Writting off of unsecured loan

Jitendra Jhanwar (Officer) (129 Points)

14 October 2011  

Dear All,

Our Parent company had given unsecured loan to his 11 subsidiary companies of Rs. 110 crores.

Now we decide that we will write off theses loans in the books of Subsidiaries Company and offer as an income and also in the books of parent company we will take the benefit of as an allowable expenditure.

Please suggest me on the following points:-

1. Is A.O. treat the expenditure booked in the books of parent company as a capital expenditure and disallows the same?

2. Can Subsidiary companies will take again unsecured loans in future form the parent company?

3. Is there any other way to write off the loans in the books of subsidiary companies?

4. If the other way is possible then what is the impact on the parent company?

 

Please help me with the above points with any relevant Case laws, if possible.

 

Regards

Jitendra Jhanwar