Practical - Foreign Unsecured loan Written back

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CA Ankit Gulgulia (Jain) (Querist)
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06 March 2010 Dear Professional Colleagues kindly throw some light on following practical case:

There is company "x ltd" which has its 100% holding Company in " y ltd " in switzerland.
X ltd has a unsecured loan from y ltd as on 31.3.2009. Subsequent to 31.3.2009 x ltd has written back the loan of y ltd with y ltd's prior approval and booked its income.

What are audit requirements under FEMA & RBI ? Moreover if the company has claimed for expenses incurred out of that amount as tax deductible will this liability written back income also get taxed now?

M Prabhakar Menon

M Prabhakar Menon (Expert)
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07 March 2010 Assuming this transaction was routed through company's regular banking channels both FEMA and RBI would have been taken care of. Your problem is if it is otherwise.If its taken as income in your P & L A/c the usual tax provisions will apply for expenses as well.The authorities will lift the corporate veil to seek hidden answers.

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