Waiver of loan from financial institution

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Hiren (Querist)
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02 October 2012 Sir,

In the the financial statement of a client there was term loan standing since long, received from GSFC. The loan a/c become NPA and subsequently there was suit filed.

However letter on during the current period, there was OTS between above parties and almost all the outstanding interest(which was charged in the a/c) had been waived

Now, my question is ...

what is the treatment of balance amount outstanding in the parties loan a/c as per Income tax ???

Amol S Joglekar

Amol S Joglekar (Expert)
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02 October 2012 Slight confusion? You are from loan taker... right? If you had debited interest on year on year basis in the earlier periods, the same shall be offered to revenue this year of OTS; as you are not going to pay the same. The subsequent part could not be understood... if you could give some figures.. it will ease out the answer.

Hiren

Hiren (Querist)
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03 October 2012 Sir,

That is right..!!. I am asking on behalf of loan taker. Following are some figures

Principal amount of Loan Rs. 46,50,000
(F.Y. 1999 - 2000)

Amount Out standing in Books
of A/c of Loanee (Int. Charged
as Per Bank Statement ) Rs. 2,50,00,000

(As on 31.03.2012)

Now During the current F.Y. there was OTS settlement between bank and loanee and accordingly loanee has paid Rs. 70,00,000 towards full and final payment

in the books of a/c of loanee there was loss since f.y. 2002 - 2003 and from above f.y. 2005 - 2006 loanee has not filled IT returns in time

Amol S Joglekar

Amol S Joglekar (Expert)
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03 October 2012 01. Final tally is 70-46.5=23.5. Against an intial loan of 46,50,000, you have paid 23,50,000 as the rent for money(popularly known as INTEREST)over a period of so many years.... 02.As against the total interest as per bank statement(which bank? GSFC of course)of 2,50,00,000, OTS has facilitated you with an amount of 23,50,000 towards interest, which needs to be accounted for. The answer is same as an amount of 2,50,00,000 debited to interest account on year on year basis needs to be reversed (offered to revenue) and 23,50,000 shall be debited. You have both the options...i)yearwise debit OR ii)entire adjustment in fy2012 13. For option i) you need to write a special letter to CBDT requesting to permit the yearwise interest write back. Thanks for such a nice query. Your views are requested... it is a very hot topic in current scenario.

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