INTEREST RECOVERABLE EXCEEDING THE LOAN AMOUNT

[S.C. WADHWA]

A Pvt Ltd. gave loan to another Company around eight years back.

The rate of interest claimed is around 13% Such another company deducted TDS every year on interest payable

In books of Pvt. Ltd. Company, the amount of interest recoverable has exceeded the amount of original loan as the another company has not made any payment since the date of receiving loan neither towards principal nor towards interest.

Please advise whether it would cause any problem for Pvt. Ltd. Company giving the loan

AI Summary

Loan Interest Accumulation Exceeds Principal; Borrowing Company Risks Time-Barred Classification Under Assessing Officer Rules A private limited company provided a loan to another company eight years ago at an interest rate of 13%. The borrowing company has not made any payments towards the principal or interest, resulting in the interest recoverable exceeding the original loan amount in the lender's books. The issue raised concerns whether this situation poses a problem for the lending company. The response indicated that the problem primarily lies with the borrowing company, as the Assessing Officer may classify these transactions as time-barred or bogus after three years. The lending company should not face issues.