If A Pvt. Ltd. having borrowed capital ( for Business purposes) of Rs. 26 CR (interest their on Rs. 2.26 CR ), give loan (Rs. 11 CR) to its sister concern B Pvt. ltd. , will the interest on proportionate loan given to B Pvt. Ltd. be disallowed u/s 36(1)(iii) of income tax act, 1961 in the hands of A Pvt. Ltd. ????
Menu
Interest on borrowed capital [section 36(1)(iii)]
Replies (2)
It should not be disallowed if it was provided on account of commercial expediency
Refer S.A Builders Ltd. V CIT [2007] SC
In that case the loan which was given to the sister concern was carrying nil rate and yet there was no disallowance
SA Builders case is not to be taken as if any loans given to sister concerns will be allowed without any interest disallowance. Courts are now taking a more specific view in this regard. If it is a subsidiary company, then SA Builders might help, but sister concerns are different. There are some instances in which such disallowance has been upheld inspite of SA Builders case.
Recent Threads
- Form 16 format
- 17(5) Blocked ITC
- Transfer of equity shares to original owner
- Login credentials and payment acknowledgement not
- Export sales not realised payment not received fro
- Capital gain account amount utilisation
- Form 26QB – Section 194-IA: TDS on Full Cons
- Indexation Benefit available or not on Calculation
- Documents for return exhibition material
- Can I set off equity losses(both short term loss a
Related Threads
CAclubindia
