Write off of loan given by a company

This query is : Resolved

B GANESH SHARMA (Querist)
Follow

01 June 2012 ABC company has given an inter corporate deposit (ICD) to XYZ company for business purposes. Later the amount could not be refunded by XYZ company and hence the same was written off by ABC company. Now, is this loan amount, which is written off, taxable in the hands of XYZ company. If yes under what head and under what section of Income Tax Act. Does it make any difference if the ICD is taken for acquiring a capital asset.
Kindly clarify

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
Follow

01 June 2012 The write off of loan is NOT taxable. Section 41(1) deals with taxability of of such cases.

However, Section 41(1) applies to an expenditure or TRADING LIABILITY which was claimed as decution and is later on recovered or written off.

Deposit received from ABC is NOT a traidng liability in the books of XYZ. Accordingly, Section 41(1) is NOT attracted and there is no taxability.

B GANESH SHARMA

B GANESH SHARMA (Querist)
Follow

01 June 2012 Thanks.

When the accounts of XYZ company are finalized the loan written off by the lender has to be taken to the credit of P&L account, which increases the book profits which will be subject to MAT. Am I right?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
Follow

01 June 2012 Take it to capital reserve.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

Ashwin Tanna

DSK TMC

avulaandcopdrl 2023

Pawan Haryani

ramesh kumar

Subscribe Now

Write off of loan given by a company

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

CA Final

Senior Executive

Accountant

GST CONSULTANCY

GST CONSULTANT

Manager- Finance and Compliance