Money lending business or simple income from other sources

[manoj gupta]

An HUF has own capital of approx. 3 crores rupees. It has given loans to two private limited companies in which karta is the director. From one company it is earning interest at 11% p.a. From other it is not charging any interest. it has also given money on loan to one outside company on which it is charging interest at 12% p.a. Now, in scrutiny case, the A.O. has raised a query as to why it is not treated that HUF is engaged in money lending business. We have to reply it. Pls. advise what are the implications of treating it money lending business and how we should counter it. The HUF is not engaged in any other business.

AI Summary

HUF with 3 Crore Capital Faces Scrutiny Over Money Lending Business Classification; Interest Rates in Question An HUF with a capital of approximately 3 crores rupees has provided loans to two private companies, where the karta is a director, and to an outside company. It earns interest from one company at 11% per annum and 12% per annum from the outside company, while the other company is not charged interest. During a scrutiny, the Assessing Officer questioned whether the HUF should be considered as engaged in a money lending business. The forum seeks advice on the implications of such classification and how to counter the claim, noting the HUF is not involved in other businesses.