Loan settlement

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Querist : Anonymous

Querist : Anonymous (Querist)

08 August 2011 one company had a bank loan of rs 20,00,000.00 & interest payble there on is rs 10,00,000.00.company made one time settlement to settle the loan by paying rs 10,00,000.00
Then what should be the treatment As per income tax .

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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08 August 2011 The department takes a view that this is remission of liability to the extent of concession granted in the settlement, and becomes taxable in a case where in earlier years, interest has been claimed as expenditure by the assessee.

However against this income business losses of earlier years can be set off in case timely returns were filed in the year of claim.
In simple words the department is free in this case to treat the concession as income and the repayment as principal amount repayment unless settlement conditions are vocal in this regard.

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