Interest on Unsecured Loan- Proprietorship
This query is : Resolved
09 August 2010
My Assessee has paid intt. @ 18p.a. on unsecured loan. can A.o. restrict the same to 15 p.a. Please provide reference to case law also, if available, to defend the assessee.
09 August 2010
It should be accordingly to the prevailing market rates. If the same is followed then allowable otherwise not.
09 August 2010
Agreed with Aditya.
But if the assessee can prove the following then he can fight the case in appeal and will easily win :
1. When the Business is new.
2. The assessee is not having good reputation in the market ( business is small).
3. There was an immediate need of the funds.
4. The assessee was not in a position to bargain with rate of interest.
5. The funds were acquired for short period (if situations are alike this).
6. There were immediate/likely rise in the prices of the raw materials/shortage of raw materials hence assessee wanted to make a good inventory to get benefit of the positive market scenario.
But if the assessee can prove the following then he can fight the case in appeal and will easily win :
1. When the Business is new.
2. The assessee is not having good reputation in the market ( business is small).
3. There was an immediate need of the funds.
4. The assessee was not in a position to bargain with rate of interest.
5. The funds were acquired for short period (if situations are alike this).
6. There were immediate/likely rise in the prices of the raw materials/shortage of raw materials hence assessee wanted to make a good inventory to get benefit of the positive market scenario.
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