26 June 2012
What will be the Consequences under Income tax act in the following sitution..
1. If a private limited company accept unsecured loan without interest and use it for the purpose of its business?
2.If a private limited company accept unsecured loan without interest and the same amount is transferred by giving loan to some other party without interest?
At the time of Assessment, the AO shall ask the indentity and confirmation for unsecured loans. It is because income may be shown as unsecured loans to evade tax.
The situation will be same in the two given situations for the receiver. There is a probable situation where the AO may disallow Interest Expense in the hands of lender for providing Interest free loan.
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