Sec. 14A of the Income Tax Act
This query is : Resolved
02 January 2009
Pl express your opinion with supporting case laws if any
A widely held Public Limited Company (Say A Ltd, a holding company of several other companies) invests Rs.30 Lakhs in a private limited company (Say B Pvt Ltd) by way of equity capital out of proceeds of its own equity (not from borrowed funds) say in AY 2003-04. B Pvt Ltd is regular in paying dividend to its shareholders incl. A Ltd.
In AY 2006-07, A Ltd for its general business purposes including investment in capital of various private limited companies, borrows money on interest from B Pvt Ltd Rs.20L at the ruling market interest rates on the basis of a loan agreement with all usual terms and conditions
The Assessing Officer (AO) while assessing the income of A Ltd would like to invoke the provisions of Sec 14A holding that the loan is nothing but withdrawl of capital investment in the guise of loan and investments are made in other companies after taking this loan.
IS THE ACTION OF AO JUSTIFIED?
A widely held Public Limited Company (Say A Ltd, a holding company of several other companies) invests Rs.30 Lakhs in a private limited company (Say B Pvt Ltd) by way of equity capital out of proceeds of its own equity (not from borrowed funds) say in AY 2003-04. B Pvt Ltd is regular in paying dividend to its shareholders incl. A Ltd.
In AY 2006-07, A Ltd for its general business purposes including investment in capital of various private limited companies, borrows money on interest from B Pvt Ltd Rs.20L at the ruling market interest rates on the basis of a loan agreement with all usual terms and conditions
The Assessing Officer (AO) while assessing the income of A Ltd would like to invoke the provisions of Sec 14A holding that the loan is nothing but withdrawl of capital investment in the guise of loan and investments are made in other companies after taking this loan.
IS THE ACTION OF AO JUSTIFIED?
02 January 2009
A Ltd has to prove that Rs 20 lakhs borrowed is for its business purposes otherwise the view of the AO will sustain.
07 December 2009
Pl elaborate
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
- TDS on Consultancy- Non DTAA
- Reopen of assessment proceeding
- Depreciation of fixed assets- coop housing society in mumbai
- Management System (IMS)
- DIN reactivation
- COMMERCIAL INVOICE FOR MATERIAL AND FREIGHT
- GST rate and HSN code for sale of racing horses
- Query – TDS on purchase of land from NRI under Income-tax Act, 2025
- Eway bill generation from place other than registeted
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- STATUTORY AUDIT OF A SMALL PRIVATE COMPANY INCORPORATED ON 28.03.2025
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
- How to pay remaining amount of TDS after due date?
- Resigning a auditor from the company for misconduct
- RCM @ 5% on Hamali charges, Transport Charges, Unloading charges we take ITC or not
- CALCULATION OF DEFFERED TAX - OP BL IS DTL & CURRET IT DTA
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
