Interest paid to relatives

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Querist : Anonymous

Querist : Anonymous (Querist)

13 September 2011 Sir,
A doctor who has taken loan from freinds & relatives amonting to Rs.17,50,000/- Is interest will be paid to such people @ 8 % . In his Balance Sheet as on 31-03-2011 there is an accrued interest amonting to Rs.1,44,000/- which is due to this people. The loan is used for the purchase of Residential Propoerty.Kindly let me know what are the pros & cons of such transcation !

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

20 September 2011 Since the loan has not been utilised for the purpose of business or profession, interest on such loan shall be disallowed.

Querist : Anonymous

Querist : Anonymous (Querist)

21 September 2011 sir,
As replied by you that the interest amount will be disallowed then please let me know whether Revised return can be filled to rectify this mistake and if YES then what is the time limit to file revised return and what are the legal impact of such action ?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

21 September 2011 Yes revised return can be filed.
Revised return can be filed before the expiry of one year from the end of the AY.

For instance for AY 11-12 revised return can be filed upto 31.3.2013.

However, in this case, revised return will result in increase in income & is bound to be questioned by the assessing officer.

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2011 Sir,
Let me know what will be the best possible course of action in this case, if interest will be disallowed then also one has to pay tax on the disallowed expenditure or what will be the best suggest me please ?

Thanks .

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)

22 September 2011 What treatment has he done in the books? Has he shown the property in the books?

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2011 Sir,
In books of accounts it is shown under fixed assets . and interest amount is shown under expenditure side ?

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