Ours is a partnership firm consisting of 5 partners, two partners have purchased LMV wherein the firm is a Co-borrower, All the documents are named personally in partners name. Even the loan financed by the banks are in the name of Partners but only the instalment gets debited in firms CC account. the question is 1. Will this purchase be considered as purchase of the Firm? "Non of the documents and in the name of the firm" 2. The instalment which is subject to interest on loan subject to TDS should this TDS be deducted by the firm and make the payment and issue the TDS certificate to the bank (But the loan schedule is named in the personal name of partners) only a counter signature withthe seal of the firm is there on the loan agreement. 3. Should this instalment payment be debited to partners capital account?
Sir, please reply to this. Its a big issue in my firm as on date.
24 March 2016
Two important questions arise: Are the LMVs used for the purposes of the business of the firm? What was the intention of purchase of LMVs by the partners?
On the reply to these questions the answers will vary.
In case the firm owns the assets, uses it for purposes of business, and shows the fixed assets in its books - the transaction is valid. The firm can claim deduction of EMI interest as well as depreciation on the vehicles. This has been decided by Supreme Court in more than one instance - the assessee firm is entitled to these benefits even though the vehicle registration is in the name of a partner. If the asset belongs to the firm TDS on EMI Interest is mandatory for the expenses to be allowable under Income Tax Act,1961.
In case the assets are owned by the partners, the EMIs are drawings by the partners, no expenses or depreciation allowable in the hands of the firm, no TDS on EMI Interest.
Considering the above circumstances you may opt for either option - the first option is more beneficial to the firm and partners.
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