Loan

This query is : Resolved

B.P. SRIDHAR (Querist)
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02 February 2013 sir,
An Assessee took a loan from a Bank through his bank account for the construction of house of his Mother who is not an I.T. Assessee. out of the loan amount he gave half of the loan amount through a cheque to his mother and used the remaining amount for his own business.Can that(Amount given to mother) be shown as gift to mother? what would be the effect. how to write in Assessee's a/cs. Pl Clarify.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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02 February 2013 Genuine gifts are made out of own money.
.
A business man , who gifts certain amount
out of borrowed funds...... does it sound good for a prudent business man ?
.
Still, if he want to extend support to his mother, he should bear the interest costs himself in his personal capacity ,and may extend interest free loan to his mother.
.

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CA. RAGHAV GARG

CA. RAGHAV GARG (Expert)
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03 February 2013 Truly in support with CA Paras Bafna Ji,
but as far as Income Tax Deptt. is concerned, they will not let the assesse take advantage of Interest and will disallow the Interest considered as expense from the p&l on the amount forwarded Interest Free or will consider a deemed Interest in the hands of assesse.

However, it is suggested to treat it such as Gift as the Money advanced to mother are not stamped with the Loan from Bank on it.

The Loan is Housing Loan, and only the Amount brought in the books are to be considered as Addition in capital in the books of Business.

help can contact at raghav@ggassociates.in

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