Investment of loan amount

My answers:

Q.1:  Yes

Q.2: Yes

Q.3:  Interest paid will be allowed as expense only if the amount of loan is invested for genuine business purpose.  Further, Sec.14A of IT Act has to be kept in mind which disallows interest on loan if the relevant income by way of dividend is exempt from income tax.

Q.4:  Yes, if the the investment activity is not the business of the proprietor.

Q.5:  Income tax return is filed for the proprietor for all his proprietorship concerns and not for one particular proprietorship concern.  I am not aware of activity of Firm A and hence cannot comment. 

Originally posted by : P C Agrawal
	My answers: Q.1:  Yes Q.2: Yes Q.3:  Interest paid will be allowed as expense only if the amount of loan is invested for genuine business purpose.  Further, Sec.14A of IT Act has to be kept in mind which disallows interest on loan if the relevant income by way of dividend is exempt from income tax. Q.4:  Yes, if the the investment activity is not the business of the proprietor. Q.5:  Income tax return is filed for the proprietor for all his proprietorship concerns and not for one particular proprietorship concern.  I am not aware of activity of Firm A and hence cannot comment.

Q5: Are you saying that if A is the Proprietor of firms B & C, Income tax is filed in the name of A which includes income from B, C & any other personal income of A even though B & C may be engaged in totally unrelated businesses?

Definitely yes, because IT return is filed for each PAN separately and PAN is allotted only in the name of the proprietor himself and not for each proprietorship concerns.