Allowability of interest paid on cash credit account

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This query is : Resolved

Sachdev Kajal (Querist)

01 September 2017 Sir / Madam,

Asseessee has one Cash Credit Account. Interest has been paid every month on the same account. however, A.O. has disallowed Interest paid on Cash Credit Account, as the account reflects debit balance at the time of payment of interest. The A.O. has considered Interest paid as Loan & Advance, as the account already has debit balance & disallowed the same u/s 43B. pls help on the same & substantiate with case law, if any.

Rakesh Mishra

Rakesh Mishra (Expert)

01 September 2017 If Cash Credit account has a debit balance then how interest will incur ? Kindly elaborate your case. Whether it have continuously debit balance or on the last date of month.

Sachdev Kajal

Sachdev Kajal (Querist)

01 September 2017 Sir,

Cash Credit account had debit balance at the time of interest payment & at the beginning and end of year.

Rakesh Mishra

Rakesh Mishra (Expert)

01 September 2017 Then you please furnish day wise statement of account to AO i.e. justify that the amount debited is towards interest incurred. Even you can ask your bank for product sheet of interest calculation that will also serve the purpose

Sachdev Kajal

Sachdev Kajal (Querist)

01 September 2017 ok sir. Thanks.
Do you have any supporting citation??

Rakesh Mishra

Rakesh Mishra (Expert)

01 September 2017 There is no need of such citation, because the AO has disallowed it on the basis of "No interest incurred" hence he assumed that the payment towards settlement of loan. Once you satisfy that the paid amount has been set off against interest incurred in actual, your problem will be solved

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