Please Help: Repayment of interest on loan
Posted Date : 14-Dec-2011 , 03:04:55 pm | Posted By Aritika Garg
Four directors of the Company have bought property in their personal names, for the business of the Company for which loan has been taken. The loan document shows the loan has been given to the four directors & the Company. The installments are being paid by the Company and the said property is being used by the Company for its business.
The outstanding loan amount as well as the property is reflected in the books of accounts of the Company.
Kindly advice:
Whether the interest payments made to the bank by the Company will be an allowed expenditure to the Company?
The outstanding loan amount as well as the property is reflected in the books of accounts of the Company.
Kindly advice:
Whether the interest payments made to the bank by the Company will be an allowed expenditure to the Company?
Category : Income Tax | Answers : 2 | Comments : 2 | Hits : 428
Answers
Answer By: Ashish Karundia
Dear Aritika,
There appears to be contradictory facts as you are saying that the directors have taken the property in their personal names and at the same time you are saying that the bank has given the loan in the name of Directors and Company.
And how the properties can be disclosed in the companies balance sheet when they are not the owner of the property.
There is a possibility that the company has entered into an agreement with the directors whereby the directors have sold the property to the company...Please check the same and revert so that we can opine on the same.
There appears to be contradictory facts as you are saying that the directors have taken the property in their personal names and at the same time you are saying that the bank has given the loan in the name of Directors and Company.
And how the properties can be disclosed in the companies balance sheet when they are not the owner of the property.
There is a possibility that the company has entered into an agreement with the directors whereby the directors have sold the property to the company...Please check the same and revert so that we can opine on the same.
Answer By: Ashish Karundia
Dear Aritika,
If so be the case, then the company can claim the deduction of the interest paid on the loan as it appears that the directors are only acting as the guarantor of the loans i.e. the directors will be liable to pay if the company fails to pay (You can refer the loan documents and confirm the same at your end).
Thus, the company can claim the deduction of the interest paid.
Hope the above suffice.
If so be the case, then the company can claim the deduction of the interest paid on the loan as it appears that the directors are only acting as the guarantor of the loans i.e. the directors will be liable to pay if the company fails to pay (You can refer the loan documents and confirm the same at your end).
Thus, the company can claim the deduction of the interest paid.
Hope the above suffice.
Comments
Aritika Garg
15-Dec-2011 , 10:29:10 amThe laon is in the joint name of all the directors & the Company. The Comapny is using it for its business & even repaying the loan amount. So can Comapny claim the full interest amount paid by it to the bank?
Aritika Garg
16-Dec-2011 , 10:15:02 amThanks alot ashish for your valuable answer