Loan Written Off

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swasti (Querist)
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11 October 2019 A private limited company is engaged in finance activities. It provides loans to other companies. Out of this a loan is irrecoverable and the company wishes to write off that loan thru Profit & Loss Account. Is the loan as such written off an allowable expenditure?

Soumitra Basu

Soumitra Basu (Expert)
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12 October 2019 yes it will be treated as bad debt

Darshan Jain

Darshan Jain (Expert)
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15 October 2019 Pl clarify whether lending is really the principal object of the company under consideration?

If you could prove the business nexus of lending only then alone can you claim it as bad debts under section. 36(1)(vii)

swasti

swasti (Querist)
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18 October 2019 Thanks for the advices. But if lending comes in ancillary objects, then?

Darshan Jain

Darshan Jain (Expert)
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18 October 2019 Loans extended without direct business nexus are not allowable as bad debts. The write-off would be disallowed.

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