Loan transaction between two associated companies.

[kamranACA]

Dear Zia,

With regards to Income Tax Law, a company can borrow from the other and other can lend to it if

- such lending is in accordance with the memorandum of association of the other (covered in business objective clauses);

- both companies have NTN numbers;

- fund transfer is made through crossed banking channel (must be verifiable by income tax authorities);

There is no deduction required in respect of Income Tax at Source under any provision of the Income Tax Ordinance, 2001.

Companies should keep in view provisions of section 208 of Companies Ordinance ,1984, if these are associates.

Best regards,

Kamran.