Mr. X borrowed Rs. 4,00,000 from his friends and relatives and agree to pay interest and he invested the money in a Firm as capital contribution. He has paid Rs.48,000.00 as interest during FY: 2008-2009, and has not received any interest on capital from the firm, but Rs. 90,000.00 as share of profit. As the share of profit is exempted from tax, Is the interest of Rs.48,000.00 can be set off against the business profit of his other businesses (from proprietorship concern)
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INTEREST ON BORROWINGS
Replies (1)
Mr.Murali
If the method of accounting being followed by the assessee is mercantile he can claim the interest paid on the borrowings whether income is earned on that particular borrowal or not.
Best Wishes
Sathikonda
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