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Waiver of working capital loan by bank

AJAY (NO) (81 Points)

02 July 2014

hello friends !! can any one tell me what will be the treatment of waiver of working capital loan by bank to assessee?? e.g assessee had taken loan of rs. 5,00,000/- frm xxx bank .. than after three years bank waive loan of rs. 3,00,000/- n 1,00,000/- of intest. what will b tax libility?

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6 Replies

pavan kumar (CA Final , CMA Final) (202 Points)
Replied 02 July 2014

Both the prinicpal and interest are treated as revenue receipts .. both are taxable

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UDAY KUMAR (Student CA Final ) (28 Points)
Replied 02 July 2014

Dear pawan, can u please refer section under which I can study tax treatment?

Minesh Rawat (Article) (199 Points)
Replied 03 July 2014

Sec 41 (1) cessation of trading liability

AJAY (NO) (81 Points)
Replied 03 July 2014

Can we interpreat working capital loan as trading liability? Is there any exact defination of trading liability?

Alok kakkar (student) (27 Points)
Replied 04 July 2014

Working capital loan is mentioned as an example of trading liability under sec 41(1). Loan amount trested as taxable, but interstate is not taxable as it is not yet allowed as deduction under section 43 B.