Loan by firm to partners spouse

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vinay (Querist)
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01 November 2016 Land purchase by firm

vinay�(Querist)�

hi I got two doubt's firstly, can a firm purchase land on loan in its name for constructing godown and office for its trading business?? if yes can the firm claim interest as expense and principal Portion as deduction in any form ??? Secondly can a firm construct a building for business purpose in the land owned by one of partner's spouse??? if yes what are tax treatments ?

Kaushik Joshi�(Expert)��

Dear Vinay, 1. Yes firm can purchase land and construct as well. interest shall be capitalised tool completion of construction and thereafter treated as revenue expense. no benefit of principal repayment. 2. Yes firm can construct on someone else's property as well. Tax treatment will depend on case to case basis. I'd suggest the firm Loan the amount to the partners spouse, construct in her name and then give it in rent to the firm.

Anand�(Expert)��

Apart from the above reply, note that the cost of godown will be eligible for depreciation. So the question whether any benefit can be taken for principal is answered as indirectly the cost of godown will be depreciated over its life.

Kaushik Joshi�(Expert)��

Very good reply by my fellow expert. It is a good way of viewing at the situation. we hope these answers have solved your queries Vinay

vinay�(Querist)��

Thanks Mr Kaushik and Mr Anand for the feedback. As mentioned if firm is providing loan to partners spouse, can it be interest free so that no interest income is credited in firms account..and can a condition be kept that future rent to be paid by firm to partners spouse can be set off with loan provided...

Please anyone go through the above queries and i still have a pending query which is still open