Interest on debtors

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This query is : Resolved

Gaurav Soni (Querist)

25 November 2016 case:

Income tax officer is saying that i have to charge interest on the amount due from the debtors.
In reply i said him that i can't charge interest from debtors because it effects our business relation and i have no problem if my debtor pay the due amount after some time. even also i have no written contract with my debtors regarding any payment due to market tradition in my city.

so is there is any answere whichi can give to the income tax officer.

is it is mandatory to charge interest on debtors due amount..

CA Amrita Chattopadhyay

CA Amrita Chattopadhyay (Expert)

28 November 2016 It is not mandatory to charge interest on debtors until and unless the same is mentioned in the contract. However, if the debtors are pending for long period, you need to provide for doubtful or bad debts.

Gaurav Soni

Gaurav Soni (Querist)

28 November 2016 ca amrita ji thank you for your reply.

can you please suggest me any act , section, law which i can show as a proof for this answere.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

04 November 2021 It is the usual practice in the business, and no need of any supporting act or case law. The addition if any by AO gets nullified whenever appealed.

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