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.

[Surender Gupta]

What is your concern. Is is FEMA or income tax? In income tax, in case AO treats the same as business, he has to allow the claim of various expenditures including bad debts and others. Submit your issues and understanding of the situation.

AI Summary

Money lending business classification may recharacterise HUF receipts and permit business expenditure claims including bad debts. An HUF advanced loans to companies with mixed interest arrangements; the income tax assessing officer queried classification as a money lending business. The respondent observed that, if so classified, the HUF would be treated as carrying on business and could claim business expenditures, including bad debts, and requested further particulars to address the matter.