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of <h1>Interest expenditure disallowance under section 36(1)(iii) deleted when funds advanced to sister concern at lower rates</h1> <h3>E PACK Polymers Pvt. Ltd. Versus ACIT, Circle-8 (2), Delhi</h3> E PACK Polymers Pvt. Ltd. Versus ACIT, Circle-8 (2), Delhi - TMI The ITAT Delhi, in the appeal for AY 2017-18, addressed the disallowance under section 36(1)(iii) of interest expenditure amounting to Rs. 90,20,116/-, upheld by the CIT(A)/NFAC on the ground of diversion of interest-bearing funds to group concerns for non-business purposes. The assessee contended that while loans were availed at 13.5% interest, only 8% interest was charged to the sister concern on advances totaling Rs. 16.40 crores. The balance sheet revealed non-interest bearing funds including share capital and reserves of Rs. 50.90 crores, exceeding the advances made. Citing *CIT vs. Reliance Utilities and Power Ltd.* (2009) 313 ITR 340 (Bom) and *South Indian Bank Ltd. vs. CIT* [2021] 438 ITR 1 (SC), the Tribunal held that the presumption must be that interest-free funds were advanced to the sister concern. Consequently, the section 36(1)(iii) disallowance was deleted. The appeal was allowed accordingly.
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