| Question And Answer | |
|---|---|
| Subject: | interest under section 36(1)(iii) disallowed |
| Category: | Income-Tax |
| Querist: | Navin Gupta |
| Answered by: | Law Intern |
| Tags: | Business expenditure, Deduction of interest, section 36(1)(iii) |
| Date: | May 16, 2025 |
Assessee has given interest free advance which is sufficient to cover from the interest free fund available in the form of partners capital and interest free advance taken. Despite of this fact the ld AO has disallowed proportionate interest under section 36(1)(iii).
The AO’s view is wrong in view of the judgements in CIT vs. Reliance Utilities and Power Ltd [2009] 313 ITR 340 (Bom) and others that there is a legal presumption that funds used for non-business purposes have come out of own funds and are not subject to disallowance u/s 36(1)(iii) of the Act.
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