Assessee-company provided interest free advances amounting to  its three directors.  Assessing Officer made disallowance under section 36(1)(iii) of certain amount out of interest expenditure on premise that interest bearing funds had been utilized for interest free advances. Commissioner (Appeals) sustained disallowance. On appeal the Tribunal held that  capital of assessee was more than Rs. 4.23 crores as on last day of accounting year and moreover profit was Rs. 41.70 lacs which was much more than amount of interest free advances amounting to Rs. 15 lacs. Disallowance was not in accordance with law.  (AY. 2006-07)