Loan from directors

This query is : Resolved

neeraj kumar agrawal (Querist)
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29 July 2011 Dear sir,

I m working in a pvt ltd comp and our directors have taken a loan from hdfc bank and same amt given to comp as a loan.

comp also pay intt on such loan to directors after TDS.

In ITR of directors such interest income will be shown as income from other sources

now the issue is intt which is paid by directors to hdfc bank is deductable as exps or not.

pls guide me

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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29 July 2011 Interest paid can be claimed as an expenditure under section 57(iii) of the Income tax Act,1961.
But this is a clear violation of section 58A of the Companies Act,1956 since the money invested is not the director's own money but borrowed from bank which is an offence punishable with fine.

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