The Assessing Officer disallowed interest paid by the assessee, alleging that interest-bearing funds were diverted for giving interest-free advances. The High Court, affirming the Tribunal\u2019s order, observed that the assessee had a substantial balance of interest-free funds available in the form of sundry creditors. It held that where mixed funds are available, a presumption arises that interest-free advances are made out of the interest-free funds, provided they are sufficient. Since the assessee\u2019s interest-free funds were sufficient to cover the advances, the interest expenditure was held to be allowable. (AY. 1988-89 to 1990-91)<\/p>\n","protected":false},"excerpt":{"rendered":"
S. 36(1)(iii) : Interest on borrowed capital-Interest-free advances-Mixed funds-Where assessee possessed sufficient interest-free funds from sundry creditors, it is presumed that advances are made from such funds; disallowance of interest deleted. [S. 260A]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-58103","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-f79","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/58103","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=58103"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/58103\/revisions"}],"predecessor-version":[{"id":58104,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/58103\/revisions\/58104"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=58103"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=58103"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=58103"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}