ltd' Case of SC judgement
Regd
Lovenish Basnal
CAclubindia
