Sec 43 B Query

This query is : Resolved

MANISH KAPOOR (Querist)
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03 November 2010 Please advice whether unapplied interest paid in April 2010 on a term loan and CC (which became NPA in 2001)on compromise with the Bank be claimed as an expenditure under sec 43(B) of the Income Tax. Note that the amount of unapplied interest was 30 lacs and the bank compromised at 15 Lakhs.No interest was debited in the books of accounts in any of the earlier years.

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)
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03 November 2010 The interest was not debited in the books of account. It means , the assessee is not maintaining his books of accounts on mercantile system of accounting. U/s 43B books should only be maintained this basis.

Sec 43B will not be applicable.

MANISH KAPOOR

MANISH KAPOOR (Querist)
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04 November 2010 The interest was not debited in the books of account because the account was NPA and the bank also did not debit the interest on accrual basis.

ICSI ICAI ICWAI

ICSI ICAI ICWAI (Expert)
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04 November 2010 yes may be claimed

ask an human expert for detail :)

RANGA SRINIVAS

RANGA SRINIVAS (Expert)
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04 November 2010 Dear Manish

Interest not debited and hence there will be no disallowance under section 43B in the year 2001. If it is paid in the current year 2010, the expenditure pertains to previous years and hence it falls under prior period items and calls for disallowance.

regards

ranga k S

MANISH KAPOOR

MANISH KAPOOR (Querist)
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04 November 2010 Dear Srinivas,

But as per Section 43 B interest paid to scheduled banks is deductible on payment basis.
Can this payment on interest be claimed as expenditure in the year 2010-11(if all the interest is paid in April 2010).

Regards
Manish

Parveen Bansal

Parveen Bansal (Expert)
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04 November 2010 Section 43B disallows interest payable but not paid. That means interest is allowed only when paid irrespective of the year of accrual of the liability. Rs. 15 lacs will be permitted as an expense on payment to the bank.......

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