Assessee advanced loan for interest @ 6% and paid interest on most of the unsecured loans @ 18%. Assessee established that the loan was given out of interest free funds. The AO could not bring on record any evidence to show that the interest free funds were used for any other purposes. Tribunal held that if the interest free surplus funds are available to the assessee, assessee is free to use the funds at his option and deleted the disallowance so made. (AY. 2014-15)
Grandhi Sri Venkata Amarendra v. ACIT (2018) 66 ITR 66 (SN) (Visakha.)(Trib.)
S. 36(1)(iii) : Interest on borrowed capital – Disallowance cannot be made as Assessee established that loan advanced at interest lower than interest paid on unsecured loans out of interest free funds.