Since the own fund of the assessee exceeds the amount of loans and advances given to various parties, a presumption can be drawn to hold that the interest free advances have been given by the assessee out of his own interest free fund. Accordingly, the question of making disallowance of interest expense does not arise. Hence, the ground of appeal of the assessee is allowed. (AY. 2008-09)
Aaryavart Impex (P) Ltd. v. ACIT (2023) 221 TTJ 817 /151 taxmann.com 22 (Ahd)(Trib)
S.36(1)(iii): Interest on borrowed capital-Interest free advances have been given by out of his own fund-No disallowance can be made.